Securitization

Thacher Proffitt announced the formation of a distressed asset practice group. The group, which is co-chaired by bankruptcy partner Hugh McDonald and structured finance partner Christopher Lewis, will focus on all aspects of distressed assets, including structuring and negotiating rescue and exit financing -- DIP lending and pre-bankruptcy forbearance arrangements --debt restructurings, foreclosures, asset dispositions, the formation of hedge funds, private equity vehicles and other investment structures for the acquisition of distressed assets as well as the acquisition and disposition of distressed debt including corporate debt and structured finance securities --CDOs, SIVs, RMBS, CMBS and ABS -- trade claims, lease products, equipment certificates and litigation claims. The group will be made up of attorneys from Thacher's structured finance, bankruptcy, litigation and tax practice groups.

Lewtan Technologies appointed Thomas Karanian to the new post of senior vice president of technology and data operations. Karanian retains his title of chief technology officer (CTO). The new appointee has been responsible for overall corporate technology strategy and direction, and for managing the company's technology components and initiatives. He has now assumed oversight of the surveillance firm's data services department.

The move is a coordinated effort by the Fed with European and Canadian banks, which plan to inject up to $45 billion in their banking systems, according to reports. The Fed plans to hold auctions of Treasuries in exchange for debt including 'AAA'-rated mortgages sold by Fannie Mae, Freddie Mac and by banks, according to a statement. The Fed also set up the Term Securities Lending Facility, which will be used to lend Treasuries to primary dealers for 28-day periods through its weekly auctions. The agency did not agree to make outright purchases of mortgage debt, something that some analysts had wanted.

Law firm Gide Loyrette Nouel closed its first MBIA-wrapped securitization since the credit crunch started in August. The bonds have been rated triple-A. Gide Loyrette Nouel represented the arrangers Calyon, which was lead arranger, Bank of Scotland and CIC on the €800 million ($1.2 million) whole business securitization for the Fraikin Group, Europe's leading truck leasing and fleet management company. Gide Loyrette Nouel also acted for MBIA. The deal enabled the partial takeout of CVC Capital Partners' bridge acquisition financing from its February 2007 takeover of Fraikin, establishing a five-year, €250 million credit facility to help Fraikin continue to grow its fleet. Monoline wraps used to be a typical feature on these more complex deals but following the credit crunch, banks have lost confidence in monoline insurers. To counter this, Gide Loyrette Nouel and Calyon introduced novel contractual and tax structuring features that has had a positive impact on the 'borrowing base' mechanism with a corresponding decrease in the level of credit enhancement required by the monoline insurer and the rating agencies. "Bringing this deal to a successful conclusion was a 'little miracle," said Patrice Doat, a Gide Loyrette Nouel partner based in London. "This was the first securitization of this type to close since difficulties arose on the markets in the summer of 2007. This was a unique, twelve month marathon deal combining a great number of parties and novel complex contractual and tax structuring. It is an excellent reflection of Gide's crossborder, multi-party capabilities."

CIFG Holding, the holding company for CIFG's financial guaranty subsidiaries, named Richard A. Price, Jr. non-executive chairman of the board of directors of the firm. Price will be responsible for developing long-term strategy to build CIFG's franchise and work with CIFG's senior management to maximize shareholder value. The new appointee most recently served as chief executive officer of Zurich Capital Markets and Centre Re, both wholly-owned subsidiaries of Zurich Financial Services. Previously, Price was founder and chief executive officer of CGA Group, which is a Bermuda-based financial guarantor.

Markit is gearing up for the launch of the iTraxx LevX Series 2, the second installment of the credit default swap index referencing European corporates. The new series is set to roll on March 17. There will be a pricing call on March 14, which is when the coupon levels are determined. On a conference call this morning, Markit officials announced that the new series includes a number of changes from Series 1, which originally launched in September 2006. Most notable among the changes is that both the senior and subordinated indexes of the LevX Series 2 will now have non-cancellable contracts, or "less cancellable," according to David Geen, general counsel at the International Swaps and Derivatives Association, who spoke on the call. The intention on the non-cancellable contract is that when there is a refinancing, the contract will reference the facility or facilities that refinance the original reference obligation. However, there are some situations where there is no suitable successor credit agreement but the contract will still cancel, Geen said. Another important feature in the Series 2 is the use of interim and final summaries related to successor credit agreements published by Markit. These will be used rather than determinations by individual calculation agents. The senior index will have 75 equally-weighted LCDS for first lien loans and the subordinated index with have 45 equally-weighted LCDS for second and third lien loans, as opposed to 35 equally-weighted names for both indices, respectively, seen in the Series 1. Series 2 will feature semi-annual portfolio rolls with quarterly coupons and a five year maturity, which is similar to the traditional iTraxx indices, Tobias Sproehnle, director at Markit said on the call. The reference obligations in both the senior and subordinated series are weighted the heaviest in cable, telephone companies and wireless with 16% of the total obligations in both indices, with General Industrials and Food and Beverage, making up 13% and 11%, respectively. Markit said it will be providing information on the reference data, including reference credit agreements and reference obligations, included in iTraxx LevX Series 2 for investors for free for thirty days. Dealers will not be redistributing the data, Markit noted.

The commercial/multifamily delinquency rates ended 2007 at or near record lows for most major investor groups, according to an inaugural analysis released by the Mortgage Bankers Association. Four of the major investment groups --commercial mortgage-backed securities, life companies, Fannie Mae and Freddie Mac -- were at or near historically low levels, according to the MBA study. The delinquency rates for the fifth investment group, FDIC-insured commercial banks and thrifts, were lower at year-end than 10 of the previous 16 years. These five investor groups hold more than 80% of commercial/multifamily debt outstanding, according to the MBA. "This is an important new analysis that helps cut through much of the recent 'noise' on commercial real estate finance," Steve Graves, managing director & Chief Operating Officer of Principal Real Estate Investors and chair of the MBA's Commercial Board of Governors, said in a statement said.

The U.K. mortgage market is predominantly a refinance market, with borrowers on average refinancing their loans every two to four years after the expiration of their teaser period.

In a testimony last Thursday before the Committee on Banking, Housing and Urban Affairs, National Association of Realtors' Public Policy Chair Vincent Malta argued that the national GSE conforming loan limit should be permanently raised to $625,500 or higher. Malta also suggested raising the limits an additional increase of 125% of the local median home-sales price in high-cost areas. "Fannie Mae and Freddie Mac provide liquidly and stability in the mortgage market and are vital to the housing sector," he said. Malta urged that such a move would increase home sales by nearly $350,000, lower inventories and increase home prices by 2% to 3%. It would also result in as many as $210,000 fewer foreclosures, and more than 500,000 borrowers would be able to refinance into lower interest rate loans, he said.

Freddie Mac released last week its quarterly Conventional Mortgage Home Price Index (CMHPI) for the fourth quarter.

In Capitol Hill's rush to aid borrowers and stem the tide of foreclosures, are investors being thrown under the bus?

The Mortgage Bankers Association (MBA) came out with its quarterly fourth quarter National Delinquency Survey results last Thursday.

When Fannie Mae and Freddie Mac had their portfolio caps raised on March 1, it appeared to be a much needed shot in the arm for the moribund housing market.

The ABS market reacted to Ambac Financial Group's $1.5 billion common stock and equity offering last week with disappointment.

CDOs are on track to see a decline in issuance for the first time in six years. However, one small deal managed to get done. The proceeds of the deal will be used to build an interactive park in Puerto Rico aimed at teaching kids the benefits of recycling.

As litigations related to ABS losses mount in the U.S., European investors are beginning to show signs of similar uneasiness.

Credit rating agency Standard & Poor's elaborated on its previously announced plans to cut 172 jobs, saying it will dismiss about 30 of its structured finance analysts by month's end.

Despite the problems besetting its fellow bond insurers, Financial Security Assurance (FSA), the third largest financial guarantor, has been riding high.

The lack of new issuance in U.S. Structured Finance CDOs does not mean the CDO market is twiddling its thumbs. Legal battles, including disputes over cash flow allocations after an event of default (EOD), have sent both buy-siders and sell-siders from the deal rooms to the courtrooms.

Solitaire Funding did it; so did Grampian Funding and a list of other asset-backed commercial paper vehicles. After skeptical investors stopped buying recherche ABCP assets - namely those with arbitrage, extendible-note and market-value structures - some program sponsors turned to using repurchase agreements as backup liquidity.