CDOs

Credit quality is good, but residential mortgage innovations complicate picture

Experts across the ABS market agree the latest bankruptcy reform proposal from Capitol Hill will likely cause a rush of bankruptcy filings before the rule actually goes into effect. However, if the credit-card sector can ease through that period without a hitch, the same law should work to decrease charge-offs and help collateral performance by making it harder for potential filers to discharge credit card debt.

Year to date as of 03/17 Term (days) 03/11 03/14 03/15 03/16 03/17 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Credit Suisse First Boston 3,143.5 1 18.4 5 Merrill Lynch & Co Inc 2,502.4 2 14.6 4 Citigroup 2,477.0 3 14.5 4 Barclays Capital 2,116.5 4 12.4 4 Deutsche Bank AG 2,027.7 5 11.8 3 Wachovia Corp 1,580.0 6 9.2 3 Goldman Sachs & Co 1,289.0 7 7.5 1 JP Morgan 989.9 8 5.8 2 Banc of America Securities LLC 515.0 9 3.0 1 ABN AMRO 479.6 10 2.8 1 Industry Total 17,120.6 - 100.0 14 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 3,944.8 1 22.9 5 Morgan Stanley 2,960.7 2 17.2 10 Citigroup 2,614.8 3 15.2 6 UBS 2,326.6 4 13.5 5 Bear Stearns & Co Inc 1,759.5 5 10.2 3 Lehman Brothers 1,194.3 6 6.9 4 Credit Suisse First Boston 889.0 7 5.2 3 JP Morgan 685.0 8 4.0 1 Wachovia Corp 681.0 9 4.0 2 Banc of America Securities LLC 194.0 10 1.1 3 Industry Total 17,249.6 - 100.0 40 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 1,579.0 1 58.9 1 Citigroup 875.0 2 32.6 1 Merrill Lynch & Co Inc 174.3 3 6.5 1 Deutsche Bank AG 17.6 4 0.7 1 Barclays Capital 17.6 4 0.7 1 Banc of America Securities LLC 17.6 4 0.7 1 Industry Total 2,681.1 - 100.0 4 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 725.8 1 30.4 1 JP Morgan 725.8 1 30.4 1 Barclays Capital 725.8 1 30.4 1 Citigroup 212.0 4 8.9 1 Industry Total 2,389.5 - 100.0 2 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 12,023.7 1 12.0 19 Morgan Stanley 10,411.8 2 10.4 12 Royal Bank of Scotland Group 9,077.9 3 9.1 17 Lehman Brothers 8,566.3 4 8.5 22 Credit Suisse First Boston 8,509.2 5 8.5 21 Bear Stearns & Co Inc 8,467.3 6 8.5 16 Merrill Lynch & Co Inc 7,976.1 7 8.0 9 Countrywide Securities Corp 7,336.0 8 7.3 7 Citigroup 6,151.8 9 6.1 14 Banc of America Securities LLC 4,862.7 10 4.9 11 Industry Total 100,261.7 - 100.0 150 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 2,368.0 1 21.5 3 Citigroup 1,830.0 2 16.6 3 Credit Suisse First Boston 1,645.9 3 14.9 2 Morgan Stanley 1,540.6 4 14.0 1 UBS 1,447.2 5 13.1 3 Lehman Brothers 1,012.4 6 9.2 1 Deutsche Bank AG 817.2 7 7.4 2 JP Morgan 317.2 8 2.9 1 Goldman Sachs & Co 40.0 9 0.4 1 Industry Total 11,018.5 - 100.0 9 Source: Thomson Financial

auto ABS 17% credit card ABS 4% enterprise finance ABS 0% equipment ABS 2% global MBS 7% real estate ABS 60% stranded cost ABS 2% student loan ABS 8%

While most ABS sectors have so far equaled or outpaced their 2004 year-to-date issuance volumes, the credit-card sector has been conspicuously absent from the party with less than one-third of the issuance seen at this time last year. While theories abound for the dearth of credit card deals, the paltry numbers have left analysts scratching their heads. Some say, however, that the sector will correct itself and even beat last year's $52 billion total.

The Public Utility Commission of Texas approved CenterPoint Energy Inc.'s request to securitize up to $1.8 billion in stranded cost ABS last week, clearing the way for a deal which the issuer hopes will occur as soon as possible. Some hurdles do remain, however, as the issuer has yet to officially select an underwriter for the transaction.

After being granted the status of a Nationally Recognized Statistical Rating Organization by the Securities and Exchange Commission last week, A.M. Best Co. intends to penetrate the securitization and banking arenas, while plans to broaden its scope in the insurance industry remain the ratings agency's main goal.

Business Loan Express priced a $102 million offering backed by the non-government guaranteed portions of Small Business Association loans - dubbed SBA 7a loans - with WestLB making its debut as lead manager on a BLX transaction. Previously, Wachovia Securities had acted as lead, with WestLB filling the co-manager role.

The U.S. primary ABS market had another bustling week to once again price upwards of $9.3 billion as of Thursday's market close, with the home equity sector accounting for $5.5 billion of new-issue volume. With the heavy new issue calendar dominating the landscape, there were conflicting reports on secondary volume. "Wednesday was a very active day in the secondary market, led by profit takers in all asset classes. For the first time in the past couple of weeks, the selling was met with widespread customer interest, while primary spreads continued to grind in tighter across ABS sectors," said Credit Suisse First Boston analysts in a report.

High yield CBOs - which comprise less than one-quarter of the broader CDO universe - accounted for close to three-quarters of materially impaired securities in the U.S. CDO sector between 1993 and 2003, according to a report from Moody's Investors Service.

Headhunters are reporting a lackluster February, and some sources attribute this to a scarcity of new job openings in the ABS market.

Following its recent equity IPO, Irvine, Calif.-based lender Encore Mortgage Corp. came to market with its first stand-alone securitization last week, a whopping $1.6 billion home equity deal last week.

Last week Capital One Financial Corp. announced plans to acquire New Orleans-based retail bank Hibernia Corp. for $5.3 billion, and though the move will undoubtedly give Capital One more liquidity and funding access, there is doubt as to what the future holds for the company's credit card ABS issuance volume.

Year to date as of 03/10 Term (days) 03/04 03/07 03/08 03/09 03/10 1-week