Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Structured Finance News can deliver.
  • Asset Securitization Report one-month trial subscription
  • StructuredFinanceNews.com one-month trial subscription
  • Free e-newsletters
  • Free whitepapers

February 23, 2009

 Past Issues

Cover Story

Govt./Private Sector Join Forces for Another Distressed Asset Cleanup

Treasury Secretary Timothy Geithner's announcement of the revamped Financial Stability Plan proved to be a showstopper during the American Securitization Forum's (ASF) annual industry conference held earlier this month in Las Vegas. But reactions were mixed. While ABS market participants welcomed a plan that could finally bring back investors who have retreated on pricing discrepancies and the lack of regulatory framework, they did not see enough detail to restore confidence.

Column

Some Credit for Geithner

Financial markets received the Department of the Treasury's latest bank-rescue plan with a resounding thud. The stock market's swoon was generally attributed to the lack of detail in the Financial Stability Plan, announced Feb. 10. After years of perusing plans and initiatives, investors were dismayed to receive a mere skeleton of a plan. In conjunction with this week's cover story, this column will focus on one part of the Treasury's plan, a proposal for a 'public-private investment fund.' While the proposal was rightly pilloried for its vagueness, it does contain the foundation for initial steps toward a recovery short of nationalization.

ABS

MBIA Spins Off Public Finance Only Insurer

Following through on a transformation plan announced last year, MBIA last week said it has restructured its insurance subsidiaries to form a new U.S. public finance-only insurer that will operate separately from its structured finance business. Bond insurance subsidiary MBIA Insurance Corp. ceded its entire $537 billion book of public finance business to subsidiary MBIA Insurance Corp. of Illinois, which MBIA expects to rename National Public Financial Guarantee Corp. and limit to writing only U.S. public finance business. MBIA has paid MBIA Illinois approximately $2.89 billion for reinsuring the public finance business and also capitalized it with an additional $2.09 billion.

SecondMarket Opens Up Trading for CDOs and MBS

With the onslaught of illiquid assets - particularly displaced MBS and CDO bonds - the development of a market for these securities becomes essential as well as useful not only for the companies that profit from them, but more importantly, the economy as a whole. SecondMarket, which has its roots creating markets for buying and selling restricted securities, is expanding its reach to cover the trading and analysis of MBS and CDOs, and eventually moving into whole loans, CMBS and ABS.

Fitch Releases Loss Severity Scale

Fitch Ratings released its criteria for its structured finance loss severity (LS) rating scale last week. The rating agency said that the new scale was established to complement the existing Long-Term Credit (LTC) ratings for these securities. 'It's important to point out that the long-term credit ratings speak to the probability that a bond will default,' said Glenn Costello, managing director and chief portfolio risk officer for U.S. structured finance at Fitch. 'But it doesn't address the risk of major losses on that particular bond, assuming it has defaulted.'

CLO Managers Push for Amendments

On Feb. 4, Moody's Investors Service revised the methodology it uses to rate CLOs, spurring a rash of CLO downgrades that has yet to end. As a result, CLO managers have begun requesting amendments to their reinvestment periods to relieve the pressure, sources said. CLO managers are increasingly looking to amend their indentures so that they can access returns made from a tranche before it is downgraded, then reinvest those gains in a better-performing asset. Typically, CLO managers are barred from such action until a tranche reaches its reinvestment period. But with so many of their tranches facing downgrades, and with reinvestment periods a long way off, CLO managers have little choice other than to seek these amendments.

MBS

Vague Housing Plan Incites Doubt

Mortgage spreads firmed up on Wednesday as Treasurys sold off prompted by another round of supply worries. These market jitters resulted from the vague details of President Barack Obama's housing plan. Lower coupons were substantially tighter - even in the face of more than $2 billion in supply - while higher coupons were weaker because of the increased prepayment risks associated with the latest plan.

President's Housing Plan Comes Amid Negative Housing Reports

There are both positive and negative aspects to President Barack Obama's Homeowner Affordability and Stability Plan (HASP) announced on Wednesday last week. On balance, 'the plan is a positive first step in stabilizing the U.S. housing market,' according to Westwood Capital.

Global

ESF Releases RMBS Transparency Principles

The European Securitization Forum (ESF) released the RMBS Issuer Principles for Transparency and Disclosure last week. This set of voluntary guidelines for issuers of European RMBS is an integral part of the industry's initiatives to increase transparency in the securitization market as recommended by the ECOFIN, the European Commission, the Financial Stability Forum, the IOSCO and other bodies. The principles will apply to disclosure of information by issuers to investors and other market participants both pre-issuance and post-issuance on a regular reporting/ongoing basis. They will establish a standard of consistency, transparency and data accessibility to for investors, and will enhance comparability of reporting across Europe.

ABS Totals

ABS Totals

View the year-to-date ABS issuance totals for ABS, MBS and CMBS.

ABS Manager Rankings

ABS Manager Rankings

View the year-to-date manager rankings for the different ABS sectors, including real estate, credit cards and autos.

Scorecards

Scorecards

View the Scorecard deals featured in ASR's latest issue.

Mortgage Refi Data

Mortgage Refi Data

See results from the Mortgage Banker's Associations Refinance and Purchase Indexes as well as the weekly mortgage rates surveyed by Freddie Mac.

Whispers

Whispers: February 23, 2009

Morgan Stanley's head of European leveraged credit trading has resigned. Robert Lepone, who oversaw various teams, including high yield bonds, leveraged loans, credit default swaps and distressed debt, left Morgan Stanley's London office for personal reasons, a spokesman said. His replacement will be announced in the coming weeks, the spokesman said, declining to comment further. Lepone's departure comes less than two weeks after Joseph McManus, a vice president with Morgan Stanley's investment-grade credit products group, left to join CastleOak Securities' fixed-income sales team.