ABS

Memorial Sloan-Kettering Cancer Center is gearing up to sell a $250 million piece of its future foreign patent royalties from cancer treatment drug Neupogen/Neulasta. Among the likely bidders are several firms with a history of securitizing pharmaceutical royalty receivables.

To paraphrase the late crooner Frank Sinatra, Fitch Ratings expects 2005 will be "a very good year" for middle-market CLO issuance, as the agency is gearing up to rate more transactions in the relatively young asset class. Fitch warned, however, that anyone thinking of entering middle-market CLO land should make sure to bring the right tools for the job, as the asset class requires a different type of analysis than many asset managers and investors may be used to.

The primary U.S. ABS market made a return to loftier volume levels last week to price close to $9.5 billion as of Thursday's market close. The real estate sector made up the bulk of total volume with $6.5 billion in new issues.

Mitsubishi Motors' senior bonds may be one of the few places relative value still exists in the overbought ABS market, but questions about servicing and the strength of U.S. operations still loom for the auto manufacturer. If Mitsubishi can successfully dodge those concerns, analysts agree its ABS presents an attractive option in the auto sector.

Canadian interloper Dominion Bond Rating Service is primed to rate its first U.S. ABCP program, and will be staffing up during the coming weeks to prepare.

Canadian company Drug Royalty Corp. is showing the market $42 million in single-A rated notes backed by pharmaceutical patent royalties. What the market isn't seeing - the pre-sold triple-B and double-B rated tranches - makes this the first senior/subordinated offering backed by this type of asset.

Based on the results of a recent Structured Finance Market Opinion survey conducted by Standard & Poor's, securitization professionals named operational risk as the second most significant factor that is likely to affect the outcome of a deal, reinstating the fact that it continues to be a looming concern for players in the marketplace.

Year to date as of 03/03 Term (days) 02/25 02/28 03/01 03/02 03/03 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Credit Suisse First Boston 2,663.9 1 18.2 4 Barclays Capital 2,136.5 2 14.6 4 Citigroup 2,128.0 3 14.5 4 Deutsche Bank AG 2,027.7 4 13.8 3 Merrill Lynch & Co Inc 2,022.8 5 13.8 3 Goldman Sachs & Co 1,289.0 6 8.8 1 JP Morgan 1,096.0 7 7.5 3 Wachovia Corp 996.0 8 6.8 3 BNP Paribas SA 146.0 9 1.0 1 ABN AMRO 146.0 9 1.0 1 Industry Total 14,651.8 - 100.0 12 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 2,938.8 1 32.5 4 Morgan Stanley 2,677.7 2 29.6 6 UBS 934.2 3 10.3 2 Lehman Brothers 751.1 4 8.3 3 JP Morgan 685.0 5 7.6 1 Credit Suisse First Boston 389.0 6 4.3 2 Bear Stearns & Co Inc 370.3 7 4.1 1 Wachovia Corp 300.0 8 3.3 1 Industry Total 9,046.1 - 100.0 19 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 1,579.0 1 87.4 1 Banc of America Securities LLC 61.2 2 3.4 2 ABN AMRO 43.6 3 2.4 1 Merrill Lynch & Co Inc 43.6 3 2.4 1 JP Morgan 43.6 3 2.4 1 Deutsche Bank AG 17.6 6 1.0 1 Barclays Capital 17.6 6 1.0 1 Industry Total 1,806.1 - 100.0 3 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 Lehman Brothers 725.8 1 30.4 1 JP Morgan 725.8 1 30.4 1 Barclays Capital 725.8 1 30.4 1 Citigroup 212.0 4 8.9 1 Industry Total 2,389.5 - 100.0 2 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 Deutsche Bank AG 10,833.7 1 13.7 17 Morgan Stanley 10,411.8 2 13.1 13 Royal Bank of Scotland Group 7,970.2 3 10.1 15 Credit Suisse First Boston 7,508.8 4 9.5 19 Merrill Lynch & Co Inc 6,188.6 5 7.8 7 Countrywide Securities Corp 5,836.0 6 7.4 6 Lehman Brothers 5,651.8 7 7.1 17 Citigroup 4,904.8 8 6.2 11 Bear Stearns & Co Inc 4,849.8 9 6.1 11 Goldman Sachs & Co 3,171.3 10 4.0 5 Industry Total 79,208.1 - 100.0 118 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 Credit Suisse First Boston 1,645.9 1 17.4 2 Morgan Stanley 1,540.6 2 16.2 1 UBS 1,447.2 3 15.3 3 Banc of America Securities LLC 1,333.5 4 14.1 2 Citigroup 1,330.0 5 14.0 2 Lehman Brothers 1,012.4 6 10.7 1 Deutsche Bank AG 817.2 7 8.6 2 JP Morgan 317.2 8 3.3 1 Goldman Sachs & Co 40.0 9 0.4 1 Industry Total 9,484.0 - 100.0 7 Source: Thomson Financial

Year to date as of Mar 2 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases 126 126 126 126 Auto Loans/Recs 41,391 36,622 4,769 35,132 6,259 16,580 18,742 6,069 Comm. Mtg 2,899 1,294 1,605 2,899 1,261 229 829 540 Commercial Loans Corp Bond/Note 3,846 1,696 2,150 3,846 2,569 746 45 485 Corporate Loans 5,352 286 5,066 5,352 2,480 395 370 1,192 914 Credit Card Rec 28,632 10,299 18,333 24,659 3,974 19,334 1,400 5,749 900 1,249 Debentures 2,122 2,122 2,122 2,122 Equip Loans Equip. Leases 4,744 4,469 275 4,164 580 2,293 1,388 554 221 289 Floorplan Recs 8,026 840 7,186 7,902 124 4,014 830 3,182 Franchisee Loans 194 194 194 Home Impr Loans Installment Recs 1,797 1,797 1,797 1,797 Junk Bonds Leveraged Loans 1,174 64 1,110 1,174 38 10 284 842 Mixed Collateral 1,881 7 1,874 1,881 1,500 306 22 53 Mnfrd Housing Ct 200 200 200 200 Motorcycle Loans 2,740 2,740 2,740 313 1,923 504 Mutual Fund Fees 501 331 170 501 501 Non-Jumbo Mtg Ln 68,520 31,864 33,291 65,728 2,793 41,621 14,956 10,760 849 319 Oil Receivables Preferred Sec 3,597 2,268 1,330 3,597 3,253 158 186 Prv Issued Sec 1,852 1,079 380 590 1,262 1,852 Rental Car Rec. 2,400 1,300 1,100 2,400 1,300 1,100 Rev Cred/Home Eq 216,332 125,057 77,504 186,006 30,325 143,388 44,757 25,956 1,606 553 Sm Business Loan 828 828 828 828 Struc Fin Credit 14,838 6,458 8,380 14,838 5,807 2,507 4,928 1,508 Student Loans 30,626 6,957 21,983 25,639 4,986 17,780 3,239 4,044 3,663 1,808 Tax Liens Ticket Rec Timeshare Loans 635 386 250 635 336 300 Tobacco Receives Trade Recs Unspecified/NA Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 48% Non-Jumbo Mtg Ln 15% Auto Loans/Recs 9% Student Loans 7% Credit Card Rec 6% Other 15%

At this year's ABS West 2005 conference, United Capital Markets president John Devaney outlined his firm's expansion plans in the coming 12 to 24 months, although few of the chattering conference attendees were listening. Following the recent hiring of CFO Linda Hannan and last week's poaching of secondary trader Randall White, Devaney is ready to execute his strategy, which includes investment banking activity, publishing research and raising funds in the capital markets - selling both debt and equity - as well as a move into high-yield corporate trading.

AmeriQuest Mortgage came to market with a $1.2 billion series 2005-R2 deal last week that was apparently unhindered by the company's highly publicized legal troubles earlier this month. In the beginning of February, just as the ABS West 2005 conference was underway, the Los Angeles Times broke that AmeriQuest was being sued in California and 20 other states for improper lending practices ranging from forging documents to lying about borrower's income, in order to qualify them for loans they otherwise could not afford. According to one source, the company made sure to cover its tracks and smooth the way for last week's transaction, which priced inside of initial guidance.

Issuance in the U.S. ABS primary market slowed considerably during the week following the Presidents' day holiday. As of last Thursday evening, just shy of $3.5 billion had priced, compared with the robust $18 billion that made the rounds the week prior.

The recent Boston Edison Co. $675 million rate reduction bond deal priced to record tight spreads for the sector, coming on the heels of a $1.9 billion rate reduction bond deal from Pacific Gas and Electric Co. last month that also re-priced the sector (see ASR, 2/7/05). Goldman Sachs and Lehman Brothers led the four-tranche deal tagged Massachusetts RRB 2005-1.