CDOs

CDO pricing can't get much better. Last week, Carlyle Investment Management was able to bring its high yield loan- backed 7.85-year triple-As at 37 basis points over three-month Libor. Carlyle High Yield Partners VI, which was led by Wachovia Securities, had been in the pipeline since last fall, when guidance for the senior class was 48 over Libor. Talk was revised in recent weeks to the 37 area, and the deal made good (see triple-A pricing chart, p. 11).

Although the potential rise in interest rates has placed a damper on most asset classes, the syndicated loans world has not lost its appeal. Instead, loans have probably been one of the most attractive asset classes around this year, and they are spurring the creation of new loan funds as well as collateralized loan obligations (CLOs).

Year to date as of 06/03 Term (days) 05/28 05/31 06/01 06/02 06/03 1-week

2004 2003 2002 ABS (Public and 144A) 300,601 236,966 187,194 ABS (Public and 144A excluding CDOs) 274,756 220,106 166,280 ABS (Public Only) 238,275 194,348 151,426 ABS (144A Only) 62,326 42,618 35,768 Non-Agency MBS 119,084 142,144 85,530 Agency MBS 158,416 318,315 192,619 CMBS 29,966 29,451 17,643 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 5,974.8 1 21.4 7 JP Morgan 4,588.9 2 16.4 7 Deutsche Bank AG 4,467.4 3 16.0 8 Banc of America Securities LLC 3,105.2 4 11.1 6 Credit Suisse First Boston 1,927.0 5 6.9 5 Merrill Lynch & Co Inc 1,265.0 6 4.5 2 Goldman Sachs & Co 1,256.2 7 4.5 1 Barclays Capital 1,162.0 8 4.2 4 Lehman Brothers 870.7 9 3.1 2 Morgan Stanley 820.1 10 2.9 2 Industry Total 27,953.6 - 100.0 31 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 4,395.8 1 17.0 8 UBS 3,517.0 2 13.6 5 Wachovia Corp 2,882.6 3 11.2 11 Deutsche Bank AG 1,968.7 4 7.6 5 Credit Suisse First Boston 1,772.4 5 6.9 4 Bear Stearns & Co Inc 1,549.8 6 6.0 5 Citigroup 1,457.7 7 5.6 8 Banc of America Securities LLC 1,215.9 8 4.7 7 Royal Bank of Scotland Group 1,005.8 9 3.9 3 BNP Paribas SA 919.5 10 3.6 1 Industry Total 25,844.8 - 100.0 70 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 5,025.0 1 23.3 7 Citigroup 4,648.4 2 21.5 10 BANK ONE Corp 3,350.0 3 15.5 5 Lehman Brothers 2,324.4 4 10.8 6 Barclays Capital 2,049.4 5 9.5 4 Deutsche Bank AG 1,024.7 6 4.7 4 Banc of America Securities LLC 818.0 7 3.8 4 Merrill Lynch & Co Inc 752.2 8 3.5 2 Credit Suisse First Boston 718.0 9 3.3 3 Goldman Sachs & Co 425.0 10 2.0 2 Industry Total 21,610.1 - 100.0 36 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 40.8 3 Credit Suisse First Boston 1,058.0 2 25.3 3 HSBC Holdings PLC 708.0 3 16.9 2 Morgan Stanley 250.0 4* 6.0 1 ABN AMRO 250.0 4* 6.0 1 Banc of America Securities LLC 212.0 6 5.1 1 Industry Total 4,186.0 - 100.0 6 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 23,438.0 1 12.4 20 Lehman Brothers 20,480.5 2 10.9 38 Royal Bank of Scotland Group 19,619.2 3 10.4 37 Credit Suisse First Boston 15,115.6 4 8.0 29 Morgan Stanley 14,393.8 5 7.6 34 Bear Stearns & Co Inc 14,225.5 6 7.6 30 Citigroup 13,674.7 7 7.3 38 Deutsche Bank AG 12,559.0 8 6.7 37 Merrill Lynch & Co Inc 11,541.4 9 6.1 21 Banc of America Securities LLC 9,873.6 10 5.2 33 Industry Total 188,455.3 - 100.0 336 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 4,289.7 1 19.5 5 Citigroup 2,986.6 2 13.6 4 UBS 2,740.0 3 12.5 4 JP Morgan 2,338.4 4 10.6 5 Morgan Stanley 2,275.2 5 10.4 5 Deutsche Bank AG 2,221.3 6 10.1 3 Credit Suisse First Boston 1,876.0 7 8.5 3 Banc of America Securities LLC 1,781.4 8 8.1 2 Lehman Brothers 1,012.6 9 4.6 2 RBC Capital Markets 462.0 10 2.1 1 Industry Total 21,983.2 - 100.0 20 Source: Thomson Financial

Year to date as of Jun 2 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 Auto Loans/Recs 27,954 24,336 3,618 23,997 3,957 10,187 13,121 4,645 Comm. Mtg 1,258 375 883 1,258 229 593 410 Commercial Loans Corp Bond/Note 3,116 966 2,150 3,116 1,839 746 45 485 Corporate Loans 2,871 165 2,706 2,871 1,969 478 424 Credit Card Rec 21,610 10,099 11,511 19,166 2,444 15,224 650 3,787 700 1,249 Debentures 1,296 1,296 1,296 1,296 Equip Loans Equip. Leases 3,188 2,938 250 2,938 250 1,847 1,091 250 Floorplan Recs 4,186 4,186 4,062 124 3,836 350 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 1,381 7 1,374 1,381 1,000 306 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 44,970 20,340 23,671 44,033 938 28,856 7,749 8,148 110 94 Oil Receivables Preferred Sec 2,382 1,053 1,330 2,382 2,038 158 186 Prv Issued Sec 484 159 325 484 484 Rental Car Rec. 2,400 1,300 1,100 2,400 1,300 1,100 Rev Cred/Home Eq 143,485 81,256 61,360 123,145 20,340 91,369 35,708 14,605 1,243 488 Sm Business Loan 200 200 200 200 Struc Fin Credit 10,905 4,799 6,106 10,905 3,198 1,496 4,730 1,392 Student Loans 21,983 378 20,119 17,605 4,378 11,076 2,955 3,066 3,077 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 48% Non-Jumbo Mtg Ln 15% Auto Loans/Recs 9% Student Loans 7% Credit Card Rec 7% Other 14%

As expected, TXU Electric's stranded cost ABS was introduced to the market last week, and on track for a Friday pricing following a launch Thursday afternoon. What was not expected was the seemingly vanilla appearance of the transaction when all was said and done.

A slew of loan-backed deals are circulating the CDO market, with about $3.7 billion of visible cash transactions in the pipeline from both European and U.S. issuers. This represents more than 27% of the new issue calendar as tracked by ASR.

What began as a relatively slow week turned into a melee of transactions last week, as several deals popped into the pipeline Wednesday and priced before Thursday's market close. Of note, real estate ABS - with $9.8 billion priced or marketing - has regained its status as the predominant asset class, following a slight break in pace.

With its secured loan recovery scale in place since December, Standard & Poor's has begun applying the modified criteria to CLOs.

Mitsubishi Motor Corp. has announced it will receive a 450 billion (US$4 billion) capital infusion, yet the fate of its U.S. finance unit remains unclear. Speculation continues over the potential impact a sale of the finance company would have on MMCA floorplan and lease securitizations.

Year to date as of 05/27 Term (days) 05/21 05/24 05/25 05/26 05/27 1-week

2004 2003 2002 ABS (Public and 144A) 291,160 226,025 173,574 ABS (Public and 144A excluding CDOs) 265,316 211,436 154,415 ABS (Public Only) 232,268 186,446 140,121 ABS (144A Only) 58,892 39,579 33,453 Non-Agency MBS 98,094 126,079 82,266 Agency MBS 139,887 304,656 191,712 CMBS 28,856 28,753 17,643 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 5,974.8 1 21.4 7 JP Morgan 4,588.9 2 16.4 7 Deutsche Bank AG 4,467.4 3 16.0 8 Banc of America Securities LLC 3,105.2 4 11.1 6 Credit Suisse First Boston 1,927.0 5 6.9 5 Merrill Lynch & Co Inc 1,265.0 6 4.5 2 Goldman Sachs & Co 1,256.2 7 4.5 1 Barclays Capital 1,162.0 8 4.2 4 Lehman Brothers 870.7 9 3.1 2 Morgan Stanley 820.1 10 2.9 2 Industry Total 27,953.6 - 100.0 31 Source: Thomson Financial