CDOs

Amid the political frenzy that seized the nation and culminated on election day last week, some investors expressed concern over what impact a Republican-led initiative to halt the creation of student loans with 9.5% floor payments would have on outstanding student loan ABS. However, investors' fears are unwarranted, according to a recent report from Morgan Stanley.

NEW YORK - Packed with nearly 700 registrants the day before the presidential election, the process of politics was replicated at Standard & Poor's Annual Global CDO Conference held here last week. An audience participation panel provided an indication of what the CDO market could expect in 2005 and created a clearer picture of participants flocking to this growing market space.

A new issuer in the franchise sector is expected to enter the term ABS market possibly before year end, market sources said.

Some ABS new asset classes appear to be stalled at the moment, according to an unscientific poll conducted by ASR staff following Standard and Poor's fourth annual New Assets Hot Topics Conference held in New York last week.

Year to date as of 11/10 Term (days) 11/04 11/05 11/08 11/09 11/10 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 9,168.4 1 15.8 18 Citigroup 8,238.7 2 14.2 13 Deutsche Bank AG 6,828.5 3 11.8 12 Banc of America Securities LLC 6,552.7 4 11.3 12 Wachovia Corp 6,459.3 5 11.1 12 Credit Suisse First Boston 4,943.7 6 8.5 10 Morgan Stanley 3,703.3 7 6.4 8 Barclays Capital 3,524.5 8 6.1 9 Merrill Lynch & Co Inc 2,426.9 9 4.2 4 Lehman Brothers 1,255.7 10 2.2 3 Industry Total 57,963.1 - 100.0 69 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 11,248.9 1 17.2 25 Morgan Stanley 6,696.4 2 10.2 19 Citigroup 5,913.9 3 9.1 22 Credit Suisse First Boston 4,865.1 4 7.4 12 Wachovia Corp 4,739.4 5 7.3 18 UBS 4,605.1 6 7.0 8 Deutsche Bank AG 4,429.6 7 6.8 11 Goldman Sachs & Co 4,297.5 8 6.6 8 Lehman Brothers 3,343.0 9 5.1 11 Bear Stearns & Co Inc 3,340.1 10 5.1 14 Industry Total 65,373.8 - 100.0 182 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 14,292.5 1 31.4 24 Citigroup 9,447.3 2 20.8 19 Lehman Brothers 4,595.5 3 10.1 9 Barclays Capital 3,649.2 4 8.0 12 Deutsche Bank AG 3,340.0 5 7.4 13 Banc of America Securities LLC 2,683.1 6 5.9 12 Credit Suisse First Boston 2,550.4 7 5.6 9 Morgan Stanley 2,515.8 8 5.5 7 Merrill Lynch & Co Inc 827.2 9 1.8 3 Wachovia Corp 775.0 10 1.7 4 Industry Total 45,460.9 - 100.0 82 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 3,958.0 1 30.8 6 Morgan Stanley 2,249.7 2 17.5 3 Banc of America Securities LLC 2,190.6 3 17.0 4 Merrill Lynch & Co Inc 1,728.6 4 13.4 2 Credit Suisse First Boston 1,058.0 5 8.2 3 JP Morgan 728.6 6 5.7 1 HSBC Holdings PLC 708.0 7 5.5 2 ABN AMRO 250.0 8 1.9 1 Industry Total 12,871.5 - 100.0 11 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 Countrywide Securities Corp 62,070.7 1 14.2 60 Royal Bank of Scotland Group 49,993.6 2 11.5 89 Lehman Brothers 44,568.3 3 10.2 86 Morgan Stanley 36,597.6 4 8.4 67 Credit Suisse First Boston 33,331.8 5 7.6 63 Bear Stearns & Co Inc 32,746.9 6 7.5 63 Deutsche Bank AG 27,070.6 7 6.2 68 Banc of America Securities LLC 26,749.6 8 6.1 69 Citigroup 22,999.8 9 5.3 64 UBS 18,134.4 10 4.2 36 Industry Total 436,238.3 - 100.0 812 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 5,875.0 1 13.4 8 Citigroup 5,686.6 2 13.0 8 Deutsche Bank AG 5,239.3 3 12.0 8 Morgan Stanley 4,582.9 4 10.5 8 Credit Suisse First Boston 4,463.9 5 10.2 7 Banc of America Securities LLC 3,982.1 6 9.1 5 JP Morgan 3,881.5 7 8.9 7 UBS 3,155.1 8 7.2 7 Lehman Brothers 2,524.1 9 5.8 4 Goldman Sachs & Co 1,827.1 10 4.2 4 Industry Total 43,719.2 - 100.0 38 Source: Thomson Financial

Year to date as of Nov 3 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases 126 126 126 126 Auto Loans/Recs 41,391 36,622 4,769 35,132 6,259 16,580 18,742 6,069 Comm. Mtg 2,899 1,294 1,605 2,899 1,261 229 829 540 Commercial Loans Corp Bond/Note 3,846 1,696 2,150 3,846 2,569 746 45 485 Corporate Loans 5,352 286 5,066 5,352 2,480 395 370 1,192 914 Credit Card Rec 28,632 10,299 18,333 24,659 3,974 19,334 1,400 5,749 900 1,249 Debentures 2,122 2,122 2,122 2,122 Equip Loans Equip. Leases 4,744 4,469 275 4,164 580 2,293 1,388 554 221 289 Floorplan Recs 8,026 840 7,186 7,902 124 4,014 830 3,182 Franchisee Loans 194 194 194 Home Impr Loans Installment Recs 1,797 1,797 1,797 1,797 Junk Bonds Leveraged Loans 1,174 64 1,110 1,174 38 10 284 842 Mixed Collateral 1,881 7 1,874 1,881 1,500 306 22 53 Mnfrd Housing Ct 200 200 200 200 Motorcycle Loans 2,740 2,740 2,740 313 1,923 504 Mutual Fund Fees 501 331 170 501 501 Non-Jumbo Mtg Ln 68,520 31,864 33,291 65,728 2,793 41,621 14,956 10,760 849 319 Oil Receivables Preferred Sec 3,597 2,268 1,330 3,597 3,253 158 186 Prv Issued Sec 1,852 1,079 380 590 1,262 1,852 Rental Car Rec. 2,400 1,300 1,100 2,400 1,300 1,100 Rev Cred/Home Eq 216,332 125,057 77,504 186,006 30,325 143,388 44,757 25,956 1,606 553 Sm Business Loan 828 828 828 828 Struc Fin Credit 14,838 6,458 8,380 14,838 5,807 2,507 4,928 1,508 Student Loans 30,626 6,957 21,983 25,639 4,986 17,780 3,239 4,044 3,663 1,808 Tax Liens Ticket Rec Timeshare Loans 635 386 250 635 336 300 Tobacco Receives Trade Recs Unspecified/NA Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 48% Non-Jumbo Mtg Ln 15% Auto Loans/Recs 9% Student Loans 7% Credit Card Rec 6% Other 15%

The pricing of CREST 2004-1 by Wachovia Securities last week was just the third CDO comprised of CMBS collateral - subordinate CMBS collateral that is - to ever hit the market. This innovative revolving structure, which debuted in late June, marks a true milestone as CDO technology converges with the asset-backed market in a structure that has investors buying in large portions.

Regulation Triple-X, the ruling that mandates how much cash reserve insurance companies must keep against their term life portfolios, has insurance carriers seeking reserve relief in the securitization market. At least two such transactions are seen funding before the year is through.

The U.S. ABS primary market put up solid numbers last week, pricing upwards of $8 billion as of Thursday's market close, and close to $6 billion still making the rounds heading into Friday.

Analysts at Standard & Poor's found that the largest increase in CDO upgrades since 2002 occurred last quarter, but the news was tempered by a sizeable level of downgrade activity. However, the third quarter spelled good news, overall, for the high-yield bond sector.

Suffice it to say with growing interest in real estate investment trusts, including the bevy

Loan sale advisor DebtX is slated to hold a $57 million commercial loan sale on Nov. 16 for a regional bank located in the Midwest US, according to Kingsley Greenland, president, founder and CEO. The loan portfolio consists of 40 relationships, which refers to loans that are different, but with the same issuer. Commercial real estate loans comprise 60% of the portfolio, while the portfolio also contains commercial and industrial (C&I), hospitality, agricultural and residential development-related loans as well, Greenland said. All of the collateral is based in the Midwest US, he noted.

Wrapped ABS increased significantly from the previous quarter as well as over the similar quarter last year, driven by the growth in the real estate sector of the ABS market. Overall wrapped activity totaled $27.5 billion of the $218.5 billion of ABS sold in 3Q04, accounting for more than 12.5% of the total volume.