Securitization

The merger of Aames Financial Corp. and Accredited Home Lenders - a move that is expected to create the sixth-largest subprime retail lender - is being called the first in an anticipated string of consolidations within the U.S. subprime mortgage lending industry, where participants continue to battle the higher cost of doing business. San Diego-based Accredited late last month announced plans to acquire Aames, a Los Angeles-based real estate investment trust for $340 million in cash and stock.

Mention of the latest developments in credit default swaps, whether on CDOs or ABS, usually calls to mind an ever-swelling notional market value and customized deal structures. But the call for a standardized trading framework has prompted several leading industry professionals to refine plans to create standardized frameworks for documenting and tracking credit default swaps trades to make sure they are in keeping with the spirit of their original contracts.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 6,627.6 1 23.6 13 JP Morgan 3,828.6 2 13.6 10 Wachovia Corp 3,139.5 3 11.2 7 Deutsche Bank AG 2,602.6 4 9.3 8 Merrill Lynch & Co Inc 1,847.5 5 6.6 4 Barclays Capital 1,705.7 6 6.1 4 Banc of America Securities LLC 1,682.4 7 6.0 2 Credit Suisse 1,550.0 8 5.5 3 Royal Bank of Scotland Group 1,479.3 9 5.3 3 Goldman Sachs & Co 868.7 10 3.1 2 Industry Total 28,093.3 - 100.0 34 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 12,433.7 1 15.2 20 Merrill Lynch & Co Inc 11,825.8 2 14.5 16 Banc of America Securities LLC 7,488.4 3 9.2 19 Deutsche Bank AG 6,810.1 4 8.3 11 UBS 5,489.0 5 6.7 15 Bear Stearns & Co Inc 4,922.6 6 6.0 10 Credit Suisse 4,317.9 7 5.3 8 Morgan Stanley 4,165.0 8 5.1 16 Royal Bank of Scotland Group 3,245.9 9 4.0 6 Wachovia Corp 3,213.6 10 3.9 8 Industry Total 81,714.2 - 100.0 162 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 Banc of America Securities LLC 8,982.0 1 29.9 13 JP Morgan 7,239.0 2 24.1 11 Deutsche Bank AG 6,228.7 3 20.8 13 Morgan Stanley 2,549.9 4 8.5 7 Barclays Capital 1,829.0 5 6.1 2 Credit Suisse 1,209.0 6 4.0 4 ABN AMRO 625.0 7 2.1 2 Wachovia Corp 500.0 8 1.7 1 Lehman Brothers 328.9 9 1.1 2 250.0 10 0.8 1 Industry Total 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 Morgan Stanley 24,392.3 1 12.0 24 Lehman Brothers 20,449.8 2 10.0 48 Credit Suisse 19,161.9 3 9.4 39 Countrywide Securities Corp 15,001.3 4 7.4 17 Deutsche Bank AG 13,951.3 5 6.8 25 Bear Stearns & Co Inc 13,558.5 6 6.7 36 JP Morgan 12,984.4 7 6.4 27 Citigroup 12,877.1 8 6.3 33 Royal Bank of Scotland Group 12,487.1 9 6.1 18 Merrill Lynch & Co Inc 11,781.7 10 5.8 16 Industry Total 203,975.5 - 100.0 386 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 4,793.6 1 18.1 7 Deutsche Bank AG 4,163.7 2 15.7 6 Credit Suisse 3,306.5 3 12.5 6 Banc of America Securities LLC 2,550.5 4 9.6 4 Morgan Stanley 2,507.4 5 9.5 3 Merrill Lynch & Co Inc 2,301.0 6 8.7 2 Goldman Sachs & Co 1,803.8 7 6.8 2 Lehman Brothers 1,284.7 8 4.9 1 UBS 998.7 9 3.8 2 JP Morgan 769.3 10 2.9 1 Industry Total 26,490.5 - 100.0 20 Source: Thomson Financial

auto ABS 8% credit card ABS 9% enterprise finance 0% equipment ABS 1% real estate ABS 72% structured settlements 0% student loan ABS 8% trade receivables 1%

Early estimates for the first quarter indicate substantial downturns in a number of hot real estate markets, leading many to speculate as to how far prices will fall, and how severe losses in the price-sensitive subprime sector will be.

Dominion Bond Rating Service says it is inching into the U.S. synthetic RMBS and ABS sectors. Bank of America Corp. recently commissioned the Canadian rating agency to supply ratings to a pair of U.S. synthetic RMBS deals. These transactions constitute the first public ratings the rating agency has assigned to synthetics in the U.S. market. DBRS is currently preparing ratings for several other deals, according to Michael Nelson, managing director of U.S. structured finance.

As economists accurately predicted, existing home sales in April slipped to a 6.76 million unit pace. Although this is approximately off 5% from the 2005 pace, it is near the 6.72 million unit pace for all of 2004, making the current reading stronger than it initially appears.

From start to finish, the ABS market had an ambitious week, as dealers rushed to get deals out the door before a long, if not leisurely, weekend. The market produced a respectable $13.6 billion in new issuances by press time.

With the ever-expanding ABS market, the growth of new ABS products and asset classes will always be an important topic. At the American Securitization Forum annual meeting to be held next week, there would be a session devoted entirely to emerging markets and products. Paul Burke, a managing director at Ambac Assurance Corp., will be moderating the discussion that would focus on such emerging assets as life insurance or triple-X transactions as well as the growth of securitization in Latin America, Asia and Eastern Europe.

AEP Texas Central Co., which is looking to raise as much as $1.7 billion through securitization, filed what it called a unanimous settlement agreement with the Public Utility Commission of Texas. The accord will hold them - and all other affected parties - to any securitization financing order that the commissioners decide on later this year.

A bit of ageing becomes the prime auto ABS sector, according to Fitch Ratings. With 11 upgrades, the asset class dominated positive ratings movement activity for U.S. term ABS in April.

Overcollateralization, excess spread and the presence of cash capitalization accounts (CCAs) on certain deals provide ample protection against prepayment losses on private student loan ABS deals, Lehman Brothers found after a test analysis on a Sallie Mae transaction.

Fitch Ratings upgraded one class of notes issued by collateralized bond obligation CAM CBO I last week. The class B notes totaling approximately $20.8 million were upgraded to BB from B+; the approximately $32.2 million in C notes remain rated at C.

Swap counterparties in deals rated by Moody's Investors Service may see the amount of collateral they're required to post decrease, thanks to new guidelines the rating agency plans to adopt.

Having gotten an earful from Wall Street about a proposal that, if implemented, could massively increase financial institutions' regulatory obligations for any structured deal that fits under a broad umbrella category of "complex structured finance transactions" (CSFTs), five federal agencies announced earlier this month that they had greatly revised their proposed criteria.

With the launch of its third CDO of CDOs, the $400 million Connecticut Value Structured Credit CDO III, Babson Capital Management has made yet another mark in what remains a niche market of the structured finance universe.