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November 24, 2008 - Weak economic conditions have put capital strains on trust preferred securities (TruPS) issuers, causing a rise in payment deferrals and defaults within pools of these assets, TruPS CDOs. Despite the government's promise of liquidity via the Troubled Asset Relief Program (TARP), market participants are not convinced that helping the banks will be enough to offset losses in these pools.
November 17, 2008 - The ABS market suffered yet another week of frozen new issuance and paltry trading activity in the secondary market. Hopes of pricing clarity for illiquid assets were quashed when Treasury Secretary Henry Paulson made the announcement that he would not be implementing the troubled asset purchase program as previously expected. On news of the announcement, the ABX-HE-AAA 07-2 dropped to close Wednesday at 36.67, a record low for the index.
November 10, 2008 - As the U.S. government continues to unveil measures aimed at preventing foreclosures and shoring up liquidity in the capital markets, industry participants have widely expressed concern over the lack of activity in the loan modification space. Services have been handed the job, but with limitations in the pooling and servicing agreements and REMIC restrictions (see cover story), they have not been able to effectively carry out these measures.
November 3, 2008 - It seems the only busy sector of the structured finance market lately is litigation. With the dearth of liquidity, market participants ranging from banks and insurers to private investors and hedge funds are wrestling with deal terms and hoping on one end to benefit from a hefty payout, or to avoid one altogether on the other.
October 27, 2008 - CLO market participants at the Information Management Network's 14th annual ABS East conference in Hollywood, Florida last week expressed confidence in the sector's long-term performance, despite the currently depressed spreads. With triple-A CLO spreads at 500 to 600 basis points, double-A spreads at 800 to 1,000 basis points and single-A spreads at 1,000 to 1,500 basis points, pricing has begun to factor in macroeconomic uncertainties, panelists agreed.
October 20, 2008 - For collateral managers who focus on CDOs, the most recent stream of troubling news in the financial sector has further shaken up an industry already reeling from more than a year's worth of nega- tive developments, including a scarcity of liquidity, downgrades, declining issuance volume and an overall decrease in investor confidence in structured products. As may be expected during a downturn in any particular market segment, the ensuing chaos has swallowed up the weakest players and provided an opportunity for stronger players to expand their market share by picking up shakier competitors at bargain prices. Although mergers and acquisitions in the collateral management space have been limited to date, the consolidation wave that has swept up the banking industry in recent weeks will likely hit the collateral management world before long, leaving struggling collateral managers forced to either close up shop or seek haven with stronger institutions.
October 13, 2008 - Speakers on the opening panel at Information Management Network's second annual European CLOs, Structured Credit Products, and Credit Derivatives Summit said that the medium- to long-term outlook for the securitization market is positive, although it will be a bumpy ride along the way. Despite mark-to-market volatility still being a main concern, there are well over 100 investors still active in the market. The panelists said they are hopeful about seeing that number grow to 200 to 400 investors.
October 6, 2008 - Prospects for CDO issuance is slim. As JPMorgan Securities analysts said in a recent report, 'supply has yet to come into the market, with many prospective sellers waiting for market stability.' This sentiment is reflected in the CDO manager rankings compiled by Thomson Reuters for the period covering the first quarter to third quarter 2008. Industry totals for the period only reached $20.1 billion, a fraction of the $258.3 billion the market saw over the same time period last year.
September 29, 2008 - As Congress battled over the terms of the Treasury bailout plan last week, Christopher Ricciardi, chief executive officer at Cohen & Co. and former managing director of global structured credit products at Merrill Lynch, launched an alternative proposal to the government's purchase strategy under the Troubled Asset Relief Plan (TARP) . Under the current government proposal, the Treasury would tap asset managers to purchase troubled assets directly from financial institutions' balance sheets. Ricciardi suggested a Federal Bond Insurance Corp. (FBIC) that would provide a fee-based government guaranty to triple-A-rated senior classes of securitizations backed by a variety of assets. The plan could also, on an optional basis, require that bond insurance from a double-A or triple-A rated monoline first be secured for the asset.
September 29, 2008 - Last week U.S Secretary of the Treasury Henry Paulson extended the biggest lifeline to the financial markets of all time - and perhaps made the biggest gamble with U.S. taxpayer money - when he announced a plan to purchase approximately $700 billion in troubled assets from U.S. financial institutions. While the ABS market reacted positively to the news, the plan's impact will be determined by the pricing of illiquid assets, something the credit markets have been grappling with for more than a year now.
September 29, 2008 - Par-based investors in the triple-A CLO market may soon have their sense of security tested. Many still apparently cling to the assumption that their bonds will ultimately be repaid at par, based on the senior position of these bonds in the transaction structure and the corresponding protection from potential losses. Our controversial view is that the secondary triple-A CLO market has been priced to an 'alternative' reality for quite some time. And we believe this pricing does not accurately reflect the chance that cumulative trading losses and defaults, coupled with significantly discounted net asset values, may challenge a par repayment of the triple-A tranche despite all the subordination.
September 22, 2008 - Sept. 15 was a day of reckoning for Wall Street as the market said goodbye to two U.S. financial institutions, 158-year old Lehman Brothers, whose parts will be wrapped into Barclays Capital, and 94-year old Merrill Lynch, which will now exist under the Bank of America umbrella. On most ABS participants' minds last week was the impact these events would have on the already ravaged structured finance market. Sources reiterated that the ABS market depends on the ability to access term funding, which has already been weakened by investor fears, though isn't changed dramatically by last week's events.
September 15, 2008 - The beginning of September was wracked with uncertainty as Fannie Mae and Freddie Mac struggled with liquidity issues. That was until the government stepped in with a bailout plan for the GSEs. However, the government cannot stop growing fears of mounting losses at Lehman Brothers, which continued last week.
August 18, 2008 - Last week proved to be another period of slow issuance for the primary market, and trading in the secondary was not that much more active. Both traders and investors reiterated their expectations that the ABS sector will not see much in the way of volume until after Labor Day.
August 18, 2008 - With the monoline industry continuing to struggle for survival, albeit with a weak pulse, and the ABS CDO sector almost flatlining, CDO hedge agreements with the monoline industry have been a cause for concern within the structured finance market. But recent decisions allowing the monolines to deliver up-front payments on CDOs are receiving industrywide praise, and it is believed more of these agreements are in the works.
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