GLG News by Asset Backed Securities Experts

Joseph SmithPresident and CEODefault Mitigation Management

Law of Unintended Consequences is at work again.

December 10, 2007

Analysis of:Llenders Agree to Freeze Rates on Some Loans | www.nytimes.com

Potential Lawsuits, repurchase demands and flawed collateral documentation will cause many more problems than the intended solution will solve. The limited nature of the eligible loans will be far less than the 1,000,000 loans identified by the administration. The parties making the agreement do not have the right to do so.

Joseph SmithPresident and CEODefault Mitigation Management

HSBC as a Bellweather Indicator

November 13, 2007

Analysis of:HSBC, the Subprime Seer:Sanguine View Isn't Likely | online.wsj.com

HSBC's indications do not necessarily indicate the extent of change in the market. Since HSBC is very forthcoming with their news, they do not capture some lenders who have not been in the past. These other lenders, some of whom are significantly larger than HSBC, have been deferring some wirte offs and will take larger positions of loss going forward. HSBC does indicate the trend but not the severity.

Maureen BoltonPrincipalGlobal Capital Access

Liquidity Sponge Could Be Full After Last Week's Leveraged Loan Sales

October 15, 2007

Analysis of:Debt on Sale: Banks Grease | online.wsj.com

This article is important because it reveals the current efforts of banks to sell off leveraged loans and contrasts such efforts with past sales.  The fact that banks are offering price guarantees and discounts to buyers of loans related to buyouts of recession-proof companies is an indication that getting rid of the enormous, committed leveraged loan pipeline will be much more difficult than anticipated. In addition to detailing the type of terms the banks were offering sellers, the article also contains a terrific illustration of the  current road show environment  -still crowded- and attendees -KKR attended and bought loans related to its very own deal-resulting in the borrower merging with the lender. 

Joseph SmithPresident and CEODefault Mitigation Management

Hidden losses to come

October 10, 2007

Analysis of:Unlikely Mortgage Winner | online.wsj.com

The problem with programs of this type is flight from debt. For many of the lenders for which we work, we can not find a high number of these foriegn buyers. if they have any problem with their financial situation they leave the country. Numerous principal residences are vacant and we have tracked them to housing scams where the refinance or purchase was related and inflated.

Maureen BoltonPrincipalGlobal Capital Access

Once Again, UBS Gets Hurt By Following the Herd

October 4, 2007

Analysis of:UBS falls victim to credit squeeze | www.ft.com

This article is important not only because it announces a US$1.3 billion write-down of UBS' fixed income portfolio, but because it parallels the situation with that of Bear Stearns' (huge write-downs followed by the "departure" of a key executive) and questions whether there are more of such "disclosures" in the coming week as Merrill Lynch, Deutsche Bank and others announce their third quarter earnings.

Maureen BoltonPrincipalGlobal Capital Access

Will China's rich enrich Morgan Stanley

September 25, 2007

Analysis of:Morgan Stanley to buy stake in China's Jutian Fund | www.reuters.com

This article announcing Morgan Stanley's plans to invest in Jutian Fund Management is important because it reveals another component of Morgan Stanley's investment strategy.   It also indicates that wealthy Chinese may be a more lucrative target for foreign investors, as opposed to the potential billion retail accounts.

Maureen BoltonPrincipalGlobal Capital Access

Carribean for Customer Service;India for Intelligence

September 24, 2007

Analysis of:Forget India; Call Centers Boom in Caribbean | abcnews.go.com

This article is important because it describes the nearly five-fold rise in call center businesses in Carribean countries such as Jamaica and the Dominican Republic.  The article also details the positive economic impact that opening one call center can have on such small countries.  Finally, an optimistic prediction that such call centers can eventually evolve into more profitable work, such as creating web sites or assisting with IT problems is made along with the consequent mpact on the islands' employment levels and wages.

Joseph SmithPresident and CEODefault Mitigation Management

It is more than liquidity and perception - the Housing Crisis

September 20, 2007

Analysis of:Financial crisis triggers first stress test | investing.reuters.co.uk

Stress is yet to be seen, early indicators are bad, the future is going to be worse. The actions to date have failed the test for working out of the mortgage crisis. What is yet to come on the mortgage market can be changed if acted on, current trends are leading to disaster.

Maureen BoltonPrincipalGlobal Capital Access

C-Bass breaks up Radian/MGIC marriage

September 10, 2007

Analysis of:MGIC, Radian End Merger Deal As Joint Venture Sustains Losses | online.wsj.com

This article is important because it announces the break up of what was to be one of the most synergistic mergers in mortgage-insurance history.  MGIC with its portfolio of traditional mortgage and bond insurance business  coupled with a bit of international exposure and Radian with its new product development skills and ability to rapidly respond to clients and assist them in assessing and pricing risk.  Unfortunately Radian lost MGIC's interest when their in-housen expertise at pricing and profiting from distressed mortgages -C-Bass lost  US$1 billion in market value due to investments in non-investment grade subprime mbs.

John SalomoneManaging DirectorStructured Finance International, LLC

Debt Meltdown - Understanding It - "Financial Mismatching" at the Core

August 10, 2007

Analysis of:Next victims of the credit squeeze | money.cnn.com

Financial Mismatching - Without understanding the funding connections among an individual sub-prime mortgage, the securitized bond issued with the mortgage as collateral, the hedge fund or managed money sourced to purchase the bond and the commercial paper issued to on-lend into the managed money fund, one cannot understand the crisis in the debt markets. At each stage along the structured finance trail, there exists fundamental funding mismatches overlooked by analysts and more tragically ignored by the managers that made these investments. The design flaws are so fundamental that any Finance 101 student would recognize them, but for the air of sophistication  that shrouds connecting financial instruments that should not be connected. Strip away the layers of obfuscating financial alchemy and you find, in essence, managers purchasing and trading fundamentally illiquid CDO's using short term funds to arbitrage interest rate and risk differentials - and they got caught.

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