CDOs

McDonnell Investment Management has hired Michael Herzig as the managing director of McDonnell's newly established New York office. Herzig will head up the sales and client service effort for McDonnell's Alternative Credit Strategies Business Unit and will also help direct the product development and strategy committee for the firm. Herzig will serve on the management committee of McDonnell, reporting directly to Edward Treichel, McDonnell's president and CEO. Before McDonnell, Herzig had a nine-year stint at Deutsche Bank as a managing director. He was most recently a co-head of the U.S. CDO business with direct responsibility for CLO and credit opportunity fund origination and distribution.

Alexander Rekeda joined Guggenheim Capital Markets as managing director and head of CDOs, effective today. Rekeda was previously head of structured credit, Americas at Mizuho Securities which he joined in November 2006. Mizuho dismissed its entire CDO-underwriting group in mid-December 2007, including Rekeda as well as 13 others, who all left Calyon for positions at Mizuho only one year prior. Rekeda had built up the cash CDO business at Calyon, where he had had been since July 2004.

This morning DBRS announced that it is expanding its U.S. structured finance market service. "In a continuing effort to provide value to the market, DBRS has announced the expansion of its U.S. structured finance market services in providing credit assessments," the rating agency said in a statement. "These assessments, which cover a variety of asset types, better allow institutions to value market risks in their portfolios." The release also said that institutions are encouraged to contact the rating agency for more granular analysis on their portfolios. It added that in "such difficult times, leadership, stability and credibility are necessities for the credit markets."

Dechert has laid off 13 associates in its finance and real estate group. The associates were offered three options: to accept the severance package, stay 60 days in another group and then take the severance, or to stay in the new position, although there is no guaranty on the length of stay in that position. Under the third option, some of the associates could end up permanent, but if they stay longer than 60 days, the current severance package does not apply. In a report from lawyer.com, a statement from Dechert Chairman Barton J. Winokur was published. "Due to the major shift in market conditions affecting client demands in our finance and real estate practice area, we currently do not have sufficient work for all the associates in FRE," Winokur said in the statement. "As a consequence, we have told 13 associates in the U.S. FRE group that we see no demand for them in that group in the foreseeable future. However, due to increased and substantial demand in other practice areas, we will be offering those lawyers the opportunity to work in those other groups."

Fitch Ratings looked at the potential impacts that a monoline split could have on the protection bought by banks from the financial guarantors, including on structured finance CDOs. The rating agency also examined the effects on the financial guarantors themselves. "The current situation is highly fluid," said Jim Batterman, a managing director at Fitch. What the market is concerned about is that a negative reassessment of financial guarantor counterparty risk might effectively result in a significant reversal of mark-to-market gains for the institutions, such as banks, that bought protection from the financial guarantors, Batterman added. Further, while some of these same protection buyers might have also hedged their counterparty exposure to the financial guarantors by purchasing protection on the financial guarantor (or its holding company) itself, Fitch said people should also consider the nuances of ISDA language, particularly in terms of settlement and succession, should these monolines be split apart.

Fitch Ratings downgraded four classes of notes issued by Coltrane CLO. All classes are on rating watch negative by the rating agency. Fitch lowered the transaction's €26,000,000 class B notes to 'CC' from 'CCC', €45,000,000 class C notes to 'CC' from 'CCC', €1,750,000 class D-1 notes to 'CC' from 'CCC' and €2,000,000 class D-2 notes to 'CC' from 'CCC'. On Feb. 25, the rating agency was informed that this CLO had experienced an event of default attributed to a threshold value event that was uncured for five business days. Fitch has not received confirmation that the controlling class or the trustee intend to liquidate the underlying loan collateral in the near term. If they actually chose to liquidate the underlying loan collateral, another rating action might be taken, Fitch said in a release. This market value CLO, which is backed by leveraged loans, was Deerfield Capital Management's first foray into the European CLO market. The €300 million CLO was priced in October 2006 via Banc of America Securities (ASR, 10/26/06).

MBIA has announced that it will stop guaranteeing ABS for six months and said that it intends to split the structured business from its municipal bond division within a five-year period. According to published reports, Joseph Brown, MBIA's new chief executive, said in a note to shareholders that this move is being made while the company evaluates its options. Meanwhile, Moody's Investors Service today confirmed MBIA's and its affiliates' 'Aaa' insurance financial strength ratings. The rating agency has also confirmed the 'Aa2' rating on surplus notes issued by MBIA Insurance Corp., and the 'Aa3' senior unsecured ratings of its parent company, MBIA Inc. The rating actions reflect Moody's assessment of MBIA's current efforts to strengthen its capital position in terms of its problematic mortgage and mortgage-related CDO exposures. The rating firm also considered the changes the company is implementing to limit the volatility associated with its insured portfolio. MBIA's current outlook is negative.

Moody's Investors Service said that the deterioration in the credit risk profiles of financial guarantors may have significant implications for a number of banks and securities firms. The rating agency's review for possible downgrades of embattled monolines MBIA and Ambac is set to conclude soon.

In any divorce, dividing up the assets can be a complicated and lengthy process, often accompanied by a mass of legal issues. The same appears to hold true when a bond insurance company is taken apart.

Markit announced plans to launch the first global, multi-bank, cross-asset client valuations platform called Markit Valuations Manager. The platform will fuse electronic delivery of dealer OTC derivative and consensus cash valuations with Markit's independent valuations into a single platform. The motivation behind the new product comes from recent regulatory and accounting changes that have increased the importance of independent valuation sources for funds, Markit said. David Lefferts, managing director at Markit, will lead the initiative and six global investment banks have agreed to support the launch of the platform including Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS. These banks will provide Markit with end-of-day and end-of-month client valuations for OTC derivative instruments and cash securities. Markit will then create a composite of dealer marks for cash securities and counterparty present values for OTC derivative positions, which clients can compare with Markit's independent valuations. The platform will launch in 2H08 with coverage of bonds and derivatives. Markit expects to expand the platform to include more banks and additional cash and derivative asset classes including ABS and MBS.

Despite what seems like an almost nonexistent CDO market, bank balance sheet CLOs are still garnering investor interest, according to sources.

Falling prices are forcing total-rate-of-return market-value CLOs to liquidate their underlying assets. These unwinding CLOs could present opportunities for investors, but could also drive prices down even further. And sources say the loan market has already hit historical lows.

ERMBX.UK, the index designed to reference synthetic U.K. prime MBS, looked set for an early launch a few weeks ago, with market reports indicating that the new index could go live earlier than the ECMBX.

The reconstruction of the securitization market took another turn last week as a collective group of European securitization market associations outlined a three-pronged initiative aimed at improving market transparency.

ABN AMRO and Dutch pension administrator PGGM have closed a synthetic CLO referencing a portfolio originated by ABN Brazilian unit Banco Real, according to a press release by the European bank. Named after the celebrated Iguacu waterfalls, the deal references a pool amounting to a notional $850 million. The credit risk of the portfolio is shared by participating credits in the first and second loss tranches of the CLO, the release said.

At the American Securitization Forum's (ASF) conference held in Las Vegas last week, many of the industry panels looked back at 2007 and reflected on how the market got to the state it's at right now.

Demands for more personal responsibility on the part of the CDO investor and the portfolio manager gave the rating agencies a break from the hot seat at the ASF's annual conference in Las Vegas last week.

Blame it on the New York Giants' Super Bowl victory or a streak of luck at the blackjack tables, but panelists at last week's American Securitization Forum's annual conference in Vegas were optimistic about liquidity returning to certain parts of the ABS market, particularly the CLO space.

Best of Times, the Worst of Times

Brown Rudnick has brought together staff from its structured finance, bankruptcy and corporate restructuring and distressed debt practices to form a structured resolution group.