CDOs

Sept. 15 was a day of reckoning for Wall Street as the market said goodbye to two U.S. financial institutions, 158-year old Lehman Brothers, whose parts will be wrapped into Barclays Capital, and 94-year old Merrill Lynch, which will now exist under the Bank of America umbrella.

In the wake of the announcement of the Lehman Brothers bankruptcy, ABS market participants are examining its effect on the industry.

The beginning of September was wracked with uncertainty as Fannie Mae and Freddie Mac struggled with liquidity issues. That was until the government stepped in with a bailout plan for the GSEs. However, the government cannot stop growing fears of mounting losses at Lehman Brothers, which continued last week.

Fitch Ratings said that credit events on Fannie Mae and Freddie Mac are unlikely to trigger large scale CDO downgrades even though both GSEs are referenced in approximately 30% of synthetic CDOs rated by the agency.

Standard & Poor's expects the U.S. Treasury's announcement that Fannie Mae and Freddie Mac had been placed in conservatorship by the Federal Housing Finance Agency, and S&P's resulting rating actions on these entities to have a minimal rating impact on U.S. and European synthetic CDO transactions, the rating agency said this afternoon.

MBIA will reinsure $184 billion worth of Financial Guaranty Insurance Corp.’s U.S. public finance book, providing a boost to municipal bond holders and to FGIC’s statutory capital position, the companies announced Wednesday night.

Fitch Ratings presents its asset-level projected loss analysis (PLA) to quantify loss expectations on structured finance (SF) CDOs.

Standard & Poor's yesterday lowered its ratings on 49 tranches from 11 U.S. cash flow and hybrid CDO deals.

With the monoline industry continuing to struggle for survival, albeit with a weak pulse, and the ABS CDO sector almost flatlining, CDO hedge agreements with the monoline industry have been a cause for concern within the structured finance market.

Last week proved to be another period of slow issuance for the primary market, and trading in the secondary was not that much more active.

As summer comes to a close and all of Europe has seemingly taken a holiday from the toughest months for the securitization market, it's likely that when players return they'll find that the European market is no closer to recovery.

Sorin Capital Management announced that Matt Chasin officially joined the firm on Aug. 11 as chief operating officer, partner and member of the investment committee.

Analysts have adopted a bearish stance on German cash mezzanine CLOs, saying they expect the deteriorating German economic landscape and shifting rating methodology to further pressure performance in this asset class.

Fitch Ratings said on Thursday that certain classes of notes issued across 43 CDOs backed all or in part by trust preferred securities issued by banks are on Rating Watch Negative.

Standard & Poor's appointed David Jacob as executive managing director and head of structured finance ratings reporting to Vickie Tillman, executive vice president at the rating agency.

Standard & Poor's cut the ratings of 50 tranches from 11 US cash flow and hybrid CDO transactions. The downgraded tranches have a total issuance amount of $5.502 billion.

The European Securitization Forum (ESF) has remained steadfast about its belief that the European securitization market will return. However, as the credit turmoil intensifies, the beleaguered market looks less likely to be fixed in the short term.

The European primary pipeline is still, for the most part, defined by retained deals, although public placement of Unicredit HVB's SME CLO, Geldilux TS 2008-1, shows that for the right paper, investors will still pay up.

The beach was looking a lot better than the office last week for many ABS traders, who noted that the summer slowdown has sapped deal flow, removing any hope of liquidity picking up.

Ambac Financial Group posted second quarter earnings of $823.1 million, thanks in large part to mark-to-market gains on credit derivatives, the company announced this morning. Ambac Financial, the parent of bond insurer Ambac Assurance Corp., said it had mark-to-market gains of $961.6 million in the second quarter, helping it record a net income equivalent of $2.80 per diluted share. Net income in the second quarter last year was $173 million, or $1.67 per share.