Securitization

While most industry participants have come to the conclusion that the U.S. housing market is unlikely to post rapid price declines on a nation-wide scale, Standard and Poor's last week released an updated simulation of how the RMBS market would perform in such a scenario - otherwise known as the ominous housing bubble burst.

The Bond Market Association announced last week that Robbin Conner has been appointed vice president and assistant general counsel. Conner, who will report to BMA associate general counsel Lynnette Hotchkiss, will also be the staff advisor to the Association's MBS and securitizaed products division. He will focus on the division's legal, regulatory and market practice initiatives that include such areas as MBS fails, good delivery guidelines, nontraditional mortgage products and credit default swaps of ABS.

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 5,839.9 1 23.0 12 JP Morgan 3,828.6 2 15.1 10 Wachovia Corp 2,286.4 3 9.0 5 Deutsche Bank AG 2,020.4 4 7.9 7 Merrill Lynch & Co Inc 1,847.5 5 7.3 4 Barclays Capital 1,705.7 6 6.7 4 Credit Suisse 1,550.0 7 6.1 3 Royal Bank of Scotland Group 1,479.3 8 5.8 3 Banc of America Securities LLC 1,374.9 9 5.4 1 Morgan Stanley 997.5 10 3.9 2 Industry Total 25,435.6 - 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 Citigroup 12,433.7 1 16.8 20 Merrill Lynch & Co Inc 9,089.5 2 12.3 12 Banc of America Securities LLC 7,206.9 3 9.8 18 Deutsche Bank AG 6,810.1 4 9.2 11 UBS 4,824.0 5 6.5 13 Bear Stearns & Co Inc 4,685.3 6 6.3 10 Morgan Stanley 4,356.3 7 5.9 17 Credit Suisse 4,317.9 8 5.9 8 JP Morgan 2,610.9 9 3.5 12 Wachovia Corp 2,557.3 10 3.5 7 Industry Total 73,857.2 - 100.0 151 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 6,682.4 1 27.3 12 JP Morgan 6,149.7 2 25.1 12 Banc of America Securities LLC 4,410.0 3 18.0 8 Deutsche Bank AG 2,549.9 4 10.4 7 Morgan Stanley 1,829.0 5 7.5 2 Barclays Capital 1,087.5 6 4.4 3 Credit Suisse 625.0 7 2.6 2 ABN AMRO 500.0 8 2.0 1 Lehman Brothers 250.0 9 1.0 1 Wachovia Corp 249.9 10 1.0 1 Industry Total 24,508.3 - 100.0 39 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 Lehman Brothers 20,105.2 1 10.6 47 Morgan Stanley 19,425.1 2 10.2 21 Credit Suisse 18,911.9 3 10.0 38 Countrywide Securities Corp 15,001.3 4 7.9 17 Deutsche Bank AG 13,789.4 5 7.3 24 Royal Bank of Scotland Group 12,487.1 6 6.6 18 Bear Stearns & Co Inc 12,121.0 7 6.4 33 Merrill Lynch & Co Inc 11,781.7 8 6.2 16 JP Morgan 11,381.6 9 6.0 23 Citigroup 8,663.0 10 4.6 24 Industry Total 189,988.7 - 100.0 362 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 21.5 7 Deutsche Bank AG 2,801.0 2 12.6 3 Credit Suisse 2,466.6 3 11.1 4 Merrill Lynch & Co Inc 2,301.0 4 10.3 2 Banc of America Securities LLC 2,027.7 5 9.1 3 Goldman Sachs & Co 1,803.8 6 8.1 2 Morgan Stanley 1,537.4 7 6.9 2 Lehman Brothers 1,284.7 8 5.8 1 UBS 998.7 9 4.5 2 JP Morgan 769.3 10 3.5 1 Industry Total 22,272.2 - 100.0 16 Source: Thomson Financial

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

Amid heightened competition, real estate investment trusts that operate within the commercial real estate sector are employing a number of strategies - from teaming up to changing course.

The Florida Public Service Commission's staff last week recommended that Florida Power & Light, a Juno Beach, Fla.-based utility company, be allowed to tap the securitization market for about $659 million. If the power company completes the transaction, it will use the funds to cover storm recovery costs.

While eyebrows were raised last week at the timing of Wachovia Corp.'s purchase of savings bank and mortgage lender Golden West Financial Corp., Golden West Chief Executive Herb Sandler vehemently denies it had anything to do with his outlook for the U.S. real estate market. Ninety-nine percent of Golden West's portfolio consists of widely criticized option adjustable rate mortgages, and more than half of those loans were originated to Californian borrowers.

Sallie Mae rolled out a new loan program earlier this month, and although one official there said the lender had no existing plans to fund it through securitization, market players think otherwise.

Just like short-term spreads on several deals, the ABS primary market spigot tightened up a bit more last week, with just $4.2 billion in deals coming out by press time.

Before the viatical settlement bond market was virtually shut down by then-unforeseen developments in drug therapies for AIDS patients, the National Association of Insurance Commissioners, or the NAIC, protected its own interests by enacting professional guidelines for setting up the policies.

A hedging strategy gone wrong at NovaStar Financial Corp. could have compromised its real estate investment trust status, according to company executives. This event might have had a more negative implication on the subprime lender than the income draining moves it has deployed to prevent it. If a company fails to meet the relatively rigid accounting standards required for REIT status, it would lose its loan portfolio's tax-exempt status.

Dick D'Addario, senior portfolio manager at the New York-based investment firm Avenue Capital Group, and his colleagues have just closed a new $500 million collateralized loan obligation (CLO), their company's third such vehicle thus far.

NEW YORK - The capital markets swung its doors wide open to the aviation industry last year, allowing close to $5 billion in issuance. Still, the securitization market could go a lot further if it could allow more flexibility within the deal structures, said panelists at the Third Annual UBS Transportation Structured Debt Conference held here last week.

Privately held ACC Capital Holdings, the parent company of Ameriquest Mortgage Co., last week announced the closure of 229 retail branches, resulting in job loss for roughly 3,800 of its employees - representing about 70% of its retail staff. The move constitutes the third round of layoffs at the company since November.

Bear Stearns this month will bring to market a $300 million commercial real estate CDO. The deal, Vertical CRE CDO 2006-1, will be the first CRE CDO managed by Banc of America subsidiary Vertical Capital, which has six deals in the market totaling $4 billion. The most recent offering was the Vertical ABS CDO 2006-1, which closed last month, according to Standard and Poor's.

Volatile prepayment speeds on student loans have made it difficult for investors to assess how ABS bonds will respond to prepayments. This is why Lehman Brothers created an interactive tool called SPREE that takes an investor's loan-level prepayment assumptions and translates them into deal-level prepayment speeds, which are also based on Bloomberg estimates.