ABS

JPMorgan Securities this month concluded its first loan-level analysis of New Century Financial Corp.'s servicing portfolio since the subprime mortgage lender began using a new servicing platform in late 2002. New Century, the nation's largest REIT and second-largest subprime lender, originated $42 billion of loans last year and expects volume to reach at least $45 billion this year.

Subprime mortgage REITs Aames Investment Corp., ECC Capital Corp. and NovaStar Financial Inc. each offered more than $1 billion apiece of ABS recently, as well as a myriad of other news.

A variety of challenges face the ABS market both long and short term and in response to concerns, the American Securitization Forum is hosting its annual meeting this month, with a focus on communicating relevant topics to a broad market audience.

The U.S. ABS primary market priced a healthy $7 billion in an abbreviated week that also witnessed whispers of a slow-down in the Federal Reserve's "measured pace" of rate hikes. Dallas Fed President Richard Fisher reportedly said the Fed is in the eighth inning of a nine-inning tightening cycle, and gave the impression the Fed may consider halting the increases after its next meeting.

The CIT Group priced $1 billion of FFELP-guaranteed student loan-backed notes last week, in a five-tranche deal led by Citigroup Global Markets and Credit Suisse First Boston, its first transaction in the sector.

Despite Personal bankruptcy filings having climbed to record numbers for the second month in a row with 170,130 filings in April, credit card chargeoffs seem to be holding stable, according to a report from Fitch Ratings. April's numbers represent a 3% increase over March 2005 and are seen as the continued fallout of the April 20, enactment of the Bankruptcy Reform Act.

Michael Youngblood, head of ABS research at Friedman Billings Ramsey, said last week that investors should be more concerned about the general prospect of payment shock to be experienced by all adjustable rate subprime borrowers - either with a hybrid ARM or an interest-only ARM - than with those loans' form of amortization. Youngblood said the general characteristics of IO ARMs and hybrid ARMs are nearly indistinguishable, and where there are material differences - such as the borrower's credit score - the IO loans actually come out looking better, contrary to the skeptical views of the subprime IO loan by many market participants.

ABN AMRO plans to raise the bar for Australia's so-called socially responsible fixed interest rate investment vehicles with its newest CDO issuance set for Friday.

As if the high-yield bond market hasn't treated private equity firms well enough already, some financial sponsors are now pushing for more flexibility in the covenants - or the restrictions around a company's capital structure - that govern their high-yield borrowings.

Year to date as of 06/02 Term (days) 05/27 05/30 05/31 06/01 06/02 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 5,135.9 1 13.4 9 Deutsche Bank AG 4,741.0 2 12.4 9 JP Morgan 4,289.5 3 11.2 7 Merrill Lynch & Co Inc 4,114.9 4 10.7 7 Barclays Capital 3,870.9 5 10.1 7 Credit Suisse First Boston 3,449.5 6 9.0 7 Banc of America Securities LLC 3,433.1 7 9.0 7 Wachovia Corp 3,362.5 8 8.8 7 Goldman Sachs & Co 1,841.0 9 4.8 2 Lehman Brothers 1,455.3 10 3.8 2 Industry Total 38,365.5 - 100.0 36 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Merrill Lynch & Co Inc 8,615.4 1 19.6 13 Citigroup 6,047.7 2 13.7 15 Morgan Stanley 3,984.6 3 9.1 16 UBS 3,442.6 4 7.8 8 Lehman Brothers 3,418.9 5 7.8 11 Bear Stearns & Co Inc 2,530.2 6 5.8 6 Goldman Sachs & Co 2,007.0 7 4.6 2 Groupe Caisses d'Epargne 1,742.0 8 4.0 2 Credit Suisse First Boston 1,589.0 9 3.6 4 Banc of America Securities LLC 1,488.1 10 3.4 11 Industry Total 44,006.8 - 100.0 116 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 4,974.9 1 38.1 11 Citigroup 2,874.8 2 22.0 6 Morgan Stanley 1,666.5 3 12.8 2 Barclays Capital 1,049.1 4 8.0 8 Deutsche Bank AG 959.8 5 7.4 8 Credit Suisse First Boston 488.3 6 3.7 3 Lehman Brothers 375.0 7 2.9 1 Banc of America Securities LLC 286.6 8 2.2 4 Merrill Lynch & Co Inc 212.6 9 1.6 2 Societe Generale 100.0 10 0.8 1 Industry Total 13,062.4 - 100.0 30 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Morgan Stanley 1,191.7 1 18.9 2 Deutsche Bank AG 1,191.7 1 18.9 2 Banc of America Securities LLC 750.0 3 11.9 1 Lehman Brothers 725.8 4 11.5 1 JP Morgan 725.8 4 11.5 1 Barclays Capital 725.8 4 11.5 1 HSBC Holdings PLC 566.7 7 9.0 1 Citigroup 212.0 8 3.4 1 Industry Total 6,319.5 - 100.0 6 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Bear Stearns & Co Inc 29,672.2 1 11.7 46 Morgan Stanley 23,594.0 2 9.3 28 Credit Suisse First Boston 22,016.2 3 8.7 49 Lehman Brothers 21,955.5 4 8.7 55 Royal Bank of Scotland Group 21,708.4 5 8.6 35 Deutsche Bank AG 18,943.3 6 7.5 37 Countrywide Securities Corp 18,809.5 7 7.4 24 Merrill Lynch & Co Inc 14,931.1 8 5.9 19 Banc of America Securities LLC 13,312.6 9 5.2 30 Citigroup 12,009.1 10 4.7 27 Industry Total 253,952.0 - 100.0 444 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Banc of America Securities LLC 3,134.2 1 15.4 4 Deutsche Bank AG 2,976.7 2 14.6 5 Morgan Stanley 2,757.6 3 13.5 3 Citigroup 2,482.7 4 12.2 5 Credit Suisse First Boston 2,196.2 5 10.8 3 Merrill Lynch & Co Inc 1,839.8 6 9.0 2 UBS 1,827.7 7 9.0 4 JP Morgan 1,187.2 8 5.8 3 Lehman Brothers 1,012.4 9 5.0 1 Goldman Sachs & Co 1,009.5 10 4.9 3 Industry Total 20,423.8 - 100.0 17 Source: Thomson Financial

auto ABS 18% credit card ABS 5% global MBS 5% real estate ABS 61% student loan ABS 8% other 3%

NEW YORK - Although an occasional annoyance to investors, extendible ABCP is the inescapable future of the conduit market, according to panelists speaking at last week's American Securitization Forum Sunset Seminar dedicated to the topic (see Observation p 18-19). Recent technological advances offering significant economic benefits to issuers are seen spreading to new sectors, regardless of whether investors feel they are adequately compensated for a risk they consider too great for the reward.

Anumber of CDO investors right now are like penny-pinching shoppers waiting for after-Christmas bargains, according to one analyst. The problem though, is that Christmas Day - the date the real estate bubble may be pricked - is a moving target.

Allegheny Energy, Inc., a Greensburg, Pa.-based utility company, filed with the West Virginia Public Service Commission last week for a financing order to issue two 15-year environmental control bonds totaling $381 million. The bonds requested, at sizes of $214 million and $167 million each, will be used to finance improvements to a power plant in Fort Martin, W.Va., according to Allegheny spokesman Allen Staggers. The bonds represent a new breed of stranded cost, or rate reduction bonds.