CDOs

The torrid pace of deals churning from the industry coined "CDO machine" this year is making last year's record issuance look like a warm-up round. Total dollar volume in the U.S. CDO market was up 96% in the first eight months of this year compared to the same period last year, according to Deutsche Bank. The number blew past the broader ABS market's feeble 0.05% gain over 2005 issuance at this time last year.

The Louisiana Public Service Commission (LPSC) last week appointed a roster of financial advisors, energy consultants and legal counsel to structure a deal that would allow Entergy Corp. to raise $690 million in securitization debt. The New Orleans-based electrical power company is looking to recoup costs it incurred after Hurricanes Katrina and Rita. If given final approval, Entergy could come to market with the transaction in early 2007.

Investors from all corners of the ABS market, especially those from Europe, came out in full force last week. With such demand for ABS paper, market players expected the week's deal tally to reach $20 billion.

Standard and Poor's late last week said it will begin assigning so-called "swap risk ratings" upon request to all rated credit default swaps - primarily those in the global synthetic CDO sector. The move highlights both efforts toward transparency within the credit default swap market, along with a shift to include the structural nuances of unfunded credit default swap transactions within the definition of ratings.

Citibank held onto its spot as the largest ABCP program administrator, with $83.9 billion in paper issued from its 13 programs at the end of the first quarter, according to Moody's Investors Service, which published its mid-year review of the ABCP market in late August. On the issuance side, European appetite for short-term funding, a higher utilization rate and market infatuation with repurchase agreements helped boost ABCP outstandings to a hearty $920 billion by the end of June.

In a move designed to "reflect the expanding capabilities of its entire organization," Cohen Brothers & Co. last week announced it had changed its named to Cohen & Co.

Hoping to align its asset-backed commercial paper programs for anticipated growth in the global market for asset-backed commercial paper, JPMorgan Chase is making several changes to its conduit programs.

Net loss rates on securitized prime and subprime auto loans improved dramatically during the second quarter of 2006, thanks to steadily falling unemployment rates and rising values on used cars, according to Moody's Investors Service.

New York Life Investment Management (NYLIM), an asset management firm headquartered in New York, follows a diverse multi-asset class platform in order to maximize returns for its investors.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 8,724.8 1 16.6 17 Citigroup 8,456.9 2 16.1 13 Wachovia Corp 6,422.4 3 12.2 12 Barclays Capital 5,227.8 4 9.9 8 Deutsche Bank AG 5,013.9 5 9.5 11 Royal Bank of Scotland Group 3,644.0 6 6.9 7 Credit Suisse 3,066.3 7 5.8 6 Banc of America Securities LLC 2,736.1 8 5.2 5 HSBC Holdings PLC 2,389.3 9 4.5 3 Merrill Lynch & Co Inc 1,847.5 10 3.5 4 Industry Total 52,629.5 - 100.0 59 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 23,876.8 1 12.1 38 Citigroup 23,630.7 2 12.0 40 Deutsche Bank AG 17,915.1 3 9.1 25 Credit Suisse 13,572.0 4 6.9 21 Wachovia Corp 12,578.7 5 6.4 31 Bear Stearns & Co Inc 12,411.6 6 6.3 24 Banc of America Securities LLC 12,209.6 7 6.2 28 Morgan Stanley 11,341.8 8 5.7 38 UBS 9,758.1 9 4.9 42 JP Morgan 9,647.6 10 4.9 25 Industry Total 197,456.0 - 100.0 370 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 13,158.3 1 27.6 17 Citigroup 9,982.0 2 20.9 15 JP Morgan 8,924.7 3 18.7 20 Deutsche Bank AG 3,424.9 4 7.2 10 Barclays Capital 3,096.8 5 6.5 7 HSBC Holdings PLC 1,999.9 6 4.2 2 Morgan Stanley 1,929.0 7 4.1 3 Credit Suisse 1,800.0 8 3.8 9 ABN AMRO 1,000.0 9* 2.1 5 Merrill Lynch & Co Inc 1,000.0 9* 2.1 4 Industry Total 47,667.4 - 100.0 71 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 1,750.0 1 21.3 3 ABN AMRO 1,250.0 2* 15.2 2 Lehman Brothers 1,250.0 2* 15.2 2 Royal Bank of Scotland Group 1,000.0 4* 12.2 2 Banc of America Securities LLC 1,000.0 4* 12.2 2 Barclays Capital 855.0 6 10.4 1 JP Morgan 500.0 7 6.1 1 Merrill Lynch & Co Inc 300.0 8* 3.7 1 Citigroup 300.0 8* 3.7 1 Industry Total 8,205.0 - 100.0 7 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 44,451.1 1 11.4 98 Royal Bank of Scotland Group 32,129.5 2 8.3 78 Countrywide Securities Corp 31,733.9 3 8.2 50 Credit Suisse 28,623.6 4 7.4 76 Morgan Stanley 28,257.1 5 7.3 29 Deutsche Bank AG 27,126.7 6 7.0 59 Bear Stearns & Co Inc 23,869.8 7 6.1 72 JP Morgan 23,016.2 8 5.9 52 Citigroup 21,976.2 9 5.6 57 Merrill Lynch & Co Inc 21,122.1 10 5.4 36 Industry Total 389,374.1 - 100.0 745 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 Citigroup 7,390.8 1 16.2 10 Deutsche Bank AG 6,320.7 2 13.8 9 Credit Suisse 4,706.1 3 10.3 8 Lehman Brothers 3,873.7 4 8.5 3 Goldman Sachs & Co 3,809.3 5 8.3 5 Merrill Lynch & Co Inc 3,420.1 6 7.5 3 Banc of America Securities LLC 3,418.5 7 7.5 5 Morgan Stanley 2,928.3 8 6.4 4 Wachovia Corp 2,649.5 9 5.8 2 RBC Capital Markets 1,500.0 10 3.3 2 Industry Total 45,699.4 - 100.0 34 Source: Thomson Financial

auto ABS 10% credit card ABS 8% enterprise finance 0% equipment ABS 2% real estate ABS 70% structured settlements 0% student loan ABS 9% trade receivables 1% utilities ABS 0%

Merrill Lynch's decision last week to acquire subprime lender First Franklin Financial Corp. swept yet another investment bank further into the loan origination business - a trend which some are coining as a "paradigm shift" within the maturing subprime mortgage market. The move is expected to provide Merrill - along with the other Wall Street banks that have preceded it - a cheaper and more direct path to reaping proceeds of securitization. Market participants said it might be too soon to predict, however, how that cost savings might alter pricing in the home equity ABS sector.

Middle market commercial finance company Churchill Financial Holdings last week announced plans to acquire CDO manager Centre Pacific LLC - a move that will create another player in the rapidly growing middle market loan CLO space.

Washington Mutual is preparing to price the first covered bond program by a U.S. issuer. While the transaction is not structured as a genuine securitization and is being marketed overseas, it is eventually expected to have implications on the way that the Seattle-based thrift - as well as other peer companies - finances its operations.

Credit analysts see no reason - for now, at least - to downgrade the high-profile $2.1 billion Ballantyne Re securitization, despite the fact that the issuing entity, Scottish Re, suffered a series of downgrades that reduced its counterparty credit rating to junk status and its stock price is languishing at yearly lows.