Securitization

In my last column three weeks ago, I said that none of the major monolines was in any danger of losing the triple-A, national-scale ratings on its wrap in Mexico.

Credit card transactions continued to dominate the issuance tally last week. The American Express Credit Account Master Trust, Series 2008-2 came to market with a $1.2 billion transaction. Lead managers were Barclays Capital, Citigroup Global Markets and JPMorgan Securities. The 10-year notes priced at the one-month Libor plus 126 basis points.

Hoping to shore up its two structured investment vehicles (SIVs) as it continues to liquidate the assets in those vehicles, BMO Capital Markets said it would provide liquidity support for the repayment of senior notes that secure the Links Finance and Parkland Finance programs.

Moody's Investors Service said that the deterioration in the credit risk profiles of financial guarantors may have significant implications for a number of banks and securities firms. The rating agency's review for possible downgrades of embattled monolines MBIA and Ambac is set to conclude soon.

Investors at the Investment Management Network (IMN) CMBS conference held in London last week said it wasn't fear that was driving the current buying freeze in the European market. They also offered issuers a list of demands needed to get the market back in working order again.

Moody's Investors Service and Fitch Ratings talked to CMBS market players about the future of their respective rating methodologies at last week's Information Management Network European CMBS conference held in London.

With originators from the Commonwealth of Independent States unwilling to accept today's spreads in the primary market, warehousing remains the name of the game. But the word is that certain Western banks, grappling with capitalization issues, have ceased loading assets onto their balance sheets from Russia and its neighbors. This is not so for Unicredit.

All investors are encouraged to look at the potential for extension risk on every deal that they buy into, analysts said.

Investment Management Network's (IMN) fourth annual CMBS conference held in London last week had 480 market players in attendance, almost half of whom came from the buyside.

In any divorce, dividing up the assets can be a complicated and lengthy process, often accompanied by a mass of legal issues. The same appears to hold true when a bond insurance company is taken apart.

In keeping with a recent trend in the ABCP business, HSBC Bank is implementing critical changes to its partially supported credit arbitrage conduit called Solitaire Funding.

The drop in home price appreciation (HPA) was the crash that preceded the current economic pileup, figuratively speaking. With the expected recession intensifying the unemployment rate in the U.S., the HPA decline might be further exacerbated despite the Federal Reserve's attempts to curb payment shock.

The government's efforts to stem the tide of home foreclosures in the U.S. expanded with the recent passage of the economic stimulus package.

Standard & Poor's announced rating actions on several monoline bond insurers including a downgrade of XL Capital Assurance and XL Financial Assurance to 'A-' from 'AAA.' The two companies remain on CreditWatch with negative implications. FGIC was also downgraded to 'A' from 'AA' and remains on CreditWatch with developing implications. Both Ambac Assurance Corp. and CIFG Guaranty had their 'AAA' financial strength rating affirmed and remain on negative outlook. MBIA Insurance Corp had its 'AAA' financial strength rating affirmed and was assigned a negative outlook. These ratings adjustments follow additional stress tests by the rating agency in the monolines' non prime book of business.

The Association of Financial Guaranty Insurers has released a statement regarding insurer MBIA's withdrawal from the association. "AFGI members are surprised at the withdrawal of MBIA from AFGI," Sean McCarthy, chair of the association of AFGI and president and COO of Financial Security Assurance Holdings Ltd., said. "AFGI is a trade association that serves as a consistent informational source, represents the industry in standardizing financial reporting and disclosure and speaks for the industry on a number of issues." McCarthy added that the AFGI has not taken a position on member firms' organizational structures, lines of business or execution formats, like CDS or policy forms. Aside from this, all of the financial guaranty products offered by industry members, including insured CDS, are allowed under applicable insurance law and regulation. "AFGI remains committed to supporting the industry and its members who offer credit enhanced products in the municipal and asset-backed markets," McCarthy said.

Markit announced plans to launch the first global, multi-bank, cross-asset client valuations platform called Markit Valuations Manager. The platform will fuse electronic delivery of dealer OTC derivative and consensus cash valuations with Markit's independent valuations into a single platform. The motivation behind the new product comes from recent regulatory and accounting changes that have increased the importance of independent valuation sources for funds, Markit said. David Lefferts, managing director at Markit, will lead the initiative and six global investment banks have agreed to support the launch of the platform including Citigroup, Credit Suisse, Goldman Sachs, JPMorgan, Merrill Lynch and UBS. These banks will provide Markit with end-of-day and end-of-month client valuations for OTC derivative instruments and cash securities. Markit will then create a composite of dealer marks for cash securities and counterparty present values for OTC derivative positions, which clients can compare with Markit's independent valuations. The platform will launch in 2H08 with coverage of bonds and derivatives. Markit expects to expand the platform to include more banks and additional cash and derivative asset classes including ABS and MBS.

Moody's Investors Service has started to rate municipal bonds insured by Berkshire Hathaway Assurance Corp. (BHAC) 'Aaa.' These bonds are supported by a "wrap of a wrap," Moody's said, meaning that the bonds are first supported by a financial guaranty insurance policy from BHAC and then further supported by a contingent-payment insurance policy provided by 'Aaa'-rated National Indemnity Co., both of which are owned by Berkshire Hathaway.

Deutsche Securities appointed David Shrenzel as head of global banking in Japan effective from Feb. 1, 2008. Shrenzel assumes the post from David Hatt, President & CEO of Deutsche Securities, who has held the post on an interim basis. Shrenzel remains a co-head of the global capital markets division at DSI with Yuji Nomoto, a position Shrenzel has held since April 2007, but is succeeded by Aaron MacDougall as head of global credit trading at Deutsche Securities, a post Shrenzel has held since September 2002. Shrenzel originally joined Deutsche Bank Group in March 2000 as head of the global ABS credit products group in New York. Before that, he spent seven years with the asset securitization business at Credit Suisse. MacDougall joined Deutsche Bank Group in June 2000 as a senior trader in the global credit trading business and, prior to this appointment, was the head trader across Deutsche Securities' flow, structured and exotic corporate credit trading and convertible bond trading businesses. Before he joined Deutsche, MacDougall worked in fixed income derivatives, credit trading and structuring at Bankers Trust and at Morgan Stanley.

After ending 2007 in disastrous fashion and becoming a downright pariah in 2008, the MBS market is in desperate need of inspiration.

Asset securitization professionals stuck ardently to their new routines last week, supporting credit card and auto loan securitizations to the exclusion of just about every other asset class.