Securitization

In the wake of credit enhancement reductions to one of Chase Manhattan Bank, N.A.'s credit card trusts, analysts with Citigroup Global Markets are predicting other credit card issuers are likely to seek similar reductions soon. "Given that one issuer has had its credit enhancement reduced, others are likely to pursue a request for credit enhancement reduction," said Citigroup analyst Mary Kane.

ABS investors can expect even more home-equity ABS supply from New Century Financial Corp. in the second half of this year. The Irvine, Calif.-based subprime lender announced last week during its second quarter earnings call that it may add as much as $6 billion to its REIT portfolio - a $4 billion increase over previous estimates - in order to meet its $7.33 dividend target next year. New Century added that it has enough cash to complete between $2 billion and $6 billion of securitizations.

Using a sample of 14 mezzanine structured finance CDOs issued between the second half of last year and the first quarter of this year, Merrill Lynch found the investment vehicles generally carried lower risk residential mortgage collateral when benchmarked against the home equity ABS sector.

Year to date as of 08/04 Term (days) 07/29 08/01 08/02 08/03 08/04 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 7,759.0 1 14.0 13 Merrill Lynch & Co Inc 7,246.0 2 13.1 9 Citigroup 6,952.2 3 12.6 12 Deutsche Bank AG 6,264.8 4 11.3 12 Banc of America Securities LLC 5,684.6 5 10.3 9 Credit Suisse First Boston 4,561.9 6 8.3 9 Barclays Capital 4,302.5 7 7.8 8 Wachovia Corp 3,712.5 8 6.7 8 Goldman Sachs & Co 2,293.6 9 4.2 3 HSBC Holdings PLC 2,063.0 10 3.7 4 Industry Total 55,263.9 - 100.0 54 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 Merrill Lynch & Co Inc 16,181.8 1 21.0 23 Citigroup 10,853.2 2 14.1 22 Wachovia Corp 6,669.9 3 8.7 13 Lehman Brothers 4,715.7 4 6.1 15 Morgan Stanley 4,714.8 5 6.1 21 UBS 4,003.1 6 5.2 10 Bear Stearns & Co Inc 3,878.5 7 5.0 11 Credit Suisse First Boston 3,293.0 8 4.3 8 Deutsche Bank AG 3,121.1 9 4.1 11 Goldman Sachs & Co 3,107.0 10 4.0 4 Industry Total 77,069.0 - 100.0 185 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 JP Morgan 6,708.1 1 25.1 15 Citigroup 4,398.7 2 16.4 14 Barclays Capital 2,999.0 3 11.2 11 Banc of America Securities LLC 2,241.2 4 8.4 9 Morgan Stanley 2,216.5 5 8.3 4 Credit Suisse First Boston 2,038.2 6 7.6 7 Deutsche Bank AG 2,022.3 7 7.6 12 ABN AMRO 1,833.2 8 6.9 7 Merrill Lynch & Co Inc 624.7 9 2.3 4 Lehman Brothers 500.0 10 1.9 2 Industry Total 26,757.0 - 100.0 56 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 Deutsche Bank AG 1,668.6 1 15.5 3 Barclays Capital 1,492.5 2 13.8 2 Credit Suisse First Boston 1,243.6 3 11.5 2 ABN AMRO 1,243.6 3 11.5 2 Morgan Stanley 1,191.7 5 11.0 2 Banc of America Securities LLC 750.0 6 6.9 1 Lehman Brothers 725.8 7 6.7 1 JP Morgan 725.8 7 6.7 1 HSBC Holdings PLC 566.7 9 5.3 1 Merrill Lynch & Co Inc 375.0 10 3.5 1 Societe Generale 375.0 10 3.5 1 Industry Total 10,800.2 - 100.0 9 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 45,141.4 1 11.7 83 Bear Stearns & Co Inc 36,779.6 2 9.5 79 Royal Bank of Scotland Group 33,836.8 3 8.8 56 Countrywide Securities Corp 31,333.8 4 8.1 38 Morgan Stanley 30,308.7 5 7.9 39 Deutsche Bank AG 27,925.0 6 7.2 52 Credit Suisse First Boston 26,967.8 7 7.0 59 Citigroup 22,026.5 8 5.7 43 Banc of America Securities LLC 20,591.4 9 5.3 43 Merrill Lynch & Co Inc 19,065.9 10 4.9 28 Industry Total 385,812.8 - 100.0 751 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 8,572.0 1 24.0 11 Banc of America Securities LLC 3,904.9 2 10.9 6 Morgan Stanley 3,883.6 3 10.9 4 Credit Suisse First Boston 3,367.9 4 9.4 5 Deutsche Bank AG 3,042.0 5 8.5 5 Merrill Lynch & Co Inc 2,965.8 6 8.3 3 UBS 2,527.7 7 7.1 5 Lehman Brothers 2,138.5 8 6.0 2 Goldman Sachs & Co 2,127.2 9 6.0 4 JP Morgan 1,808.5 10 5.1 4 Industry Total 35,759.0 - 100.0 29 Source: Thomson Financial

auto ABS 18% credit card ABS 7% global MBS 4% real estate ABS 58% student loan ABS 9% other 4%

General Motors Acceptance Corp. may be issuing a lot less ABS than expected this year, and possibly for the next five, as Bank of America Corp. last week agreed to buy $55 billion worth of retail auto loans from GMAC over the next five years. Not only will the deal reduce the amount of loans GMAC has available to securitize, but sources also believe BofA is not likely to securitize any of those loans via its new Bank of America Securities Auto Trust.

As part of its recently finalized reforms to the securities offering process, the Securities & Exchange Commission has interpreted a rule under the Securities Act of 1933 that will leave ABS underwriters liable for all deal information provided to investors up until an investment decision is made.

Rarely would a panel of four lawyers talking about securitization be considered lively, but last week's Sunset Seminar on offering reform hosted by the American Securitization Forum, managed to be just that. The panel, moderated by Thacher Proffitt & Wood partner Stephen Kudenholdt, featured Richard Careaga, senior counsel for Washington Mutual, Chad Eisenberger, director and counsel for UBS and Jordan Schwartz, partner Cadwalader, Wickersham & Taft.

The U.S. ABS primary market refused to give in to the summer slowdown as it generated around $13 billion for the third week in a row.

After roughly four years on the drawing board, Willis Lease Finance Corp. completed the first-ever term securitization backed by aircraft engine leases last week, pricing a $228 million senior/subordinated transaction via lead manager UBS. In addition to being the first aircraft lease ABS, Willis Engine Securitization Trust 2005-1 was the first operating lease asset transaction to price without a monoline surety wrap.

UCC Capital Corp. plans to price the first-ever revolving term securitization backed by licensing fee revenues from a variety of intellectual property assets. UCC Capital will act as issuer, underwriter and servicer for the proposed offering, which is expected to price within the next 30 to 45 days.

Subprime mortgage lender Saxon Capital Inc. this month simultaneously lost two of its executives. Bradley Adams, executive vice president in charge of capital markets and Mark Rogers, senior vice president and corporate strategies director, both left the company on July 15 and July 14, respectively.

Morgan Stanley introduced its new student loan ABS prepayment model last week, determining that some shorter student loan paper looks cheap versus longer dated supply. By using a different calculation of projected prepayment activity, the model provides a way of looking for value opportunities in the sector.

Due to an early delivery of logs to its parent company, Scotia Pacific Co. was able to avoid a $2.2 million shortfall and make its July 20 interest payment to noteholders - but the company's future ability to keep the notes current remains uncertain. The notes are the only publicly rated timber collateralized notes outstanding, and only one of two such deals to ever hit the market, according to Everett Rutan, an analyst at Moody's Investors Service.