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 [转帖]America's MBS, but Europe or Asia's trouble. |
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parisparis
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加入时间: 2004/09/04
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作者：parisparis 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Germany is a major buyer of US CDOs.
As London Firm Shuts Down, Worries Spread
To American Home Loans Made Back in 2005
By CARRICK MOLLENKAMP, MICHAEL HUDSON and SERENA NG
June 29, 2007
Bond market turmoil spread yesterday as a London investment fund shut down because of bad bets on mortgage-backed securities and, separately, banks were left holding part of a closely watched corporate bond offering.
The London fund, Caliber Global Investment Ltd., announced it was shutting down because of souring investments in bonds backed by mortgages to American homeowners with sketchy credit. So far, most of the pain in the mortgage market was caused by loans made in 2006, when lending standards reached a low. Caliber, a unit of hedge-fund operator Cambridge Place Investment Management LLP, was hurt by loans made in 2005. Delinquencies in these older loans are also building, and investors have been selling off bonds backed by these mortgages in anticipation of problems.
Caliber, which listed on the London Stock Exchange in June 2005, lost 53% of its value. It said it will unwind the fund and attempt to return about $900 million to investors in the next 12 months. The company said in a statement there was "insufficient demand currently for investment through listed investment companies exposed to this asset class."
In the corporate debt market, Dollar General Corp. raised $1.9 billion in a junk-bond sale to fund its buyout, though investors balked at the terms on one part of the offering, which gives the company the ability to halt interest payments if its business sours, and take on more debt instead.
It is known as a "payment-in-kind toggle" provision and the underwriters of the offering -- which included Goldman Sachs, Citigroup, Lehman Brothers and Wachovia -- were left holding $725 million worth of the bonds with this provision. They plan to sell it later.
Problems have been mounting in credit markets for the last few weeks. (See related article.) One problem has been the struggles of two hedge funds run by Wall Street firm Bear Stearns Cos., which invested in debt backed by subprime mortgages. After a near collapse, Bear had to pledge a loan of up to $3.2 billion to rescue at least one of the funds. Meanwhile, investors have been balking at a wave of new bond and loan issues being brought to the corporate credit market, uneasy with terms that they consider too easy on borrowers. Many of these corporate issues are related to buyouts.
In the mortgage sector, the 2006 vintage of subprime loans have already been labeled a bust because delinquencies and defaults on these loans started rising shortly after they were made. The 2005 vintage is now showing more signs of stress.
Among its mortgage bond holdings, those tied to 2005 loans were most prominent in Caliber's portfolio. As of March 31, Caliber had $320.1 million worth of 2005 residential mortgage backed securities, versus $40.5 million worth of 2006 securities. The bonds tied to these 2005 loans are losing their value.
Caliber's unrealized losses for its 2005 holdings were $58.4 million, including a $12 million second-quarter charge, are $46.4 million, the company said in a report last month. This week, Caliber threw in the towel.
Defaults and foreclosures on 2006 loans are worse than 2005. But the rates of bad loans for 2005 are rising and are considerably worse than for 2004 and 2003.
According to First American LoanPerformance, 19.6% of 2006 subprime home loans that are at least 15 months old were delinquent as of April. The 2005 loans are going bad at a slower pace -- but the delinquencies are mounting. As of April, delinquencies accounted for 18.9% of 2005 subprime loans that were at least 26 months old. A delinquency is a loan that is 60 days or more overdue or already in foreclosure.
One portfolio manager, Bryan Whalen at Metropolitan West Asset Management, said the worst loans were made between September 2005 and November 2006, as cutthroat competition encouraged some lenders to push down their lending standards to new lows.
Investors are also concerned about borrowers who took out 2005 adjustable-rate mortgages, many of which will reset with higher interest rates this year. In some cases, the value of bonds backed by these mortgages are falling in anticipation of problems. Moreover, borrowers have had trouble refinancing out of these loans and into fixed rate mortgages because lenders have been tightening their credit standards.
Caliber said the decision was made after a review that began in early May. Later, Caliber told investors it was witnessing a "deterioration" in the U.S. subprime market and it had sold six positions in investments backed by 2006 subprime mortgages, including three at a loss.
In other developments, five U.S. bank, thrift, and credit union regulators plan to release final guidelines for subprime mortgage lending this Friday morning, several people familiar with the matter said. The guidelines direct lenders to use more caution when underwriting "teaser" rate adjustable-rate mortgages, among other things. The guidelines don't apply to state-licensed nonbank lenders.
Write to Carrick Mollenkamp at [email protected], Michael Hudson at [email protected] and Serena Ng at [email protected]
作者：parisparis 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 [转帖]America's MBS, but Europe or Asia's trouble. -- parisparis - (5377 Byte) 2007-6-30 周六, 01:22 (1006 reads)
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