CDOs

Two prominent ABS research teams tackled the credit card sector last week as Lehman Brothers touted Discover Bank's ABS as a refuge of value after its spreads widened on reports of a corporate spinoff, and Morgan Stanley dissected various issues at credit card issuers GE Capital, Capital One Financial and the Bank of America-owned Fleet trust.

Personal bankruptcy filings in the U.S. totaled a whopping 165,459 in March, reportedly the largest number on record, but so far credit card ABS performance trends have remained stable and are expected to stay that way, according to Fitch Ratings. The spike represents an 8.5% increase over March 2004, but is only 0.2% higher, year-to-date, than last year. The March increase is largely due to the enactment of the Bankruptcy Reform Act, signed by President George W. Bush on April 20.

NEW YORK - Although Basel II and U.S. regulatory changes continue to have an impact on the conduit market, growth in asset-backed commercial paper issuance is expected to continue, said Deborah Seife, managing director at Fitch Ratings at a briefing the ratings agency hosted here last week.

Pacific Investment Management Co. is scaling back its investment in structured finance CDOs this year due to performance concerns. The move could be the "catalyst for concern in the entire market," said Steven Finnk, an analyst at United Capital Markets.

CDOs stand as "about the only market with spreads at or near all-time tights," according to a JPMorgan Securities report. "This performance cannot continue indefinitely," analysts wrote.

Zoe (Jinyang) Wang, analyst; Julia Tung, vice president and senior analyst, Moody's Investors Service

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 4,207.7 1 16.5 8 Credit Suisse First Boston 3,449.5 2 13.6 7 Citigroup 3,206.3 3 12.6 5 Barclays Capital 3,195.9 4 12.6 6 Merrill Lynch & Co Inc 2,502.4 5 9.8 4 JP Morgan 2,270.2 6 8.9 4 Banc of America Securities LLC 2,001.3 7 7.9 4 Wachovia Corp 1,837.0 8 7.2 4 Goldman Sachs & Co 1,289.0 9 5.1 1 Lehman Brothers 780.3 10 3.1 1 Industry Total 25,433.4 - 100.0 25 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 6,848.8 1 21.4 10 Morgan Stanley 3,864.6 2 12.0 13 Citigroup 3,526.6 3 11.0 8 UBS 3,142.6 4 9.8 7 Lehman Brothers 2,714.2 5 8.5 9 Bear Stearns & Co Inc 2,271.2 6 7.1 5 Groupe Caisses d'Epargne 1,742.0 7 5.4 2 Banc of America Securities LLC 1,454.9 8 4.5 6 Wachovia Corp 1,241.9 9 3.9 3 JP Morgan 987.3 10 3.1 2 Industry Total 32,085.1 - 100.0 80 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 JP Morgan 1,775.0 1 21.4 7 Morgan Stanley 1,666.5 2 20.1 2 Citigroup 1,375.0 3 16.6 4 Barclays Capital 1,049.1 4 12.6 8 Lehman Brothers 625.0 5 7.5 2 Merrill Lynch & Co Inc 512.6 6 6.2 4 Deutsche Bank AG 499.1 7 6.0 5 Credit Suisse First Boston 413.3 8 5.0 2 Banc of America Securities LLC 286.6 9 3.5 4 UBS 46.3 10 0.6 1 Societe Generale 46.3 10 0.6 1 Industry Total 8,302.0 - 100.0 20 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 1,191.7 1 21.4 2 Deutsche Bank AG 1,191.7 1 21.4 2 Lehman Brothers 725.8 3 13.0 1 JP Morgan 725.8 3 13.0 1 Barclays Capital 725.8 3 13.0 1 HSBC Holdings PLC 566.7 6 10.2 1 Citigroup 212.0 7 3.8 1 Industry Total 5,569.5 - 100.0 5 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 Bear Stearns & Co Inc 18,969.0 1 10.0 27 Countrywide Securities Corp 18,043.6 2 9.5 18 Lehman Brothers 17,302.8 3 9.1 42 Morgan Stanley 16,762.0 4 8.8 18 Royal Bank of Scotland Group 16,619.6 5 8.8 25 Deutsche Bank AG 16,198.2 6 8.5 32 Credit Suisse First Boston 15,747.7 7 8.3 34 Merrill Lynch & Co Inc 10,591.0 8 5.6 13 Banc of America Securities LLC 9,182.0 9 4.8 20 UBS 7,935.0 10 4.2 18 Industry Total 189,939.8 - 100.0 341 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 3,134.2 1 18.9 4 Morgan Stanley 2,757.6 2 16.6 3 Citigroup 2,230.0 3 13.4 4 Credit Suisse First Boston 2,196.2 4 13.2 3 Deutsche Bank AG 1,483.8 5 8.9 3 UBS 1,447.2 6 8.7 3 Lehman Brothers 1,012.4 7 6.1 1 JP Morgan 983.8 8 5.9 2 Goldman Sachs & Co 806.2 9 4.9 2 Merrill Lynch & Co Inc 550.3 10 3.3 1 Industry Total 16,601.7 - 100.0 13 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 3,134.2 1 24.2 4 Citigroup 2,230.0 2 17.2 4 Credit Suisse First Boston 1,645.9 3 12.7 2 Morgan Stanley 1,540.6 4 11.9 1 UBS 1,447.2 5 11.2 3 Lehman Brothers 1,012.4 6 7.8 1 Deutsche Bank AG 817.2 7 6.3 2 Goldman Sachs & Co 806.2 8 6.2 2 JP Morgan 317.2 9 2.5 1 Industry Total 12,950.9 - 100.0 11 Source: Thomson Financial

auto ABS 19% credit card ABS 5% global MBS 5% real estate ABS 59% student loan ABS 9% other 3%

With its strong presence in the auto sector, MBIA was the leading financial guarantor in the first quarter, having wrapped roughly $5.9 billion of primary ABS supply in the first three months of the year. Overall wrapped volume was up from the same period last year, accounting for 12.1% of total supply - led by the auto sector, which was bolstered by numerous auto rental fleet lease transactions - up from the 6.62% of wrapped volume in 1Q04.

ABS analysts at Citigroup Global Markets are reclassifying all 2004 and later vintage deals from Paramus, N.J.-based auto lender Long Beach Acceptance Corp. into the bank's Near Prime index. Those vintages had previously resided in Citigroup's subprime index, but, Long Beach has "significantly elevated the credit quality of its underwriting profile," according to Citigroup. Analysts now expect that elevation in underwriting profile will result in much improved losses, consistent with other near-prime lenders.

As the aftershock from this spring's auto-sector implosion continues to roil the market, questions are starting to swirl about the stability of rental-fleet securitizations. The deals most in question are those in which General Motors and Ford Motor Co. have promised to buy back vehicles from the rental companies, as the financial strength of those manufacturers will dictate whether they have the buying power to honor their repurchase agreements. While that strength seems to be deteriorating rapidly, rating agency officials said there is little to worry about - for now.

JPMorganChase announced last week its intention to wind down its $4.3 billion dollar Delaware Funding ABCP conduit. The firm will transfer the assets from Delaware Funding to its Park Avenue Funding, or Parko, conduit, according to Deborah Toennies, managing director at JPMorgan. Delaware Funding's outstanding obligations are expected to be fully paid down by the end of May.

The U.S. ABS primary market saw a solid amount of issuance last week with over $10 billion priced, including a $1 billion auto loan deal from American Honda Finance Corp. that sources say stabilized the sector and eased fears with its pricing.

General Parts Inc., one of the largest automotive wholesale distributors in the U.S., launched a credit tenant lease via Wachovia Securities last week, sources said.