CDOs

Standard & Poor's rated global structured securities performed better during the second quarter of 2004 than during the first. The upgrade rate for structured finance securities was more than three times the downgrade rate. This positive trend was pronounced across many sectors but was most noticeable among U.S. RMBS ratings. A review of the performance suggests continued strength among U.S. RMBS ratings and therefore upgrades, a significant increase in European and U.S. CMBS upgrades, and a significant decline in U.S. ABS downgrades. A notable increase in European ABS downgrades is due primarily to lowered ratings in the aircraft ABS area. Globally, in addition to aircraft ABS, a few other ABS asset types and CDO sectors continued to show weaknesses in their rating performance during the second quarter of the year.

Year to date as of 07/15 Term (days) 07/09 07/12 07/13 07/14 07/15 1-week

SuperLumina Funding, a newly rated multi-seller ABCP conduit, plans to fund about $1.25 billion in U.S. dollar, triple-A rated new-issue CDOs as its first course of business.

A Westport, Conn.-based credit card issuer, which targets college undergraduate and graduate students, is marketing its inaugural securitization, with the hopes of launching this week. Specialty monoline credit card issuer Clout Financial teamed up with the more familiar M&I Bank to bring Clout Financial Credit Card Trust series 2004-1, a $110 million Ambac-wrapped fixed-rate offering via Societe General, in the Rule 144A markets last week.

As market participants recovered from the long holiday weekend, U.S. ABS primary issuance slowed to an indolent trickle. Total volume was a meager $1.8 billion, with only $1.3 billion actually pricing. Analysts expect the calendar to build quickly over coming days as issuers begin to ready their transactions for the market, according to a report from Credit Suisse First Boston.

The practice of "notching" adjusting ratings, or refusing to rate, certain asset pools in a structured product unless a substantial portion of the assets are rated by the same agency rating the structured product has been a controversial issue for the wider debt markets for some years now.

The recently announced sale of Boullioun Aviation Services by WestLB will likely lead to an aircraft lease securitization shortly after the transactions' close, said sources with knowledge of the situation. Boullioun's attractive lease portfolio and forward delivery schedule, combined with the likely financial needs of potential acquirers, have many expecting an ABS from the new entity, depending on which competitor purchases the unwanted unit.

Year to date as of 07/08 Term (days) 07/02 07/05 07/06 07/07 07/08 1-week

2004 2003 2002 ABS (Public and 144A) 390,885 292,798 240,186 ABS (Public and 144A excluding CDOs) 358,806 271,312 210,995 ABS (Public Only) 313,322 239,160 189,688 ABS (144A Only) 77,563 53,638 50,498 Non-Agency MBS 174,659 172,613 108,740 Agency MBS 189,910 362,794 252,453 CMBS 42,199 36,964 23,996 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 7,192.8 1 19.7 10 JP Morgan 6,106.3 2 16.8 10 Deutsche Bank AG 5,344.5 3 14.7 9 Wachovia Corp 3,158.9 4 8.7 4 Credit Suisse First Boston 3,120.2 5 8.6 7 Banc of America Securities LLC 3,105.2 6 8.5 6 Barclays Capital 2,355.2 7 6.5 6 Merrill Lynch & Co Inc 2,002.4 8 5.5 3 Goldman Sachs & Co 1,256.2 9 3.5 1 Lehman Brothers 870.7 10 2.4 2 Industry Total 36,454.5 - 100.0 42 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 5,668.0 1 17.7 10 UBS 3,917.0 2 12.2 6 Wachovia Corp 3,117.4 3 9.7 13 Deutsche Bank AG 3,054.2 4 9.5 8 Citigroup 2,590.5 5 8.1 11 Credit Suisse First Boston 1,772.4 6 5.5 4 Bear Stearns & Co Inc 1,549.8 7 4.8 5 Lehman Brothers 1,521.0 8 4.7 7 Morgan Stanley 1,445.8 9 4.5 5 Banc of America Securities LLC 1,391.9 10 4.3 9 Industry Total 32,078.9 - 100.0 89 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 10,541.3 1 38.9 16 Citigroup 4,698.4 2 17.4 10 Lehman Brothers 4,119.2 3 15.2 8 Barclays Capital 2,349.4 4 8.7 6 Deutsche Bank AG 1,324.7 5 4.9 6 Credit Suisse First Boston 1,194.3 6 4.4 4 Banc of America Securities LLC 1,193.0 7 4.4 5 Merrill Lynch & Co Inc 752.2 8 2.8 2 Goldman Sachs & Co 425.0 9 1.6 2 Morgan Stanley 375.0 10 1.4 1 Industry Total 27,072.4 - 100.0 44 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 1,708.0 1 34.0 3 Credit Suisse First Boston 1,058.0 2 21.1 3 HSBC Holdings PLC 708.0 3 14.1 2 Banc of America Securities LLC 632.0 4 12.6 2 Wachovia Corp 420.0 5 8.4 1 Morgan Stanley 250.0 6* 5.0 1 ABN AMRO 250.0 6* 5.0 1 Industry Total 5,026.0 - 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 Countrywide Securities Corp 36,039.4 1 14.5 37 RBS Greenwich Capital 29,078.3 2 11.7 55 Lehman Brothers 25,447.5 3 10.2 54 Credit Suisse First Boston 19,254.4 4 7.7 39 Morgan Stanley 18,741.3 5 7.5 41 Bear Stearns & Co Inc 18,078.9 6 7.3 39 Citigroup 15,476.5 7 6.2 46 Deutsche Bank AG 14,827.9 8 6.0 42 Merrill Lynch & Co Inc 13,430.7 9 5.4 27 Banc of America Securities LLC 13,270.3 10 5.3 40 Industry Total 249,330.6 - 100.0 441 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 5,289.7 1 19.7 6 Deutsche Bank AG 3,616.4 2 13.5 5 Morgan Stanley 3,275.2 3 12.2 6 JP Morgan 3,207.9 4 12.0 6 Citigroup 2,986.6 5 11.2 4 Credit Suisse First Boston 2,745.6 6 10.3 4 UBS 2,420.0 7 9.0 5 Banc of America Securities LLC 1,781.4 8 6.7 2 Lehman Brothers 1,012.6 9 3.8 2 RBC Capital Markets 462.0 10 1.7 1 Industry Total 26,797.3 - 100.0 23 Source: Thomson Financial

Year to date as of Jul 7 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 36,454 32,823 3,632 31,076 5,379 13,137 17,886 5,432 Comm. Mtg 1,913 650 1,263 1,913 276 229 829 540 Commercial Loans Corp Bond/Note 3,555 1,130 2,425 3,555 2,026 746 45 738 Corporate Loans 4,454 194 4,260 4,454 2,387 395 370 830 471 Credit Card Rec 27,072 10,099 16,973 23,209 3,864 18,984 1,400 4,739 700 1,249 Debentures 1,588 1,588 1,588 1,588 Equip Loans Equip. Leases 4,414 4,164 250 4,164 250 1,988 1,387 529 221 289 Floorplan Recs 5,026 840 4,186 4,902 124 4,014 830 182 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 331 331 331 331 Non-Jumbo Mtg Ln 57,234 25,764 28,337 54,944 2,290 35,290 11,214 9,630 772 312 Oil Receivables Preferred Sec 2,382 1,053 1,330 2,382 2,038 158 186 Prv Issued Sec 1,119 391 380 1,119 1,119 Rental Car Rec. 2,400 1,300 1,100 2,400 1,300 1,100 Rev Cred/Home Eq 192,097 104,670 74,869 168,512 23,585 122,180 42,778 24,978 1,537 553 Sm Business Loan 828 828 828 828 Struc Fin Credit 12,279 4,842 7,437 12,279 3,511 2,244 4,928 1,508 Student Loans 26,797 3,454 21,858 22,344 4,453 14,151 3,239 3,844 3,663 1,808 Tax Liens Ticket Rec Timeshare Loans 621 386 236 621 471 150 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 49% Non-Jumbo Mtg Ln 15% Auto Loans/Recs 9% Credit Card Rec 7% Student Loans 7% Other 13%

Calabasas, Calif.-based Countrywide Securities Corp., from about as far from Wall Street as you can get, was the leading underwriter of new-issue ABS at the halfway mark of the year - the first time a captive broker-dealer underwriter has been top-ranked in the modern era of ABS. In a not-so-surprising twist, its lending unit, Countrywide Home Loans, is the leading issuer as well.

Sunterra Corp., which had been a dominant timeshare player prior to filing for bankruptcy in 2000, is hoping to present the ABS market with its first term transaction in almost five years. The deal is scheduled for this month.

In its final iteration of its ABCP risk-based capital guidelines, the Federal Deposit Insurance Corp. lowered the eligible liquidity conversion factor to 10% from the 20% it proposed last fall. Industry pundits were pushing for 7%. Also, the FDIC has decided not to include final guidance on capital against securitized revolving credits with early amortization provisions (such as credit cards), but will readdress this issue through the implementation of Basel II.