Securitization

Individual restructurings continue across the SIV sector as sponsors take a more proactive stance in the run-up to M-LEC. Last week, Rabobank and Societe Generale announced proposals that would help their respective vehicles avoid enforcement.

For the last few months, many difficulties have beset European banks, with the latest hardship being write-downs announced by several of these firms. Despite these problems, financial institutions are still performing relatively well, even in the face of the negative headlines.

Argentine issuance rose in the last few months, not in the least bit scraped by a spike in interest rates. Yet the future isn't as bright, with tighter regulatory scrutiny of consumer ABS (see story below) and poor diversity away from that asset class likely to take a toll.

Argentine regulators have imposed a new rule on tranche issuance that could broaden the investor base for ABS while it simultaneously cools activity. Additional proposed changes might have a more chilling effect.

MBIA's shares traded higher last week on the announcement of Warburg Pincus' infusion of up to $1 billion of additional capital into the monoline insurer. MBIA sought the new capital to maintain its triple-A rating and to cushion loss expectations on its RMBS portfolio.

Michael Strange left the financial institution securitization group at Barclays Capital to take up a position at Goldman Sachs, according to sources familiar with the matter. A Goldman rep declined to comment. At press time, it was unclear when Strange, who helped build Barclays' presence in Russian existing assets, would start his new job. Whether Strange will switch to a different area at Goldman or ramp up its business in Russian securitization was another open question. At least publicly, Goldman hasn't been a player in the space of Russian securitization, though sources said the bank had a sizable Moscow office, making a significant dent in other areas of the Russian finance market. At Barclays, Strange was involved in arranging such transactions as mortgage deals for Gazprombank with euro and ruble tranches and a dollar RMBS for Vneshortgbank .

Just about three weeks remain on the ABS issuance calendar of 2007, but as every market professional knows, issuers and investors began their winter slumber a long time ago.

It is well known that the private loan market is seeing near-explosive growth. Now, the riskier side of such growth is coming to light, as Moody's Investors Service placed the rating of more than 16 notes in about a dozen student loan securitizations on review for possible downgrade.

The increasing number of government investigations into subprime lending, and continued losses on these loans have prompted a substantial amount of litigation.

As a result of declining issuance in the real estate and structured finance markets, Thacher Proffitt & Wood has joined the ranks of a number of other law firms, banks and asset management firms that have laid off staff in these departments.

As a sign that the European CMBS market might be coming back to life, Lehman Brothers priced its Windermere XIV, the first CMBS deal seen in Europe in nearly five months. Investor reaction to the deal could be indicative of renewed interest in CMBS.

Last week saw a trickle of activity for publicly placed primary deals, although most deal flow continued to be driven by retained or pre-placed transactions.

Panterra Funding, an ABCP with a good deal of exposure to emerging markets, has ceased issuance and repaid all its paper as of the end of November, Moody's Investors Service said in a brief statement.

Fieldstone Mortgage filed for Chapter 11 last week, shortly after announcing that it would stop accepting loan applications and funding mortgage loans. According to court documents, the company has liabilities of more than $100 million, with creditors including Morgan Stanley and Bear Stearns, who are seeking $38.5 million and $15.3 million, respectively. Fieldstone's parent company, Fieldstone Investment was acquired by C-Bass in July.

Standard & Poor's financial strength rating outlook for CIFG was misstated last week. The company's outlook was revised to negative from stable on June 7, 2007, as a result of CIFG's corporate governance policies and procedures, its succession planning for senior management, and concerns regarding the ongoing support for the business from parent Natixis, which subsequently infused $100 million into the company. ASR regrets the error.

ABS market professionals are still dealing with a sluggish issuance calendar, and with four weeks remaining in 2007, they do not expect to unwrap the gift of recovery anytime soon. Between Nov. 19 and press time Nov. 28, around $9.7 billion of deals came to market.

Calyon is arranging its first CDO backed by commodity trigger swaps - or a collateralized commodities obligation (CCO) - set to close by the end of the month. The transaction, Amadeus 2007-1, references 10 commodities, including base metals, precious metals and energy assets, through a static portfolio of 150 Asian long and short commodity trigger swaps. But the new CCO is launching into what has been a relatively inactive sector, raising the question: Will these exotic' products be seen as an investment alternative for CDO investors in search of diversity?

While A-Rod was unanimously expected to re-sign with the Yankees, panelists at IMN's Real Estate Mezzanine Loan Forum in New York last week were not as certain about the future of the CRE CDO market. A group of panelists made up of CRE CDO managers and a CDO lawyer collectively agreed that value in the commercial real estate market has not yet bottomed out. They also agreed that CDO write-downs were not over for the major banks.

November remittance data ushered in more bad news this month, but the results were surprisingly milder than October.

The two largest triple-A bond insurers might look to reinsure their "very reinsurable" portfolio of asset-backed securities and municipal bonds if the rating agencies tell them to raise more capital, executives from Ambac Financial Group and MBIA Insurance said yesterday.