CDOs

Merrill Lynch again seized the top spot among U.S. CDO underwriters in the first half of the year, selling 27 deals to the market totaling some $22.2 billion and a 16.8% market share, according to data maintained by Thomson Financial. The investment bank managed to reclaim its position back after losing it in the first quarter to Citigroup Global Markets, a shift some speculated was the result of the loss of a handful of staff members led by former Merrill star Chris Ricciardi.

It has been three years since the Global Research Analyst Settlement was announced, but it appears not every firm on the Street got the message. Wachovia Corp.'s capital markets group just cost the firm a $25 million fine, stemming from charges of research-related conflicts of interest. Similar charges were lobbed against Wachovia by a CDO research analyst nearly one year ago.

Merrill Lynch Bank USA, a subsidiary of Merrill Lynch, is preparing to launch its first multiseller asset-backed commercial paper program called Zane Funding, a much more flexible program than the existing Deer Valley Funding.

The outlook for tobacco bond securitizations remains stable for the time being, said Fitch Ratings. The rating agency said this after the Supreme Court of Florida decided that several tobacco companies do not have to pay a $145 billion settlement stemming from a class-action lawsuit against them.

Asset securitization professionals did not have a huge workload awaiting them after the Independence Day holiday last week, as a mere $6 billion in potential new issuance was being marketed. Some market professionals predicted that just $3 billion in new issuance would price by week's end.

by Dina J. Moskowitz, assistant general counsel, Natalie Abrams, associate general counsel, and Amy Martin, director, Standard & Poor's

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 6,027.5 1 17.8 12 Wachovia Corp 5,432.9 2 16.1 10 JP Morgan 5,062.5 3 15.0 12 Deutsche Bank AG 2,690.2 4 8.0 8 Royal Bank of Scotland Group 2,169.3 5 6.4 5 Banc of America Securities LLC 1,925.9 6 5.7 3 Merrill Lynch & Co Inc 1,847.5 7 5.5 4 Barclays Capital 1,603.4 8 4.7 3 Credit Suisse 1,550.0 9 4.6 3 HSBC Holdings PLC 1,329.2 10 3.9 2 Industry Total 33,810.0 - 100.0 43 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 20,899.6 1 16.6 26 Citigroup 18,158.5 2 14.4 30 Deutsche Bank AG 13,959.1 3 11.1 17 Banc of America Securities LLC 9,548.4 4 7.6 22 Credit Suisse 8,382.2 5 6.6 15 Bear Stearns & Co Inc 8,063.9 6 6.4 16 UBS 7,224.1 7 5.7 37 Royal Bank of Scotland Group 6,499.7 8 5.2 8 Wachovia Corp 5,823.8 9 4.6 12 Morgan Stanley 5,216.0 10 4.1 21 Industry Total 126,166.1 - 100.0 249 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 8,982.0 1 24.5 13 Banc of America Securities LLC 8,235.0 2 22.5 12 JP Morgan 7,824.7 3 21.4 18 Deutsche Bank AG 2,924.9 4 8.0 8 Morgan Stanley 1,929.0 5 5.3 3 Barclays Capital 1,900.0 6 5.2 5 Credit Suisse 1,375.0 7 3.8 7 ABN AMRO 1,000.0 8 2.7 5 HSBC Holdings PLC 1,000.0 8 2.7 1 Merrill Lynch & Co Inc 500.0 10 1.4 2 Industry Total 36,620.5 - 100.0 56 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 32,794.1 1 10.8 74 Countrywide Securities Corp 30,032.0 2 9.9 38 Royal Bank of Scotland Group 29,648.6 3 9.8 62 Morgan Stanley 27,201.9 4 9.0 27 Credit Suisse 24,514.6 5 8.1 58 Deutsche Bank AG 19,902.4 6 6.6 43 Merrill Lynch & Co Inc 19,640.2 7 6.5 31 Bear Stearns & Co Inc 19,068.3 8 6.3 54 Goldman Sachs & Co 15,919.6 9 5.3 24 JP Morgan 15,553.2 10 5.1 37 Industry Total 303,026.2 - 100.0 541 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 7,319.1 1 19.5 9 Deutsche Bank AG 6,320.7 2 16.8 9 Merrill Lynch & Co Inc 3,420.1 3 9.1 3 Credit Suisse 3,306.5 4 8.8 6 Goldman Sachs & Co 2,869.6 5 7.6 3 Lehman Brothers 2,834.1 6 7.6 2 Morgan Stanley 2,568.2 7 6.8 3 Banc of America Securities LLC 2,550.5 8 6.8 4 Wachovia Corp 1,610.0 9 4.3 1 RBC Capital Markets 1,553.0 10 4.1 2 Industry Total 37,555.5 - 100.0 27 Source: Thomson Financial

auto ABS 9% credit card ABS 8% enterprise finance 0% equipment ABS 2% real estate ABS 72% structured settlements 0% student loan ABS 9% trade receivables 1%

In terms of dollar volume, the East Cameron Gas Co. Sukuk Trust is not exactly a big deal, at $165.6 million. Yet those involved with the transaction are billing it as the first true U.S.-based future-flow securitization backed by overriding royalty interests in gas resources, which also comply with shari'ah laws.

Credit Suisse last week ushered in another first-time CDO manager to the market when it closed the $1 billion Harp High Grade CDO I, a high-grade portfolio of RMBS assets to be managed by New York-based Annaly Mortgage Management subsidiary FIDAC. The deal comes at a time when a wave of new managers - particularly those like Annaly that operate as REITs - have opted to dip a toe into the rapidly growing CDO market.

Industry-level trends and manufacturer performance affect prepayment speeds on prime auto ABS deals, and Detroit-based manufacturers exhibit the strongest link between the two occurrences, according to Lehman Brothers analysts.

The repeal of the single-holder rule for higher education loan borrowers is translating to a boost in prepayment speeds on student loan ABS, according to several market sources.

The asset securitization market juggled three significant market events last week. The Federal Reserve tightened credit by raising its federal funds rate to 5.25% on Thursday, but ABS professionals noted that the increase had already been priced into several deals; interest rate increases on higher education loans were slated to take effect on July 1; and Standard & Poor's new LEVELs credit enhancement requirements (see story on p. 11) on certain home equity loans, including so-called piggy-back loans, also went into effect on the first of July.

Robert R. Malin, the co-head of Citigroup Global Market's U.S. asset-backed securities business died Friday, June 23. Malin, who passed while on vacation with his family in Rome, was 46.

At a time when the demand for timeshare ABS is on the rise and the sector appears relatively stable, Standard & Poor's has introduced its U.S. Timeshare Securitization Performance Index (TSPI), a report that will highlight the performance of all timeshare term issuance rated by S&P since 2001.

The Public Utility Commission of Texas on June 21 approved a $1.7 billion stranded cost securitization order for the AEP Texas Central Co., the last of such deals expected from the state.