Asset-Backed Alert - IMN

APRIL 12, 2013
2 JP Morgan Maps Next MBS Issue
2 Discover Pressed for Junior Paper
2 Europe CLO Pros Hail New Approach
3 CLO Issuers Grumble Over S&P Stance
3 BTG Sells Mortgage-Bond Holdings
4 Uncertainty Clouds CLO Forecasts
4 Auto Performance Back at Pinnacle
5 S&P Gets Look at ‘Mock’ Solar Deal
5 Budget Cuts Leave Brazos in Limbo
6 Alt-A Securities Setting the Pace
6 Trups CDO Offering Tests Market
8 Equipment Shop Courts Buysiders
9 Mortgage-Seizure Threat Subsides
10 INITIAL PRICINGS
THE GRAPEVINE
The leader of PineBridge Investments’
structured-product buying unit has left
the firm to join Fifth Third Bank as head
of a Cincinnati unit that helps buyside
clients devise fixed-income investment
strategies. As a member of PineBridge’s
New York office, John Dunlevy was
responsible for all of the $68.6 billion
firm’s investments in asset- and
mortgage-backed bonds. He also has
worked as chief fixed-income strategist
at Nomura, and as a portfolio manager at
Beacon Funds and Hyperion Capital.
Director Kashif Gilani has resigned from
Barclays’ asset-backed bond banking
unit. As a member of Barclays’ New York
team, Gilani focused on structuring deals
backed by student loans and credit-card
See GRAPEVINE on Back Page
Bank of Japan Moves Seen as Boon for ABS
Look for some of Japan’s largest institutional investors to become active buyers of
U.S. asset-backed securities in the months ahead.
The risk-averse Japanese institutions don’t often invest in structured products
issued in the U.S. So why now? With the Bank of Japan about to begin buying Japanese
government bonds as part of an aggressive quantitative-easing program, the
already-low yields on those notes are expected to fall even further. That should
motivate yield-starved institutional investors in the nation to take a fresh look at
the U.S. asset-backed bond market, sources said.
“Mark my words, it won’t be long before we start seeing the Japanese venturing
into our space,” one syndication specialist said. “This program won’t just drive down
rates on Japanese government bonds, but on all securities. Stateside, asset-backed
bonds will be seen as a safe haven with solid yields.”
Among the Japanese institutions viewed as likely buyers of newly issued paper in
See JAPAN on Page 4
TD Pulling Trigger on Bond-Issuing Initiative
Toronto-Dominion Bank is moving forward with plans to issue bonds backed by
credit-card accounts and auto loans.
After several months of preparation, the Toronto bank appears to be almost
ready to float offerings in both asset classes — distributing the deals separately in
the U.S. and Canada according to collateral location. Multiple transactions would
follow throughout the year.
The effort is led by Craig Lowery, a vice president in charge of treasury and funding.
On the credit-card side, he’s focusing on a growing book of bankcard accounts
that TD offers in the U.S. and Canada. He’s also considering deals backed by Target
accounts, despite earlier indications that those receivables would be funded solely
through deposits.
TD bought $5.7 billion of Visa and private-label accounts from Target in March,
See TRIGGER on Page 6
Knight Traders Bristle at Stifel’s Ultimatum
Stifel Financial appears to be playing hardball with a team of bond traders it is
absorbing from Knight Capital.
Up to 100 Knight traders and sales professionals who cover mortgage-backed
securities or corporate debt are set to join Stifel as it completes its acquisition of
Knight’s fixed-income unit. On March 15, Stifel agreed to pay an undisclosed sum
for the business, with a closing date expected in about three months.
In the past, Stifel generally has proved adept when it comes to integrating businesses
it acquires, according to executive recruiters. But this time its tactics are
rankling the Knight crew — to the point where litigation now seems inevitable.
“Everyone who has left [Knight] has hired a lawyer to fight off Stifel,” a source
said.
What’s their gripe? Sources said Stifel is offering the Knight traders and salespeople
weak accounts with a paltry 6-10 clients apiece, compared to the fatter client
See KNIGHT on Page 8

April 12, 2013
Asset-Backed
2
ALERT
JP Morgan Maps Next MBS Issue
J.P. Morgan is moving quickly to float its next jumbo-mortgage
securitization.
After pricing its first such deal in years on March 25, the
bank is aiming to complete a follow-up offering of undisclosed
size by the end of June — proceeding with plans to establish a
routine issuance program. It already has an initial blueprint for
the transaction in hand, and has been showing it to Fitch, DBRS
and Kroll.
The same agencies rated the $616.3 million deal that J.P.
Morgan completed last month. Moody’s and S&P didn’t grade
that offering, and it’s unclear whether they’ll get an opportunity
to weigh in on the upcoming one.
Moody’s seems a less-likely candidate. J.P. Morgan declined
to retain the agency for the March transaction after it refused
to give triple-A grades to the offering’s senior classes, citing
concerns over how long investors are given to pursue claims
involving loans that fail to meet representations and warranties.
And the bank apparently remains miffed.
S&P, meanwhile, was pulled from the March deal after saying
it would assign top ratings to the senior securities only if
they were supported by subordinate classes equal to more than
8% of the issue’s overall balance. That’s more than the agency
required for offerings from Credit Suisse and Redwood Trust,
and likewise exceeded the 7.4% subordination level assigned
to J.P. Morgan by Fitch, DBRS and Kroll. While J.P. Morgan and
S&P have discussed the matter further since then, there’s no
word on whether they reached an agreement.
Issuers in the U.S. have completed eight jumbo-mortgage
securitizations totaling $3.4 billion this year, according to
Asset-Backed Alert’s ABS Database. That’s about a third of
total production for the asset class since the credit crisis. Other
issuers in the second-quarter pipeline include Credit Suisse,
Everbank and Redwood, which began shopping a $463 million
transaction on April 2. Citigroup also has a $300 millionplus
securitization in the works, although the timing remains
unknown.
Discover Pressed for Junior Paper
Nudged by investors, Discover is giving serious thought to
issuing more subordinate tranches from its credit-card securitization
trust.
In the wake of the financial crisis, card bonds carrying
below-triple-A grades were few and far between, as investors
demanded yields on junior paper that were too costly for most
issuers. That began to change last year, though, as yield-starved
buysiders showed a greater willingness to bear the risk.
Following in the footsteps of American Express and GE
Capital, Discover in November issued a $250 million securitization
made up of a single tranche of subordinate paper, rated
A1/AA+/A- by Moody’s, S&P and Fitch. Its most recent deal, a
$1.7 billion offering that priced Feb. 6, was entirely triple-Arated.
Since then, sources said, investors have put increasing
pressure on the Riverwoods, Ill., company to conduct future
offerings of subordinate tranches. Discover issues about once
a quarter.
One factor motivating investors, beside the promise of higher
returns, is the fact that card-bond collateral has performed
well. Indeed, credit card charge-off and delinquency rates —
key indicators of bond performance — are near their lowest
levels ever, according to an index maintained by Moody’s.
Still, issuers remain wary about increasing production of
subordinate bonds. So far this year, only one such offering
has taken place — a $555.6 million securitization by American
Express on March 14 that included both senior and junior
tranches. In that case, Amex sold two subordinate slices totaling
$55.5 million — one rated single-A, the other triple-B.
Europe CLO Pros Hail New Approach
A European collateralized loan obligation that Pramerica
Fixed Income priced April 10 is expected to serve as a model
for such deals going forward, with the collateral pool including
both high-yield corporate bonds and leveraged loans.
The thinking is that the approach could help in efforts to
revive Europe’s moribund CLO market, which has seen only
a handful of deals since the financial crisis. Investec Bank is
teeing up a deal, joining Apollo Management, BNY Mellon unit
Alcentra, Carlyle Group, New Amsterdam Capital and 3i Debt
Management among the firms expected to issue European collateralized
loan obligations this year.
“I haven’t seen it like this in a couple of years,” one source
said of the renewed optimism. “It’s getting to the point where if
there is consistent flow, you have to be out there as well if you’re
going to be taken as a serious issuer.”
Pramerica’s €300 million ($395 million) offering was just the
second “CLO 2.0” in Europe — industry jargon for a new deal
structure that includes a range of investor protections. But the
most striking thing about the deal is its investment parameters:
Up to 40% of the assets can be high-yield European corporate
bonds, making for an unusual collateral mix of securities and
loans. Investors can expect that to be a standard feature of
European CLOs for the foreseeable future, sources said.
That’s significant because a key reason for the dearth of
European CLOs in recent years has been a severe shortage
of leveraged loans. Loan-origination volume for the first two
months of the year plummeted to less than €1 billion in 2009,
after reaching €31.3 billion in 2006. Last year, €4.1 billion of
leveraged loans were issued in January and February.
More recently, origination has increased substantially,
to more than €10 billion in the first two months of this year,
according to S&P. That, coupled with the inclusion of corporate
bonds in the collateral pools, has led to forecasts of as many as
a dozen CLOs being issued in Europe by yearend.
Barclays ran the books on the Pramerica deal, dubbed
Dryden 27 Euro CLO. The only previous CLO 2.0 offering in
Europe was a €300.5 million offering that Cairn Capital priced
Feb. 20 via Credit Suisse.

April 12, 2013
Asset-Backed
3
ALERT
CLO Issuers Grumble Over S&P Stance
S&P’s recent warnings about deteriorating quality among
collateralized loan obligation pools are being met with
increased agitation from issuers who fault the agency’s rating
methods.
The complaints became especially amplified after S&P said
last week that it expects to increase the credit protections
required to earn triple-A grades on CLOs underpinned by certain
types of loans, while separately releasing an April 5 report
that voiced concerns about weakening credit profiles among
such deals. The issuers’ main gripe: that the agency has consistently
underestimated the amount of money that managers
stand to recover when a collateral account defaults.
While the dispute has been developing for some time, S&P’s
decision to lower the boom prompted a quick retaliation by
some issuers. They include Apollo Management, which plans
to leave the agency off its next CLO. Apollo has issued seven
CLOs totaling $2.9 billion dating back to 2010, each of which
was graded by S&P and Moody’s. This time, it will be Moody’s
and Fitch.
Sources said dissatisfaction with S&P’s methods also might
explain why a March 26 deal from GoldenTree Asset Management
came without a rating from the agency. That $669 million
issue, sold under the New York firm’s GoldenTree Loan Opportunities
brand, also carried marks from Moody’s and Fitch.
While GoldenTree has occasionally launched CLOs through
other programs without S&P’s blessing, last month’s transaction
marked the first time in the 11-year history of GoldenTree
Loan Opportunities that the agency wasn’t engaged. All told,
the series has produced seven deals adding up to $4.5 billion.
That issuers are forgoing S&P ratings isn’t necessarily a surprise,
as the agency has acknowledged that it expects to lose
some market share over its stance. But the fact that high-profile
issuers already are dropping the agency demonstrates the
depth of the division.
As CLO volume exploded in recent years, S&P emerged as
the most active rating agency in the sector. Given that status,
issuers have had little choice but to grudgingly include the
shop’s recovery projections in their deal documents — following
its borrower-by-borrower assumptions rather than setting
a single recovery target for the entire asset pool.
They also have had to leave out certain borrowers that score
poorly in S&P’s recovery forecasts, even if the issuers’ own
analysis suggests a positive outcome. In recent days, however,
more and more managers have said privately that they’ve had
enough. “For years we’ve had an issue with how they derive
recovery rates,” one manager said. “It’s very simplistic and inaccurate.
As a result, they show very low recovery rates on highly
rated loans.”
Much of the head-butting involves so-called covenant-lite
loans, which are credits that limit the actions lenders can take
when borrowers run into trouble. While last week’s report from
S&P broadly addressed concerns that the credit cycle is entering
a decline, the agency emphasized that growing use of covlite
loans as CLO collateral in particular has been dampening
its outlook. That’s partly because recoveries among those assets
could become especially difficult in a downturn.
S&P says its view is supported by the fact that it rates more
corporate borrowers than anyone else, and that ratings among
cov-lite borrowers have been falling. It plans to stick with its
approach.
Managers counter that S&P is guessing where credit quality
is headed, adding that cov-lite assets typically have performed
well and can help them assemble collateral pools at a time
when leveraged-loan supply has lagged demand. They additionally
point out that most CLOs contain enough subordination
to protect senior investors even under pessimistic recovery
scenarios, and suggest the agency underestimates the amount
of cash on borrowers’ balance sheets.
Some also accuse S&P of taking an overly cautious tack
in response to the $5 billion lawsuit it is facing from the U.S.
Department of Justice. That complaint, filed in February in U.S.
District Court in Los Angeles, accuses the shop of bolstering its
market share prior to the credit crisis by knowingly assigning
high grades to mortgage bonds and collateralized debt obligations
with weak asset pools.
BTG Sells Mortgage-Bond Holdings
BTG Pactual Asset Management has been taking profits on
its holdings of non-agency mortgage bonds, following a steep
increase in the values of those instruments.
The asset sales have flowed from the shop’s BTG Pactual
Distressed Mortgage Fund, which so far this year has cut the
volume of private-label home-loan securities in its portfolio to
$315 million from $400 million. The vehicle now holds 75 such
positions, down from 112, according to a letter distributed to
investors on March 28.
Looking forward, BTG plans to continue taking advantage
of what it calls “lofty price levels” in the market. “Our primary
motivation was to take some profits while disposing of less liquid
positions,” the firm’s managers wrote.
Despite the maneuvering, the manager noted that it believes
it still has enough positions to benefit if bond prices keep moving
up and ample buying power should values decline.
Its 2-year-old vehicle gained nearly 46% in 2012, ranking in
the upper echelon of-mortgage bond funds, and followed up
with a 7.4% gain for the first two months of this year. However,
BTG has been warning shareholders that it would be difficult to
repeat last year’s performance — while acknowledging that it is
too early to exit the trade all together.
The fund runs $260 million of equity, boosting its buying
power through the use of leverage.
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April 12, 2013
Asset-Backed
4
ALERT
Uncertainty Clouds CLO Forecasts
Collateralized loan obligation professionals are still all over
the map when it comes to forecasting this year’s issuance volume.
As 1,500 industry participants crammed into Information
Management Network’s “2nd Annual Investors’ Conference on
CLOs and Leveraged Loans” at the Conrad Hotel in New York
on April 10-11, many trumpeted the crowd as a testament to the
market’s current strength. Away from the panel discussions, conferencegoers
expressed differing views about future dealflow.
In one camp is Joseph Moroney of Apollo Management, who
predicts that CLO volume in the U.S. this year will amount to
roughly $55 billion — more or less matching the 2012 total. But
ING Investment senior vice president Marc Boatwright said he
could see the figuring topping $75 billion. Also calling for growth
is Golub Capital portfolio manager Michael Loehrke.
Loehrke expects CLO-issuing opportunities to rise with an
increase in loan production, fed in part by a rising volume of
mergers and acquisitions. However, he tempers that forecast by
noting that issuers won’t maintain the quarterly pace of $28.7 billion
that they set during the January-March period of this year.
One point of agreement: Nobody expects volume to decrease
from last year’s levels. That’s true even of those who offer only
vague outlooks, like Deutsche Bank CLO-banking head Chris
Dauria, who said supply could meet or exceed last year’s level.
Coming off a year of explosive growth, CLO professionals
have struggled since the beginning of 2013 to reach a consensus
on what to expect in terms of new-issue supply going forward.
Amid the general bullishness at IMN’s conference, for example,
there were undercurrents of uncertainty about difficulties managers
have been facing in finding suitable loans and deteriorating
credit quality among asset pools (see article on Page 3).
Conferencegoers also noted that frequent loan restructurings
and an apparent refusal by investors to accept tighter spreads on
senior CLO paper have been leading to jerky dealflow. So have
new FDIC policies that prompted at least two large buyers of top
CLO classes to halt those purchases as of April 1. Investors continue
to grumble about a lack of deal transparency as well.
Then there are those who see market forecasts as a self-serving
exercise. “The big issuers want to tell everyone that the party
is over, move along,” one source said. “If they didn’t, then investors
might just sit back and wait for something better to come
along. The dealers will tell you their pipeline stretches through
the fourth quarter. Everyone is just talking their book.”
Bank of Japan announced April 4 that it plans to boost its buying
of government bonds by 50 trillion yen ($520 billion) annually.
Quantitative-easing measures pursued by the U.S. central
bank since the financial crisis have driven down yields on Treasury
securities and agency mortgage bonds to historic lows.
That, in turn, has sent investors scurrying into the asset-backed
bond market in search of yield.
The Bank of Japan’s announcement prompted a selloff of Japanese
government bonds, sending yields surprisingly higher in
recent days. Still, the returns on those notes remain well below
those of comparable U.S. Treasurys — not to mention assetbacked
securities.
“We’re watching this very closely,” another banker said of
Japan’s quantitative-easing initiative, which has been in the
works since the beginning of the year. “Since this started, Japanese
government bonds are yielding next to nothing. Japanese
investors are going to have to start looking at alternatives.”
Auto Performance Back at Pinnacle
Delinquencies among securitized pools of prime-quality
auto loans have dipped to a level visited only once in the
past dozen years. The volume of past-due accounts dropped
8 bp to 0.33% during the month ended March 15, matching
a recent low seen in April 2012, according to an index maintained
by Fitch. The last time delinquencies were lower was
in June 2001. Losses also declined, dropping 7 bp to an annualized
rate of 0.33%. That indicator has been aided in part
by strong demand for used cars, which improves recoveries
from sales of repossessed vehicles. Among subprime loans,
delinquencies fell 63 bp to 3.02% while losses declined 17
bp to 5.36%. Those improvements, driven in part by distributions
of tax refunds, at least temporarily defy widespread
expectations that weaker underwriting standards would
cause subprime-loan performance to suffer. Fitch expects
the pattern to continue into June.
2.5
2.0
1.5
1.0
0.5
Prime Auto Loans
0.0
1/08 1/09 1/10 1/11 1/12 1/13
Japan ... From Page 1
the States are heavy hitters Government Pension Investment
Fund of Japan, Nihon Keizai Shimbun Pension Fund and Yokahama
National University.
While Japanese investors have occasionally bought into
deals from the U.S. in the past, little of that activity involved
pension systems and other institutional players. Rather, the
demand was driven by banks — which lately have shown a
particular interest in collateralized loan obligations.
Following in the footsteps of the U.S. Federal Reserve, the
15 Subprime Auto Loans
12
9
6
3
0
1/08 1/09 1/10 1/11 1/12 1/13
Loss Rate (%)
60-Day Delinquencies (%)
Source: www.fitchratings.com

April 12, 2013
Asset-Backed
5
ALERT
S&P Gets Look at ‘Mock’ Solar Deal
A government-sanctioned organization is constructing a
prototype securitization of leases on solar-power equipment,
with the aim of determining whether such issues could earn
high-enough ratings to be feasible.
The undertaking is the product of Solar Access to Public
Capital, a group of about 40 companies brought together by the
U.S. Department of Energy’s National Renewable Energy Laboratory
with the aim of creating a market for solar-equipment
securities. SolarCity is playing the role of issuer on the model
deal, with Credit Suisse as the underwriter — mirroring a relationship
that the shops already have in place for an actual offering
that’s in the works.
The theoretical transaction would total $50 million and would
be based on a portfolio of leases on residential installations. The
plan is to submit the sample to S&P prior to the July 8 start of the
“Intersolar North America” conference in San Francisco.
A second model securitization involving installations on
commercial buildings will also be presented to S&P, with Credit
Suisse again acting as underwriter. However, no issuer has been
assigned for that side of the project.
The goal in both cases is to determine whether S&P will
grade the securities double-A or higher, which is the level that
prospective issuers see as necessary to move forward with their
inaugural offerings.
Why assemble a model securitization? Ever since companies
like SolarCity began expressing an eagerness to securitize
more than two years ago, rating agencies have hesitated over
the complexities and unfamiliar nature of the targeted assets.
The view is that an informal mark from S&P, which has yet to
officially sign on to grade the sample deal, could help issuers
tweak their offerings to ensure broad appeal from the start —
rather than floating potentially lower-rated transactions that
could dampen enthusiasm for the asset class.
S&P’s concerns about solar-equipment deals have included
a lack of historical lease-payment data. The Department of
Energy and the Solar Access group are answering by drafting
standard power-purchase and lease contracts and by creating a
database of lease performance.
That said, it’s unclear why the focus is on how S&P alone
would rate the deals. Credit Suisse, which already has supplied
financing to SolarCity and prospective issuer SunRun, was in
talks with Moody’s last year about possibly grading deals of
$500 million from each company. And while Moody’s is not a
member of the Solar Access group, it has been talking to the
Department of Energy about its approach to the market.
S&P is a member. So are Kroll, Credit Suisse, SolarCity, Sun-
Run and most other solar-equipment solar installation and
leasing companies interested in securitization.
Budget Cuts Leave Brazos in Limbo
The U.S. Department of Education is withholding a servicing
contract that it was poised to award to Brazos Higher Education,
pushing the education lender’s securitization plans onto
the backburner.
The Department of Education had been looking at mid-
June to add Brazos to a list of not-for-profit servicers assigned
to handle collections on government-originated Direct Loans.
But on April 1, the agency said it would halt such assignments
at least until the end of its current fiscal year on Sept. 30.
That decision, brought on by the federal spending cuts
known as sequestration, came as a shock to Brazos. In fact, the
Waco, Texas, lender already had spent $2 million and hired 20
people in anticipation that it would receive the contract.
So what does that have to do with Brazos’ presence in the
asset-backed bond market? The company, once an active
issuer, had been eyeing the assignment as a key source of fee
income at a time when many of its other lines of business dried
up — with the idea that it could use the revenues to launch or
expand other lending projects that it eventually would fund via
a renewed securitization program.
In the three years since the Obama Administration blocked
private-sector lenders from writing fresh loans via the Department
of Education’s Federal Family Education Loan Program,
those shops have been pursuing Direct Loan servicing contracts
as a revenue lifeline. In the meantime, many have seen
their lending volume founder.
Brazos wrote only $300,000 of non-government private
loans in 2012, giving it little in the way of fresh assets to securitize.
The company was negotiating for a $10 million warehouse
line from a regional bank, with the goal of using the capital
to write and eventually securitize loans to students of trade
schools and specialized training programs. But that deal never
materialized.
Brazos has sought alternative sources of revenue in the meantime,
including its December purchase of online job-interview
service InterviewStream. But any securitization plans — seen as
a driver of ongoing lending growth — now are on hold until the
company learns of its future as a Direct Loan servicer.
The Department of Education’s intentions on that front
are unclear. In the meantime, Brazos will lay off the workers
it hired. It also will submit a letter to the agency next week
explaining the importance of the contract and urging for a
quick resolution.
Brazos began issuing student-loan backed bonds in 1995,
and to date has completed 42 deals totaling $15.7 billion,
according to Asset-Backed Alert’s ABS Database. It last was in
the market in August 2012 with a $115.2 million issue, with
Morgan Stanley as bookrunner.
Corrections
An April 5 article, “CLO Issuers Mulling Capital Calls,” overstated
the spread for a class of a Carlyle Group collateralized
loan obligation. The 5.4-year senior tranche of the deal, Carlyle
Global Market Strategies, 2013-2, priced at 115 bp over threemonth
Libor.
An item in The Grapevine on April 5 misidentified the headquarters
of Ares Management. The firm is based in Los Angeles.

April 12, 2013
Asset-Backed
6
ALERT
Alt-A Securities Setting the Pace
Hedge funds that started buying alternative-A mortgage
paper late last year knew what they were doing.
Turns out that bonds backed by alt-A adjustable-rate mortgages
have outperformed other types of home-loan securities
since the start of the year. According to an April 5 research
report from Bank of America, the values of alt-A bonds issued
from 2005 to 2007 are up at least 6% year to date — compared
to a 3.6% average gain for legacy jumbo-mortgage securities.
The top performers: alt-A bonds issued in 2006, which have
gained an average of 7.4% since Jan. 1.
Hedge funds and other buyside players turned their attention
to alt-A paper late in the fourth quarter as a nearly yearlong
rally in the market for jumbo-mortgage bonds appeared to
be losing steam. Among the shops thought to have been active
buyers at the time are Greg Lippmann’s LibreMax Capital and
BTG Pactual.
Trups CDO Offering Tests Market
Investors are salivating over an unusually large offering of
collateralized debt obligations backed by trust-preferred securities
that hit the secondary market this week.
The $200 million “BWIC” — for bids wanted in competition
— is made up of senior bonds from 16 transactions issued
prior to the financial crisis. Sources identified the seller as Commerce
Street Investment, a Dallas shop that appears to be liquidating
its entire inventory of so-called Trups CDOs. Bids are
due April 17.
The expectation is that the offering could establish a new
pricing benchmark for such securities, whose values plummeted
during the financial crisis. Some believe the notes will
change hands above 70 cents on the dollar, and possibly as high
as 80 cents, compared to a mere 30 cents four years ago.
“Prices are up 6% this year,” one trader said. “Everyone is
looking for this stuff, even though not a lot is coming out.”
Indeed, offerings of Trups CDOs have been sporadic, and a
$200 million batch is virtually unheard of. That largely reflects
the fact that no such deals have been issued since the financial
crisis, and an increasing number of transactions are in run-off
mode.
That’s one factor behind the price gains. Another is that deal
performance has been improving, after many of the regional
banks that issued Trups deferred payments to bondholders
during the credit crisis have resumed installments. In most
cases, payment deferrals are permitted for up to five years —
meaning the window is now closing for those issuers.
That’s part of the reason rating agencies lately have upgraded
a broad swath of Trups CDOs. “All the rating agencies are acting
uniformly,” another trader said. “There is no question all
the trends and ratings actions are favorable. There is probably
more room to run.”
Commerce Street’s offering is dominated by bonds from FTN
Financial’s once-popular PreTSL shelf, which sold $12.5 billion
of Trups CDOs from 2000 to 2007, according to Asset-Backed
Alert’s ABS Database. The portfolio encompasses pieces with
face values up to $30 million, though half are $10 million or
less.
Bidders will likely include one or more insurance companies,
which last year began snapping up senior Trups CDOs as
buy-and-hold investments. One of the largest buyers following
the financial crisis was Hildene Capital of New York, which has
amassed a portfolio with a face value of $2 billion.
Trigger ... From Page 1
in a deal that also gives the bank the right to write and fund all
of the retailer’s plastic in the U.S. for the next seven years.
Industry professionals have been talking about TD’s potential
as an issuer of credit-card bonds since mid-2012, when
several Canadian banks indicated that they would lean more
heavily on securitization for funding. So far this year, CIBC,
National Bank of Canada and RBC have securitized accounts
written at home. However, predicted deals backed by U.S.
receivables have yet to materialize.
TD’s plans for issuing auto-loan paper have been more of a
moving target. Last year, sources said they expected the bank to
act on a rumored push to securitize the loans of Chrysler Financial,
the former Chrysler Corp. unit it bought from Cerberus
Capital in 2011. But TD set aside any such bond-issuing ambitions
as it pushed to replace Ally Bank as the preferred lender
for the automaker — which years earlier had removed Chrysler
Financial from that role.
TD eventually lost out to Banco Santander. With that matter
out of the way, however, the word is that its securitization plan
is back in motion. “TD is the one people keep talking about,
and they’ve been planning this for a while,” one source said.
“Ultimately, they want to expand the funding alternatives they
have.”
TD has never been an issuer of credit-card accounts in the
U.S., but has completed a few deals in Canada, most recently
in 2003. The bank hasn’t sold auto-loan paper to date in either
country. It has been behind some collateralized bond and
loan obligations in both nations and in Europe, but not since
well before the credit crisis. Separately, TD has issued covered
bonds in Canada and has been looking at similar deals in the
States.
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April 12, 2013
Asset-Backed
8
ALERT
Equipment Shop Courts Buysiders
Commercial Credit Group is preparing its first broadly offered
securitization of equipment loans.
The $194.5 million offering is expected to price in the next
two weeks, with J.P. Morgan and SunTrust Bank serving as
bookrunners. It will encompass $179.4 million of senior securities
spread across two classes with triple-A ratings from S&P
and DBRS, plus $15.1 million of subordinate notes with single-
A grades.
Commercial Credit is offering the securities quasi-publicly
under Rule 144A. The Charlotte company’s only two previous
securitizations were privately placed. Those offerings, totaling
$170 million, priced in the past two years with Wells Fargo and
SunTrust running the books.
Commercial Credit offers equipment financing to construction,
shipping and waste-management companies. The company
was founded in 2004.
Knight ... From Page 1
books the Knight staffers are used to. And if they don’t like
it? Stifel apparently has told them they’ll have to take a gardening
leave until yearend before joining another shop. The
St. Louis-based brokerage has made it clear it would sue any
Knight staffers who defy the edict, on the grounds that they’d
be damaging Stifel’s business by delivering clients to competitors.
“Stifel is basically saying, take these crappy accounts or
you don’t work for the next eight months,” a source said.
So far, nearly a dozen Knight staffers have ignored Stifel’s
ultimatum and jumped ship.
Knight is being broken up following a trading error last
August that resulted in a $440 million loss for the Jersey City,
N.J., brokerage. Getco, a high-speed trading operation in Chicago,
has agreed to pay $1.4 billion for Knight’s equity business.
CALENDAR
Main Events
Dates Event Location Sponsor Information
June 18-20 Global ABS 2013 Brussels IMN www.imn.org
Oct. 6-8 ABS East Miami IMN www.imn.org
Events in US
Dates Event Location Sponsor Information
April 16-17 CLO Credit Risk Workshop New York Fitch Training www.fitchtraining.com
April 17 Future of Capital Requirements New York SIFMA www.sifma.org
April 17-19 New York School of Aviation Finance 2013 New York Euromoney www.euromoneyseminars.com
April 22-23 Single Family Aggregation: REO-to-Rental Forum Miami IMN www.imn.org
April 22-23 Airfinance Conference New York Euromoney www.euromoneyseminars.com
April 24 Practical Look at Loan Operations & Settlement Today New York LSTA www.lsta.org
April 29-30 Auto Finance Risk Summit Dallas Royal Media autofinancerisksummit.com
April 29-30 Residential Mtge. Litigation & Regulatory Enforcement Washington ACI www.americanconference.com
May 3 Sunshine Backed Bonds Conference New York IMN www.imn.org
May 7-8 Education Loan & Financing Summit Washington iiBIG www.iibig.com
May 8 MBS: introduction to Securitization & Processing New York FMW www.fmwonline.com
May 14-15 Risk & Regulation New York CFP www.risk-regulation-usa.com
May 16-17 SiLAS 2013 Miami Euromoney Seminars www.euromoneyseminars.com
May 21 Distressed Debt Forum New York Mergermarket mergermarketgroup.com
May 29-31 Spring Life Settlement Conference Las Vegas LISA www.lisa.org
June 3-6 Credit Management & Debt Recovery New York Euromoney Training www.euromoneytraining.com
June 17-21 Risk Minds USA 2013 Boston ICBI www.riskmindsusa.com
June 24-25 Aircraft Finance & Leasing New York ACI www.americanconference.com
Sept. 10-11 Commercial Paper & Money Markets Symposium New York iiBIG www.iibig.com
Sept. 16-17 ASF Securitization Institute: Securitization Fundamentals New York ASF www.americansecuritization.com
Oct. 16 Fundamental of Swaps & Other Derivatives 2013 New York PLI www.pli.edu
Oct. 17 Covered Bonds-The Americas New York IMN www.imn.org
Oct. 17-18 Advanced Swaps & Other Derivatives 2013 New York PLI www.pli.edu
To view the complete conference calendar, visit The Marketplace section of ABAlert.com

April 12, 2013
Asset-Backed
9
ALERT
Mortgage-Seizure Threat Subsides
The company behind a plan that calls for municipalities to
seize underwater mortgages appears to be losing enthusiasm
for the effort.
Officially, Mortgage Resolution Partners’ project remains
under way. But sources said the San Francisco firm is showing
signs of conceding that rising housing prices have negated
interest among its municipal partners.
The California municipalities of San Bernardino County,
Fontana and Ontario dropped out of the effort in January. They
had been seen as the most promising prospects to work with
Mortgage Resolution, which proposes to offer funding and
management assistance to municipalities that use eminent
domain to buy mortgages at risk of foreclosure.
To finance the plan, Mortgage Resolution has lined up more
than $500 million from investors. Along with rising housing
prices, its momentum may have been sapped by threats of lawsuits
from the American Securitization Forum and Sifma.
The company is still holding out for one municipality, however.
Officials in the Massachusetts town of Brockton are scheduled
to vote on April 11 whether to join the effort.
“This whole thing is irrelevant until some city pulls the trigger,
which is appearing more unlikely,” one source said.
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April 12, 2013
Asset-Backed
10
ALERT
INITIAL PRICINGS
SBA Tower Trust, 2013-1, 2013-2
Priced: April 4
Amount: $1.3 billion
Collateral: Cell-tower leases
Seller: SBA Communications
Bookrunner:
Deutsche Bank, Barclays, Citigroup, J.P. Morgan, Wells
Fargo, RBS, TD Securities
Class M/F Amount Yield WAL
2013-1C A 425.000 2.250 5.00
2013-1D Baa3/BBB 330.000 3.625 5.00
2013-2C A 575.000 3.750 10.00
Toyota Auto Receivables Owner Trust, 2013-A
Priced: April 9
Amount: $789.1 million
Collateral: Auto loans (prime)
Seller: Toyota
Bookrunners: Bank of America, Morgan Stanley, RBS
Class M/S Amount Yield WAL Spread Benchmark
A-2 AAA 374.940 0.372 1.05 +5 EDSF
A-3 AAA 307.980 0.551 2.10 +16 Int. Swaps
A-4 AAA 106.155 0.700 3.20 +18 Int. Swaps
FRS LLC, 1
Priced: April 10
Amount: $335.5 million
Collateral: Railcar leases
Seller: Flagship Rail Services
Bookrunners: Wells Fargo, Deutsche Bank
Class S&P Amount Yield WAL Spread Benchmark
A-1 A 105.000 1.811 3.10 +130 Int. Swaps
A-2 A 191.963 3.100 6.00 +195 Int. Swaps
B BBB 38.568 4.000 6.00 +285 Int. Swaps
Flagship Credit Auto Trust, 2013-1
Priced: April 10
Amount: $222.2 million
Collateral: Auto loans (subprime)
Seller: Flagship Credit Acceptance
Bookrunner: Wells Fargo
Class S/K Amount Yield WAL Spread Benchmark
A A+/AA- 174.000 1.333 1.31 +100 EDSF
B A 14.500 2.786 3.22 +225 Int. Swaps
C BBB 21.000 3.627 3.71 +300 Int. Swaps
D BB 12.660 5.449 3.83 +480 Int. Swaps
In the know?
Commercial Mortgage Alert, the weekly
newsletter that guarantees your edge in
real estate finance and securitization.
Start your free trial at CMAlert.com or call 201-659-1700.

xxx
April 12, 2013 Asset-Backed
11
1
Asset-Backed
MARKET MONITOR
ALERT
ALERT
($Bil.)
350
WORLDWIDE ABS ISSUANCE
012 2013
300
0.0 0.0 Year-to-date volume ($Bil.)
5.7 3.8 2013 2012
7.5 14.5 250
US Public 33.9 40.3
1.6 21.7 US 144A 24.5 27.2
1.3 22.9 200 Non-US 21.6 27.5
6.6 30.1 TOTAL 80.0 95.1
4.1 36.6 150
9.6 50.0
6.8 52.8
100
4.9 56.8
8.2 61.6
1.7 69.4
50
2.9 70.9
2013
4.8 78.6 0
5.1 80.0
1.7
7.3
2.8
7.1
7.5
5
US NON-AGENCY MBS ISSUANCE
3.2
Volume in past 15 months ($Bil.)
7.2
4
5.9
1.6
3
6.8
2.4
2
2.8
9.0
1
0.0
8.2
0
4.2
F M A M J J A S O N D J F M A
8.4
1.6
6.9
9.0
2.8
6.2
3.2
9.1
8.3
4.3
4.3
0.6
5.6
9.5
5.6
5.6
0.2
6.7
4.6
35
30
25
20
J F M A M J J A S O N D
5-YEAR FIXED CARD SPREADS
Last 12 months (basis points)
15
A M J J A S O N D J F M A
15
12
9
6
3
0
SPREADS ON TRIPLE-A ABS
Credit card - Fixed rate
(vs. Swap)
Credit card - Floating rate
(vs. 1 mo Libor)
Auto loan - Tranched
(vs. Swap)
Home equity - Fixed-rate/
wrapped (vs. Swap)
Swap spreads
(bid/offer midpoint)
2012
US CLO ISSUANCE
Volume in past 15 months ($Bil.)
F M A M J J A S O N D J F M A
Spread (bps)
Avg. Week 52-wk
Life 4/5 Earlier avg.
2.0 +14 +13 +6.8
5.0 +25 +24 +23.6
2.0 +16 +14 +7.4
5.0 +27 +26 +23.3
2.0 +16 +14 +8.3
3.0 +20 +21 +17.4
2.0 +125 +125 +262.3
5.0 +350 +350 +628.3
2.0 +15 +18 +19.1
5.0 +19 +19 +19.3
10.0 +17 +16 +9.5
Source: Deutsche Bank
35
30
25
20
15
10
5
0
30
25
20
15
10
5
0
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
US ABS ISSUANCE
Volume in past 15 months ($Bil.)
F M A M J J A S O N D J F M A
NON-US ABS ISSUANCE
Volume in past 15 months ($Bil.)
F M A M J J A S O N D J F M A
ASSET-BACKED COMMERCIAL
PAPER OUTSTANDING
Since 1/1/06 ($Bil.)
26
24
22
20
18
16
14
12
10
8
6
4
2
0
ABS SECONDARY TRADING
Weekly volume reported to FINRA ($Bil.)
Inv. Gr.
Non-Inv. Gr.
A M J J A S O N D J F M A
26
24
22
20
18
16
14
12
10
8
6
4
2
0
MBS SECONDARY TRADING
Weekly volume reported to FINRA ($Bil.)
Inv. Gr.
Non-Inv. Gr.
A M J J A S O N D J F M A
400
300
Source: Federal Reserve Board
200
1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13
Data points for all charts on this page can
be found in The Marketplace section of
ABAlert.com

April 12, 2013
Asset-Backed
12
ALERT
THE GRAPEVINE
... From Page 1
receivables. Word has it that he’s headed
to a similar post at Credit Suisse —
where he spent 13 years before joining
Barclays in 2011.
Trader Steven Yodowitz turned up last
month in the Los Angeles office of
broker-dealer Sierra Pacific Securities,
where his coverage areas include assetbacked
securities and residential and
commercial mortgage bonds. Yodowitz
had been out of work since July 2012,
when he left the top mortgage-bond
trading post at Crowell Weedon & Co. of
Los Angeles. Before that, he was a bond
trader and salesman at Bank of Manhattan
in El Segundo, Calif. He also has
worked at Bank of America and Nomura.
Buyside shop HillMark Capital is
looking for a New York-based analyst
to cover collateralized loan obligations,
which it buys on the new-issue and
secondary markets. The shop, led
by Mark Gold, is seeking candidates
with at least five years of experience
involving leveraged loans and CLO
management. Applicants can email
resumes to hr@hillmarkcapital.com.
Kroll is seeking a mortgage-bond analyst.
The recruit would be based in New
York, leading coverage of new transactions
and working with the agency’s
surveillance team to monitor existing
deals. He or she would report to senior
managing director Glenn Costello.
Trader Steven Hampton started a few
weeks ago in the Charlotte office of
market-making firm Tahoe Fixed Income.
In his new role, Hampton is focused on
whole loans, non-agency residential and
commercial mortgage bonds and securities
backed by student loans. He previously
spent nine years at Duncan-Williams.
Fitch would like to hire an analyst for
its London office. The recruit would
rate bonds backed by auto loans across
Europe and credit-card accounts in the
U.K., reporting to managing director
Andreas Wilgen.
Zhengyuan Lu has left Gleacher & Co.
unit Gleacher-RangeMark, which offers
analytics services to clients in the fixedincome
market. He’s now working at
New York small-business lender On Deck
Capital as a vice president in charge of
capital markets. Lu also has worked at
Keefe, Bruyette & Woods and Fortis Bank.
Analyst Bob Winata joined Union Bank’s
New York office April 1 as a senior vice
president overseeing the risk attached
to portfolios of mortgage-servicing
rights. Winata previously held similar
positions at Ally Financial and Capital
One, and earlier traded subprime whole
loans at Freddie Mac.
J.G. Wentworth is wrapping up efforts to
prune the staff of Peachtree Settlement
Funding, a structured-settlement buyer it
bought in 2011. Wentworth dismissed at
least 30 Peachtree staffers last week and
plans to lay off at least 68 more, all from
a unit that lends money to injury victims
and their lawyers. Some 150 structuredsettlement
workers already were let go
in 2011. Meanwhile, Wentworth plans
to keep some Peachtree staffers who
focus on buying lottery winnings. But it’s
expected that Wentworth will eliminate
any remaining overlaps between
Peachtree’s securitization staff and its
own, which produces two or three deals
per year.
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