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Joseph Gordon-Levitt Talks Emotional, Inspiring Experience In NYC

by on November 16, 2011

Huffington Post…

When the massive production caravan hauling “The Dark Knight Rises” descended upon lower Manhattan last month, there was speculation that the Batman epic’s director, Christopher Nolan, would work to somehow incorporate the Occupy Wall Street protesters into his film. And while that didn’t quite come to pass , one of the movie’s stars decided to take a camera down to Zuccotti Park and explore the scene on his own. Joseph Gordon-Levitt’s timing couldn’t have been any better. As it turned out, the 30-year old star found himself Tuesday in the thick of the volatile struggle between protestors and the New York Police Department, which raided the park earlier in the morning and cleaned out the nearly-two-month-old makeshift tent city. Gordon-Levitt ended up shooting about three hours worth of footage at the scene, he told The Huffington Post Tuesday night at the premiere of “50/50″ co-star Bryce Dallas Howard’s new short film for Canon’s “Project Imagin8ion” . Despite the fevered pitch at the protest sites, he was very encouraged by what he saw. “I had a lot of long conversations with all sorts of people — kids, older people, some cops — I talked to some people who look really rebellious, I talked to some people who were wearing a suit,” the star said. “I talked to all sorts of people and everyone’s just feeling really positive and optimistic. They look around and they see people who are on the same page, and they’re not going to just sit around and say, ‘Oh, there’s nothing I can do,’ and it’s reassuring, it’s exciting.” He said he was moved in particular by the call and response public address system dubbed the people’s mic by protesters. It was “beautiful to see,” he said. It’s no surprise that the makeshift open platform appeals to Gordon-Levitt, who runs an online collaborative production company, HitRecord . Just getting the message out, he said, was a major improvement over his last round of First Amendment-flexing pavement pounding. “You know, when I was like, in college say, I remember when in 2003, when the United States started bombing Iraq, and we marched in protest, and no one gave a fuck man. No one paid attention; no one wanted to talk about it,” he remembered, growing animated. “Now, for various reasons, I guess because partially things have gotten so bad and I think partially because of the Occupy movement, it’s become a topic of conversation and people are willing to talk about it.” Check out Gordon-Levitt’s initial post about the experience on his website .

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Joseph Gordon-Levitt Talks Emotional, Inspiring Experience In NYC

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Obama Considers Tax Credit For Businesses That Hire Vets

by on July 12, 2011

Huffington Post…

WASHINGTON, July 7, 2011 – A tax credit for companies that hire military veterans could be the next step in helping the acutely underemployed group, President Barack Obama suggested yesterday in his Twitter town hall meeting. The president addressed many economic issues surrounding his theme of how to reduce the federal deficit, and was asked about jobs for veterans while fielding questions submitted on Twitter.

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Obama Considers Tax Credit For Businesses That Hire Vets

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Kotak Wealth & IIFL face fee rebate charge – mydigitalfc.com

June 15, 2011

Kotak Wealth & IIFL face fee rebate charge mydigitalfc.com “As part of our family office , we charge clients a fixed rupee fee or a percentage fee based on the client AUM for providing investment advice,” the spokesperson said. A Kotak Mahindra Bank spokesperson said: ” Family office business is based on … and more »

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Vicky Ward: The Whirligig of Time Fails to Bring Its Revenges

April 5, 2011

A year ago, while Washington was grandstanding about the about lazy, unethical, risky banking practices that put the entire country at risk — I published a book. It was called The Devil’s Casino: Friendship, Betrayal and the High Stakes Played Inside Lehman Brothers , and it chronicled, among other things, the lazy, unethical, risky banking practices that had put the entire country at risk in 2008. At the time, the D.C. hearings and S.E.C. investigations were underway, and Washingtonians swore that they’d clean up the mess and regulate the hell out of Wall Street — and that greed would be a thing of the past. I expressed my skepticism at the time. “The crisis will happen again,” I said. “Not tomorrow, and not in the same way — but you cannot regulate greed.” That, really, was the central theme of the book, which looked at the evolution of Wall Street through the narrow lens of Lehman Brothers, spanning fifty years. Fast forward to today, when my book comes out in paperback. Let’s take a look at the headlines: Alan Greenspan has just declared that Dodd-Frank reform legislation is a waste of time for the reasons listed above. The financial system is so ” irredeemably opaque ,” he wrote in the Financial Times , that policymakers cannot hope to sort it out. Barney Frank (D. Mass), the former chairman of the House Financial Services Committee naturally disagrees. In the Financial Times , he mumbles on about the effectiveness of stress tests. But didn’t it take most U.S. banks about thirty seconds to pass those in the wake of TALF ? Mr. Greenspan has a point. But, forget opacity — let’s just look at the simple stuff. Bernie Madoff — in jail for perpetrating the biggest Ponzi scheme ever — has declared that it was no surprise that J.P. Morgan stands accused of reaping $6.4 billion in funds from the scheme. The bank denied this, but Madoff said the bank “must have known.” In other words, when given the opportunity to make money in dubious circumstances — people take the money. President Obama has ended his open war with Wall Street, making nice with the Chamber Of Commerce and promising that he will find ways to work with them, not against them. Why has he taken this unprecedented action? Could it be because he has realized that if employment does not rise and the economy is still faltering, he might not be re-elected in 2012? Lloyd Blankfein, the CEO of Wall Street’s favorite punching bag, Goldman Sachs, has just received a bonus of $18 million at the same time that one of his outside directors, Raj Gupta, the former CEO of McKinsey, is testifying that he gave inside information from Goldman board meetings to Raj Ratnaram , the CEO of hedge fund Galleon. And what about Warren Buffett, considered for most of his 80 years the only straightshooter in the world of finance, and a crucial player in saving the world economy (well, Goldman Sachs) in 2008? Turns out he might not be quite so straightforward. His image is tarnished amid accusations that he acquired the chemicals company Lubrizol when he knew that his second-in-command and heir-apparent, Jeffrey Sokol, since let go, had just bought $10 million shares of the firm. On Friday, Wall Street Journal readers were treated to this great headline: ” Subprime Bonds Are Back “. Whoopee! The very things that led Americans to treat their houses as ATMs are having a resurgence. And on Monday, we learned that the Fed and US Treasury are engaged in a war with the FDIC over how many companies should be branded too big to fail. The Fed and US Treasury want less than ten; the FDIC wants three to four times that number. The moral of this is: Greenspan is right. It’s all too complex for anyone to sort it out. Meanwhile has anything happened to the housing Government Sponsored Entities, Fannie Mae and Freddie Mac, which blew up the weekend before Lehman did? Yes: according to a front page article in Friday’s New York Times . Although neither Fannie or Freddie has yet been reformed (that’s on next year’s agenda, apparently), their top six executives received over $35.4 million since their collapse in 2008. That’s an awful lot of money for doing-well, nothing. And all those dreadful losses reported to be happening in the hedge fund industry, swirling with rumors about insider trading after the closure of David Ganek’s Level Global and three other hedge funds in the wake of FBI raids ? Well, it turns out that hedge funds, while not outperforming the market, are still profitable — thanks to those lovely fees. Greed never dies; rules are made to be bent; the rich are indeed different from the rest of us — and Shakespeare’s fool was wrong. It would seem the whirligig of time does not, alas, bring its revenges. Vicky Ward is a contributing editor to Vanity Fair and the author the New York Times Bestseller: The Devil’s Casino, Friendship, Betrayal and the High-Stakes Games Played Inside Lehman Brothers (John F. Wiley & Sons).

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Watch List (Dec: 16) Investors Work Up More Appetite for Risk

December 15, 2010

IN THIS WEEK’S ISSUE: More Sales Expected in More Markets In 2011 As Investors Work Up Appetite for Risk GGP Reorganization Leads to a Surge in CRE Fundraising in November A&P Files Chapter 11; Seeks To Cancel 73 Store Leases Lease Cancellations: A&P Stores T.J. Maxx To Close 71 A.J. Wright Stores, Layoff 4,400 $5.8 Billion in TALF CMBS Loans Still Outstanding Two New CMBS Deals Come to Market U.S. CMBS Delinquencies Resume Climb, Approach…

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Citigroup’s Stuckey Will Retire as Bank Whittles Down Unwanted Asset Pool

April 30, 2010

By Bradley Keoun April 30 (Bloomberg) — Citigroup Inc. said Richard “Rick” Stuckey , named in January 2009 to oversee $241 billion of the bank’s most toxic mortgages and bonds, will retire later this year after cutting the pool by half. Stuckey, 54, stepped down as head of the Special Asset Pool unit on April 26, the New York-based bank said in an internal memo confirmed by spokeswoman Shannon Bell . He will remain an adviser during a transition before retiring “in the latter part of the year,” the memo said. Stuckey was succeeded by Aloysius T. “Ish” McLaughlin , who oversaw sales of newly issued investment-grade bonds, according to the memo. Chief Executive Officer Vikram Pandit formed the Special Asset Pool to dispose of unwanted loans and securities as regulators pressured the bank to shrink following its $45 billion bailout in late 2008. Stuckey, who helped unwind bad bets by Long-Term Capital Management LP following the hedge fund’s collapse in 1998, cut the pool to $126 billion as of March 31. “Rick has made incredible progress in managing down the assets in the pool,” Michael Corbat , 49, head of the bank’s Citi Holdings division, said in the memo. The Special Asset Pool is a part of the $503 billion-asset Citi Holdings, which also includes CitiFinancial, auto-lending, student-lending and other businesses tagged for eventual sale or closure. Salomon Start McLaughlin, 44, began his Wall Street career in 1995 as a trainee at Salomon Inc., which was bought in 1997 by Citigroup predecessor Travelers Group Inc. He led sales of newly issued asset-backed securities from 2000 to 2005 and added responsibility for investment-grade corporate bonds in 2005. Since the bailout, McLaughlin also has helped coordinate Citigroup’s use of the federal Term Asset Backed Securities Loan Facility, according to the memo. The program, known as TALF, was set up last year to help restart the market for packaging auto- loans, credit-card debt and commercial mortgages into securities. Stuckey has been with Citigroup or its predecessors for 28 years, according to the memo. Like McLaughlin, he came from Salomon, according to his Financial Industry Regulatory Authority record. Asset Pool Many of the loans and securities in the Special Asset Pool were covered by the $301 billion of government guarantees that Citigroup got along with cash infusions in late 2008. To escape the most onerous restrictions that came with the bailout, Citigroup repaid $20 billion of the money in December and terminated the guarantees. After that, Citigroup decided to transfer $61 billion of assets from Citi Holdings to the Citicorp division, which encompasses branch banking, investment banking, trading, corporate cash management and other “core” businesses that Pandit plans to keep. The transferred assets included $18 billion from the Special Asset Pool, according to a presentation on the company’s website. In the first quarter, the bank also sold $6 billion of loans and securities from the Special Asset Pool, Chief Financial Officer John Gerspach said in an April 19 conference call. Sandler O’Neill & Partners analyst Jeff Harte wrote in an April 27 report that the Special Asset Pool is “expected to run off much more rapidly” than other businesses in Citi Holdings as “loans are repaid and securities sold.” Myron Scholes From 1991 to 1993, Stuckey was co-head of Salomon’s derivatives unit with Myron Scholes , the Nobel Prize-winning Stanford University professor who was a partner in Long-Term Capital. In 1998, he was assigned to a team created by 14 Wall Street firms to manage the unwinding of Long-Term Capital’s assets after the hedge fund suffered $4.6 billion of losses. In November 2007, after the ouster of former CEO Charles O. “Chuck” Prince, Citigroup created a Sub-Prime Portfolio Group to manage most of the bank’s $43 billion of subprime mortgage assets, and Stuckey was assigned to run it. In August 2008, he was transferred by trading chief James Forese to head government risk Treasury, before being reassigned five months later to the Special Asset Pool. To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .

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Dodd Bill Would Allow Fed To Hide Its Spending

April 22, 2010

The Wall Street reform bill headed for a test vote on the Senate floor Monday night will allow the Federal Reserve to continue to pump trillions of dollars into major banks largely in secrecy, the co-author of House language that would open the central bank to an audit charged in a memo to the Senate. “The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn’t do anything of the sort. I’m going to run down the details for you, and reprint the legislative language so you can read it yourself,” writes Rep. Alan Grayson (D-Fla.). It would not allow the GAO to look into the Fed’s massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions. Grayson and co-author Rep. Ron Paul (R-Texas) passed legislation through the House that would allow the Government Accountability Office (GAO) to audit the Federal Reserve and, after a delay, release the information to Congress. It was a remarkable victory, with a populist coalition beating back the combined lobbying efforts of the Treasury Department, the Fed and Wall Street banks. The Senate has been more hostile territory for the Fed audit provision. Banking Committee Chairman Chris Dodd (D-Conn.) opposes the Grayson-Paul version, but allowed a much more restrictive audit proposal from Sen. Jeff Merkley (D-Oregon) into his bill. Grayson, in his memo, outlines the shortcomings of the Senate bill. Walker Todd, who spent some 20 years as a counselor with the Federal Reserve Banks of New York and Cleveland, reviewed Grayson’s analysis and told HuffPost he concurs with it. The Seante bill would allow an audit of the TALF program and slightly expands authority to audit emergency lending conducted under section 13(3) of the Federal Reserve Act, but restricts it to very specific purposes. Meanwhile, it would not allow the GAO to look into the Fed’s massive purchase of toxic assets, its hundreds of billions in foreign currency swaps with other central banks or its open market operations, among other restrictions. Fed backers argue that requiring transparency would politicize monetary policy, though monetary policy and the Fed itself are already political — they regularly lobby Congress, after all — and would tempt lawmakers to pressure the Fed to inflate the currency to reduce the debt burden. Merkley said he agrees with Grayson’s analysis. “I appreciate Representative Grayson’s concerns over accountability at the Federal Reserve. I have been a strong proponent of Fed reform and voted against the re-confirmation of Ben Bernanke because the Fed has been so lax in using its regulatory powers,” Merkley said in a statement to HuffPost. “Moreover, I felt strongly that we need to act now to empower the GAO to audit the extraordinary emergency programs created by the Fed and I succeeded in getting that power into the Senate bill. Rep. Grayson points out, fairly in my mind, that we need to go even further to audit the Fed’s standing programs. I agree. While we need to protect the Fed’s independence to implement monetary policy, I think the structure and use of their standard programs should be transparent.” Read Grayson’s memo, followed by the legislative language: Memo to the Senate: Stop Secret Bailouts by the Fed Sometimes, you just know that you’ve struck a nerve. I knew it early last year, when a clip of my questioning the Inspector General of the Federal Reserve over the Fed’s balance sheet became the most viewed Congressional hearing in YouTube history. The Fed had lent out around $1 trillion, and I wanted to know what happened to the people’s money. So did the people. They were angry at the Fed, and they showed it. And because of that righteous anger, the financial reform bill in the House contains a provision to audit the Federal Reserve fully. If it passes the Senate, we will finally know to whom the Fed lent our money, how much, and what little we got in return. So it’s up to the Senate. The Senate has a provision in its reform bill that purports to audit the Fed. But, it really doesn’t do anything of the sort. I’m going to run down the details for you, and reprint the legislative language so you can read it yourself. But the story is simple; if the House version of a Fed audit passes, we will finally know to whom the Fed lent our money. If the Senate version passes, the Fed can continue to make sweetheart loans to whomever it wants, without telling Congress or the public. The way Congress oversees complicated government agencies is through the Congressional audit arm, the Government Accountability Office (GAO). The GAO does the actual auditing, and gives that information to Congress, which then holds hearings and makes policy. The House bill grants the GAO the authority to audit the Fed, and then releases that information to Congress with a six-month delay, to prevent traders from gaming the system. The Senate version only allows the GAO to audit a certain part of the Federal Reserve, its emergency lending facilities. The GAO already has some of that authority. Amazingly, the Senate version forces the GAO to withhold this information from the public, and Congress, for as long as the Federal Reserve chooses. The details, and the specific legislative language, are below. Limited Audit Authority What the Senate bill allows: – The Senate language slightly expands existing authority to the GAO to audit only the emergency lending authority in section 13(3) of the Federal Reserve Act, but only for specific purposes. – The Senate language would grant the GAO authority to audit the TALF program. What the bill does NOT allow: – The Senate language does not allow audits of the mortgage backed security purchase program, a $1.25 trillion program that at this point comprises the bulk of the Fed’s balance sheet. This program includes Freddie and Fannie backed debt. – The Senate language does not allow audits of possible losses on foreign currency swap lines, of which there were more than $500 billion at the height of the crisis. This includes unlimited credit lines granted to central banks all over the world, solely through at the discretion of Federal Reserve and without the input of any elected official or the State Department. – The Senate language does not allow audits of open market operations, where there is ample room for errors, market manipulation, and insider trading violations. – The Senate language does not allow audits of possible losses on securities acquired through non-section 13(3) facilities. This includes looking for possible losses, seigniorage, political conflicts and costs to the Treasury. Federal Reserve Secrecy – In the Senate version, all audits must remain redacted. The GAO can’t even tell Congress to whom the Fed is lending money, the amounts it is lending, or any details about collateral or assets held in connection with any credit facility. – The GAO can never release a full version of any audit unless the Federal Reserve first chooses to shut down the audited credit facility. – Once the Federal Reserve shuts down the authority for the credit facility, the GAO still has to wait a year before it can release details about that facility. If the Fed simply chooses to stop making loans, but does not eliminate the authority to make loans, the GAO has to wait three years before it can release a full report. The Fed can at any point during this period choose to restart the facility, and thereby prevent the release of a full report. See for yourself. The legislative language in the Senate draft is here. Sec. 714. Audit of Financial Institutions Examination Council, Federal Reserve Board, Federal Reserve banks, Federal Deposit Insurance Corporation, and Office of Comptroller of the Currency (a) In this section, “agency” means the Financial Institutions Examination Council, the Board of Governors of the Federal Reserve System (in this section referred to as the `Board’), Federal Reserve Banks, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision. (b) Under regulations of the Comptroller General, the Comptroller General shall audit an agency, but may carry out an onsite examination of an open insured bank or bank holding company only if the appropriate agency has consented in writing. Audits of the Board and Federal reserve banks may not include – (1) transactions for or with a foreign central bank, government of a foreign country, or non-private international financing organization; (2) deliberations, decisions, or actions on monetary policy matters, including discount window operations, reserves of member banks, securities credit, interest on deposits, and open market operations; (3) transactions made under the direction of the Federal Open Market Committee; or (4) a part of a discussion or communication among or between members of the Board and officers and employees of the Federal Reserve System related to clauses (1)-(3) of this subsection. (c)(1) Except as provided in this subsection, an officer or employee of the Government Accountability Office may not disclose information identifying an open bank, an open bank holding company, or a customer of an open or closed bank or bank holding company. The Comptroller General may disclose information related to the affairs of a closed bank or closed bank holding company identifying a customer of the closed bank or closed bank holding company only if the Comptroller General believes the customer had a controlling influence in the management of the closed bank or closed bank holding company or was related to or affiliated with a person or group having a controlling influence. (2) An officer or employee of the Office may discuss a customer, bank, or bank holding company with an official of an agency and may report an apparent criminal violation to an appropriate law enforcement authority of the United States Government or a State. (3) Except as provided under paragraph (4), an officer or employee of the Government Accountability Office may not disclose to any person outside the Government Accountability Office information obtained in audits or examinations conducted under subsection (e) and maintained as confidential by the Board or the Federal Reserve banks. (4) This subsection shall not– (A) authorize an officer or employee of an agency to withhold information from any committee or subcommittee of jurisdiction of Congress, or any member of such committee or subcommittee; or (B) limit any disclosure by the Government Accountability Office to any committee or subcommittee of jurisdiction of Congress, or any member of such committee or subcommittee. (d)(1) To carry out this section, all records and property of or used by an agency, including samples of reports of examinations of a bank or bank holding company the Comptroller General considers statistically meaningful and workpapers and correspondence related to the reports shall be made available to the Comptroller General. The Comptroller General shall have access to the officers, employees, contractors, and other agents and representatives of an agency and any entity established by an agency at any reasonable time as the Comptroller General may request. The Comptroller General may make and retain copies of such books, accounts, and other records as the Comptroller General determines appropriate. The Comptroller General shall give an agency a current list of officers and employees to whom, with proper identification, records and property may be made available, and who may make notes or copies necessary to carry out an audit. (2) The Comptroller General shall prevent unauthorized access to Records, copies of any Record, or property of or used by an agency that the Comptroller General obtains during an audit. (3)(A) For purposes of conducting audits and examinations under subsection (e), the Comptroller General shall have access, upon request, to any information, data, schedules, books, accounts, financial records, reports, files, electronic communications, or other papers, things or property belonging to or in use by– “(i) any entity established by any action taken by the Board described under subsection (e); “(ii) any entity receiving assistance from any action taken by the Board described under subsection (e), to the extent that the access and request relates to that assistance; and (iii) the officers, directors, employees, independent public accountants, financial advisors and any and all representatives of any entity described under clause (i) or (ii); to the extent that the access and request relates to that assistance; (B) The Comptroller General shall have access as provided under subparagraph (A) at such time as the Comptroller General may request. (C) Each contract, term sheet, or other agreement between the Board or any Federal reserve bank (or any entity established by the Board or any Federal reserve bank) and an entity receiving assistance from any action taken by the Board described under subsection (e) shall provide for access by the Comptroller General in accordance with this paragraph. (e) Notwithstanding subsection (b), the Comptroller General may conduct audits, including onsite examinations when the Comptroller General determines such audits and examinations are appropriate, of any action taken by the Board under the third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343); with respect to a single and specific partnership or corporation.’ (f) REVIEWS OF CREDIT FACILITIES OF THE FEDERAL RESERVE SYSTEM.– (1) DEFINITION.–In this subsection, the term ‘credit facility’ means any utility, facility, or program authorized by the Board of Governors of the Federal Reserve System under the third undesignated paragraph of section 13 of the Federal Reserve Act (12 U.S.C. 343), including any special purpose vehicle or other entity established by or on behalf of the Board of Governors or a Federal reserve bank, that is not subject to audit under subsection (e), including– (A) the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility; (B) the Term Asset-Backed Securities Loan Facility; (C) the Primary Dealer Credit Facility; (D) the Commercial Paper Funding Facility; and (E) the Term Securities Lending Facility. (2) AUTHORITY FOR REVIEWS AND EXAMINATIONS.–Subject to paragraph (3), and notwithstanding any limitation in subsection (b) on the auditing and oversight of certain functions of the Board of Governors of the Federal Reserve System or any Federal reserve bank, the Comptroller General of the United States may conduct reviews, including onsite examinations, of the Board of Governors, a Federal reserve bank, or a credit facility, if the Comptroller General determines that such reviews are appropriate, solely for the purposes of assessing, with respect to a credit facility– (A) the operational integrity, accounting, financial reporting, and internal controls of the credit facility; (B) the effectiveness of the collateral policies established for the facility in mitigating risk to the relevant Federal reserve bank and taxpayers; (C) whether the credit facility inappropriately favors one or more specific participants over other institutions eligible to utilize the facility; and (D) the policies governing the use, selection, or payment of third-party contractors by or for any credit facility. (3) REPORTS AND DELAYED DISCLOSURE.– (A) REPORTS REQUIRED.–A report on each review conducted under paragraph shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such review is completed. (B) CONTENTS.–The report under subparagraph (A) shall include a detailed description of the findings and conclusions of the Comptroller General with respect to the matters described in paragraph (2) that were reviewed and are the subject of the report, together with such recommendations for legislative or administrative action relating to such matters as the Comptroller General may determine to be appropriate. (C) DELAYED RELEASE OF CERTAIN INFORMATION.– (i) IN GENERAL.–The Comptroller General shall not disclose to any person or entity, including to Congress, the names or identifying details of specific participants in any credit facility, the amounts borrowed by specific participants in any credit facility, or identifying details regarding assets or collateral held by, under, or in connection with any credit facility, and any report provided under subparagraph (A) shall be redacted to ensure that such names and details are not disclosed. (ii) DELAYED RELEASE.–The non-disclosure obligation under clause (i) shall expire with respect to any participant on the date on which the Board of Governors, directly or through a Federal reserve bank, publicly discloses the identity of the subject participant or the identifying details of the subject assets or collateral. (iii) GENERAL RELEASE.–The Comptroller General shall release a non redacted version of any report on a credit facility 1 year after the effective date of the termination by the Board of Governors of the authorization for the credit facility. For purposes of this clause, a credit facility shall be deemed to have terminated 24 months after the date on which the credit facility ceases to make extensions of credit and loans, unless the credit facility is otherwise terminated by the Board of Governors. (iv) EXCEPTIONS.–The nondisclosure obligation under clause (i) shall not apply to the credit facilities Maiden Lane, Maiden Lane II, and Maiden Lane III.

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Banks Punished in Swaps as Gap to Industrial Bonds Soars: Credit Markets

April 21, 2010

By Abigail Moses and Kate Haywood April 21 (Bloomberg) — Investors are paying record high rates to protect bonds of banks in Europe from default relative to the rest of the market as the region’s fiscal crisis deepens, while payments tied to the debt of U.S. financial companies soars on concern about tougher regulation. The Markit iTraxx Financial Index of credit-default swaps is about 20 basis points higher than the corporate Markit iTraxx Europe Index, according to JPMorgan Chase & Co. As recently as January, the relationship was reversed. Credit swaps on U.S. banks rose as investors speculated a Securities and Exchange Commission lawsuit against Goldman Sachs Group Inc. boosts chances of a legislative overhaul. The International Monetary Fund called Greece’s fiscal crisis a “wake-up call” on sovereign-debt risks as the country began talks on activating a 45 billion-euro ($61 billion) emergency aid package. Even after Goldman Sachs and Morgan Stanley reported earnings this week that beat analyst estimates, default risk climbed as a Senate panel approved derivatives legislation that would require lenders to spin off their swaps trading desks. “Tighter regulation certainly won’t help banks increase profits in the near term,” said Jeffrey Burch , co-head of global credit at Investec Asset Management in London, which manages more than $65 billion. Investors are also “reacting to the risk of spillover from Greece,” he said. Mortgage-Backed Securities Elsewhere in credit markets, Citigroup Inc. is attempting to sell $222.4 million of securities backed by new mortgages, the first transaction of its type in more than two years. Ford Motor Co. sold bonds tied to auto loans at a third of the relative yield it paid six months ago. U.S. 10-year interest-rate swap spreads turned positive for the first time in two weeks amid speculation the government may begin reducing the amount of debt it sells as the economy strengthens. Russia is scheduled to raise at least $4 billion in its first international bond sale since defaulting in 1998. Citigroup, which made the 255 loans in the past 11 months, is underwriting the potential sale with JPMorgan as co-manager, according to people familiar with the matter who declined to be identified because the sale is private. Redwood Trust Inc. , the Mill Valley, California-based real estate investment trust that specializes in jumbo-mortgage assets, is being called the securitization’s sponsor, which may mean it will buy more-junior classes, the people said. Issuance of home-loan bonds without government-backed guarantees peaked at almost $1.2 trillion in both 2005 and 2006 before freezing as the worst U.S. housing slump since the Great Depression sparked record plunges in their prices that weakened investors and curbed lending, according to the newsletter Inside MBS & ABS. Ford Offering Ford, the only U.S.-based automaker to decline a federal bailout, sold the largest portion of its $1.09 billion deal at a yield of 15 basis points more than benchmark interest rates, compared with 45 basis points in November, a person familiar with the matter said. The new issue is Ford’s first sale of bonds composed of auto loans since the Federal Reserve’s Term Asset Backed Securities Loan Facility concluded last month, though the Dearborn, Michigan-based automaker’s prior issue in November was held outside of TALF. Daimler AG, Bayerische Motoren Werke AG and Deere & Co. all sold similar debt last week, according to data compiled by Bloomberg. The difference between the rate to exchange fixed- for floating-interest payments for 10 years and similar-maturity Treasury notes, known as the swap spread, touched 0.13 basis point from negative 1.25 basis points yesterday. The spread was last positive on April 6, when it touched 3.25 basis points. A basis point is 0.01 percentage point. Emerging Markets In emerging markets, the extra yield investors demand to own bonds instead of Treasuries rose 6 basis points to 242 basis points, according to the JPMorgan Emerging Market Bond Index. Gramercy, a Greenwich, Connecticut-based investment fund, is “predisposed” to accept Argentina’s offer to restructure $20 billion in defaulted bonds held out of a 2005 settlement, Managing Partner Robert Koenigsberger said. “We are favorably predisposed to accept the offer, when it is officially launched, provided that market conditions are such that the value of the offer remains attractive,” Koenigsberger said in a statement e-mailed to Bloomberg News. Russia, Egypt Russia’s bond is driving borrowing costs to record lows for companies from OAO Gazprom to VTB Group , the nation’s second- biggest bank. The government plans to sell bonds due in 2015 at about 125 basis points more than similar-maturity U.S. Treasuries and 2020 notes at a premium of about 135 basis points, according to two people with knowledge of the deal. Egypt plans to raise $1.5 billion of bonds after adding a 30-year note to its first overseas sale of dollar debt in nine years, according to a banker involved in the transaction. The country may sell $1 billion of 10-year notes to yield about 5.875 percent and $500 million of 30-year bonds to yield about 7 percent, said the banker, who declined to be identified because terms aren’t set. Greek government officials joined with representatives of the European Union, IMF and European Central Bank in Athens to begin hammering out the deficit-cutting measures Europe’s most indebted nation will have to accept to be able to tap the funds. The iTraxx European financial gauge on 25 banks and insurers jumped 4.75 basis points today to 102.5, the highest in two months, while the corporate benchmark rose 2.75 to 83, JPMorgan prices show. An increase in the index signal deteriorating perceptions of credit quality. Spanish Banks Credit-default swaps on Spanish and Portuguese banks led the increase in financial debt risk in Europe, with contracts on Banco Commercial Portugues SA surging 25 basis points to 265, Banco Espirito Santo SA climbing 20 basis points to 269.5 and Banco Santander SA 12 basis points higher at 144, according to CMA DataVision prices. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a country fails to adhere to its debt commitments. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. Concern over Greece’s creditworthiness pushed the spread between the government’s 10-year bonds and benchmark German debt to 516 basis points, the highest in at least 12 years. Credit- default swaps tied to Greece’s debt jumped 19 basis points to a 488, a record close, CMA prices show. Talks in Athens Greece needs to raise 10 billion euros by the end of May, according to the debt management agency’s data. The country could activate the emergency aid package before the talks in Athens conclude in two weeks’ time, Finance Minister George Papaconstantinou said. Credit-default swaps on other European governments also soared as investors used the derivatives as a proxy for Greece as well as hedging against contagion. Contracts on Spain’s government debt climbed 15 to 160 basis points while Portugal advanced 31 to 232, CMA prices show. “Greece swaps are very illiquid, so some investors are looking to short other European sovereigns and financials as a way to manage that risk and hedge against losses,” said Peter Chatwell , a fixed-income strategist at Credit Agricole CIB in London. “If you can’t sell the asset you want to sell, you sell something that’s most closely correlated with it.” Goldman Sachs, JPMorgan Credit-default swaps on Goldman Sachs, the most profitable firm in Wall Street history, jumped 10 basis points to a two- month high of 134. Contracts on Morgan Stanley rose 7 basis points to 148.5, JPMorgan climbed 3 to 74 and Bank of America Corp. increased 11 to 137, according to CMA. Goldman Sachs, Morgan Stanley and JPMorgan are based in New York. The benchmark Markit CDX North America Index was little changed at about 88 basis points, according to index administrator Markit Group Ltd. Goldman Sachs reported April 20 that earnings jumped 91 percent to $3.46 billion, or $5.59 a share, compared with an average estimate of 23 analysts surveyed by Bloomberg for $4.14 per share. It was the bank’s second-most profitable quarter since it started releasing quarterly figures in 1997. Morgan Stanley said first-quarter net income was $1.78 billion, or 99 cents a share, beating the 57-cent average estimate of 24 analysts surveyed by Bloomberg. Morgan Stanley’s fixed-income results, the best since the third quarter of 2008, follow record revenue from debt trading reported earlier this month by JPMorgan, Goldman Sachs and Charlotte, North Carolina- based Bank of America. To contact the reporters on this story: Abigail Moses in London at Amoses5@bloomberg.net ; Kate Haywood in London at khaywood@bloomberg.net

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Ford Bonds Tap Consumer Revival as Nordstrom Sells Notes: Credit Markets

April 20, 2010

By Tim Catts, Bryan Keogh and Kate Haywood April 20 (Bloomberg) — Ford Motor Co. is marketing bonds backed by auto loans at half the relative yield it paid six months ago and Nordstrom Inc. sold notes at its lowest rate ever as investors gain confidence that consumer spending is strengthening. Ford, the only U.S.-based automaker to decline a federal bailout, is offering the largest portion of its $1.09 billion deal at yields as low as 20 basis points more than benchmark interest rates, half what investors demanded in November, a person familiar with the matter said. Seattle-based retailer Nordstrom sold $500 million of 10-year, 4.75 percent securities. Corporate borrowers that serve U.S. consumers are selling debt as returns on their bonds accelerate. Retailers, which lost 0.35 percent in March, have gained 0.83 percent this month through yesterday, according to Bank of America Merrill Lynch index data. Retail sales increased 1.6 percent last month, more than anticipated and the biggest gain in four months, raising the odds of an economic recovery. “There is no question that the consumer is back,” said James C. Camp , managing director of fixed income at Eagle Asset Management Inc. in St. Petersburg, Florida, with $17 billion in assets under management. Retailers’ sales, which declined every month from September 2008 to August 2009, have rebounded as employment and consumer confidence have improved. The U.S. economy added 162,000 jobs in March, the most in three years. The Conference Board’s confidence index rose to 52.5 last month from 46.4 in February. Standard & Poor’s raised its ratings on consumer cyclical companies such as retailers by a 2-to-1 margin this year, compared with 0.8-to-1 for corporate America overall, according to data compiled by Bloomberg. LeasePlan, Vesteda Elsewhere in credit markets, LeasePlan Corp NV, the Dutch car-fleet management company, sold 594 million euros ($798 million) of bonds backed by U.K. auto leases. Vesteda sold 350 million euros of notes backed by commercial properties in the first European deal of its kind in seven months. Russia may cut the yield on its first international bond sale in 12 years to below the level proposed to investors, according to Renaissance Capital and Uralsib Financial Corp. LeasePlan’s AAA rated notes, issued through special-purpose company Bumper 2009-3 A, will pay a coupon of 1.5 percentage points more than the euro interbank offered rate, according to a person familiar with the sale. Royal Bank of Scotland Group Plc managed the transaction for the car-fleet management company, the person said. Latin America Vesteda sold its AAA rated notes through Vesteda Residential Funding II, a special purpose company created to package mortgages into securities, the Maastricht, Netherlands- based property owner said in a statement. The bonds were priced to yield 1.63 percentage points more than Euribor and placed with one investor. Russia is seeking to sell as much as $17.8 billion of debt at record-low yields, with five-year dollar bonds at about 1.25 percentage points more than similar-maturity U.S. Treasuries, two people familiar with the offering said. In emerging markets, the extra yield investors demand to own bonds instead of Treasuries fell 0.01 percentage point to 2.36 percentage points, according to the JPMorgan Emerging Market Bond Index. The gap this year had widened to as much as 3.23 percentage points on Feb. 8. Argentina Debt Argentine bonds advanced for the first time in three days as gains in U.S. stocks fueled investor appetite for the South American nation’s high-yielding debt. The yield on Argentina’s 7 percent bonds due 2015 slid 0.02 percentage point to 11.41 percent, according to Bloomberg pricing data. The bond’s price rose 0.1 cent to 82.85 cents on the dollar. Latin America may see the pace of credit rating increases slow as governments in the region refrain from implementing reforms aimed at broadening their tax base and increasing competition, Fitch Ratings said. Elections in countries including Brazil, Argentina and Colombia in the next 18 months make the passage of such reforms unlikely, Fitch analysts led by Shelly Shetty wrote in a report. Nordstrom’s 10-year senior unsecured notes priced to yield 100 basis points more than similar-maturity Treasuries, Bloomberg data show. The chain initially planned to sell $350 million of the debt. In November 2007, Nordstrom sold $650 million of notes due in January 2018 at a spread of 230 basis points, Bloomberg data show. A basis point is 0.01 percentage point. The largest portion of Ford’s offering of auto-loan debt is expected to pay a spread of 20 basis points to 25 basis points more than benchmark interest rates, according to a person familiar with the transaction. In its last sale of similar debt in November, Ford paid 45 basis points over benchmarks. Fed’s TALF Program Ford is among companies selling asset-backed securities after the end of a U.S. aid program, showing investors don’t need government assistance to buy bonds backed by consumer debt. The Federal Reserve’s Term Asset Backed Securities Loan Facility concluded last month. “Better funding costs makes it easier for Ford to go out and make loans,” said John McElravey , an analyst at Wells Fargo Securities in Charlotte, North Carolina. The new issue is Ford’s first sale of bonds composed of auto loans since TALF ended, though the Dearborn, Michigan-based automaker’s prior issue in November was held outside of TALF. Daimler AG, Bayerische Motoren Werke AG and Deere & Co. all sold similar debt last week, Bloomberg data show. ‘Punch Bowl’ With the U.S. jobless rate at 9.7 percent, the recovery in consumer confidence is fragile, said Scott MacDonald , head of credit and economics research at Stamford, Connecticut-based Aladdin Capital Holdings LLC, which oversees $12.5 billion. “There is no way the consumer can have the same dynamic impact on the U.S. economy it did before 2008,” he said. “Unemployment is still an issue and there are still housing foreclosures. The consumer binge pre-2008 was based on borrowed money, the punch bowl is gone.” The performance of retailers’ bonds compares with a gain of 0.86 percent this month through yesterday for U.S. investment- grade debt, following a 0.35 percent return in March, according to Bank of America Merrill Lynch index data. Wal-Mart, Lowe’s Wal-Mart Stores Inc. , the world’s biggest retailer, sold $2 billion of debt on March 24, tapping the U.S. corporate bond market for the first time since July. The Bentonville, Arkansas- based retailer’s five-year notes have climbed 0.864 cent to 100.173 cents on the dollar as of 2:01 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The bonds yield 2.837 percent. Lowe’s Cos. , the second-largest U.S. seller of home- improvement goods, issued $1 billion of notes on April 12 in its first sale since 2007. The Mooresville, North Carolina-based company’s 10-year notes rose to 1.844 cent to 101.662 cents on the dollar to yield 4.42 percent, Trace data show. Atlanta-based Home Depot Inc. is the biggest U.S. home-improvement retailer. “It’s mostly an economic story from this point, with people looking for signs of life and finding some,” said James Goldstein , an analyst at CreditSights Inc. in New York. “The worst is behind retailers.” To contact the reporters on this story: Tim Catts in New York at tcatts1@bloomberg.net ; Bryan Keogh in London at bkeogh4@bloomberg.net ; Kate Haywood in London at khaywood@bloomberg.net

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Pimco’s Kiesel Buys Bonds Wishing `Next Life’ as JPMorgan: Credit Markets

March 26, 2010

By Caroline Salas and Pierre Paulden March 26 (Bloomberg) — Pacific Investment Management Co., manager of the world’s biggest bond fund , says bank securities are the best investments in credit markets. JPMorgan Chase & Co. , Bank of America Corp. and Citigroup Inc. are benefiting from a combination of slowing consumer loan losses and the Federal Reserve ’s zero interest-rate policy, according to Mark Kiesel , global head of corporate bond portfolio management at Pimco. Bondholders also will gain from banks raising capital to bolster their balance sheets, he said. “If I could come back as any corporate entity in my next life it would be as a money-center bank,” said Kiesel, who oversees $300 billion of credit investments from Newport Beach, California. “You can borrow money at virtually zero, you make prudent loans and you basically earn that spread.” Net interest margin, a measure of lending profitability, at U.S. banks with greater than $15 billion of average assets climbed to 3.38 percent as of Dec. 31, rebounding from a record- low 2.94 percent a year earlier, according to data from the Federal Reserve Bank of St. Louis . U.S. bank bonds have outperformed the overall investment- grade corporate bond market this month, returning 0.22 percent compared with a 0.32 percent loss for the average security, Bank of America Merrill Lynch index data show. Even after a 21 percent return since the end of 2008, bank securities are attractive and offer better value than industrial company bonds, in part because financial companies are likely to be insulated from shareholder-friendly activities such as leveraged buyouts, Kiesel said. LBO Risk “Banks still look compelling,” he said. “The incentives are aligned, regulators are going to demand more equity capital in the capital structures . You’ve got a sector that’s focused on bondholders, the LBO risk is virtually nil.” Elsewhere in credit markets, AmeriCredit Corp. , the lender to auto buyers with poor credit, plans to sell $200 million of bonds backed by loans in its first asset-backed offering since the end of a U.S. program to revive the market, according to a person familiar with the offering who declined to be identified because terms aren’t public. The Fort Worth, Texas-based company’s last issue of similar debt in February was sold through the Federal Reserve’s Term Asset-Backed Securities Loan Facility, which attracted investors by financing purchases of the securities. The TALF program ended earlier this month. Asset Sales Fed officials are moving toward a consensus that asset sales will play a more prominent role in their exit from the most expansive monetary policy in the central bank’s history. Chairman Ben S. Bernanke told legislators yesterday that “restoring the size and composition” of the Fed’s record $2.32 trillion balance sheet to a “more normal configuration” is a long-term policy goal. St. Louis Fed President James Bullard said in an interview the central bank must start making plans now for future asset sales. “There does seem to be agreement that you want to get back to a normal-looking balance sheet at some point in the future,” Bullard said. “We want to someday get back to a pre-crisis balance sheet — both the size of it and the fact that it would be an all-Treasuries balance sheet.” The extra yield investors demand to own corporate bonds rather than government debt shrank to the narrowest since November 2007. Spreads tightened 2 basis points to 151 basis points, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. For the week, spreads narrowed 3 basis points. Average yields rose to 4.039 percent, the highest in almost two weeks. Higher Borrowing Costs In Europe, companies face higher borrowing costs as they seek to refinance at least $283 billion of debt this year and as they compete against governments, which may need to borrow more than 2 trillion euros ($2.7 trillion), Moody’s Investors Service said in a report today. “The competition for funds is likely to eventually drive up the cost of corporate credit,” Elena Nadtotchi , a London- based analyst at the ratings firm, wrote in a report today. The cost to protect against defaults on U.S. corporate bonds fell, trading in a benchmark credit derivatives index shows. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 14, which investors use to speculate on creditworthiness or to hedge against losses, declined 1.04 basis point to a mid-price of 87.2 basis points as of 12:52 p.m. in New York, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index, linked to credit-default swaps on 125 investment-grade companies, rose 0.63 basis point to a midprice of 78.4 basis points, Markit composite prices show. Bondholder Protection Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and equals $1,000 annually on a contract protecting $10 million of debt for five years. The extra yield, or spread, investors demand to own U.S. bank bonds instead of similar-maturity Treasuries has narrowed to 216 basis points from 254 basis points on Feb. 16, according to Bank of America Merrill Lynch index data. That’s helped spur $111 billion of bank bond sales this quarter, the most since the second quarter of last year, as issuers from JPMorgan to Wells Fargo & Co. took advantage of increased demand for their debt, according to data compiled by Bloomberg. JPMorgan sold $1.5 billion of 6.7 percent subordinated debentures maturing in 2040 yesterday, which count toward regulatory capital requirements. The New York-based bank had planned to raise $500 million. Bank Capital Securities Banks will sell more capital securities as they seek to restructure their balance sheets, Kiesel said. Citigroup sold $2 billion of trust preferred securities on March 10 to raise capital after repaying bailout funds to the Treasury. Financial institutions also will benefit from the $1.4 trillion of debt that Moody’s estimates needs to be refinanced by 2014, including about $800 billion of high-yield debt, according to MFC Global Investment Management. High-yield bonds are rated below Baa3 by Moody’s and lower than BBB- by Standard & Poor’s. “The fee machine will be huge,” said Arthur Calavritinos , senior vice president at MFC Global, who helps manage the $958.9 million John Hancock High Yield Fund in Boston, and has bought preferred securities of Bank of America. “We’ve been through Armageddon. These deals will get done.” JPMorgan, Bank of America and Goldman Sachs Group Inc. are best positioned to take advantage of the underwriting opportunities from refinancing the debt, according to Dick Bove , a banking analyst for Rochdale Securities in Lutz, Florida. High-Yield Sales Junk-bond sales rose to $57.9 billion this year, the most in any quarter since the three months ended June 30, 2007, Bloomberg data show. “The money is available and the willingness to invest is there,” Bove said. “This is a money-making opportunity for the underwriters.” Bove predicted this week that bank stocks, the leaders of the biggest U.S. market rally since the 1930s, may quadruple over the next two to three years as loan-loss defaults decrease. The world’s biggest financial institutions have taken $1.75 trillion of writedowns and credit losses since the credit freeze began in 2007. Loan Portfolio ‘Deterioration’ “Deterioration in the loan portfolios is slowing and that’s a positive sign,” Pimco’s Kiesel said. “It tells you that you’re getting some stability on the part of housing and the consumer.” Charlotte, North Carolina-based Bank of America and JPMorgan led five of the six-biggest U.S. credit-card issuers in reporting that late payments fell or held steady in February, signaling a retreat from record industry losses. Kiesel said the banks he likes best are JPMorgan, Citigroup, Bank of America and San Francisco-based Wells Fargo. Pimco has been buying more senior bank bonds than subordinated debt because the junior securities have rallied more, he said. Capital securities have returned 7.05 percent this year, more than triple the 2.06 percent gain for investment-grade bonds, Bank of America Merrill Lynch data show. JPMorgan’s $3 billion of 6.3 percent notes due in 2019 fell 0.6 cent to 109.9 cents on the dollar to yield 4.9 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt, which was issued in April, has climbed from 97.8 cents and a yield of 6.61 percent on May 27. Royal Bank of Scotland Group Plc , the biggest U.K. government-owned bank, said in a statement yesterday that it will swap or repurchase as much as $23.5 billion worth of subordinated notes and preference shares in a plan to bolster its capital. To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net ; Pierre Paulden in New York at ppaulden@bloomberg.net

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Ford Investment-Grade Rating `Years Away’ as Bonds Recover: Credit Markets

March 24, 2010

By Shannon D. Harrington and Keith Naughton March 24 (Bloomberg) — Ford Motor Co. , the biggest issuer of high-yield, high-risk securities, is “years away” from regaining the investment-grade rating it lost in 2005 even as growing U.S. market share and reduced debt lead to a surge in its bond prices, Chief Financial Officer Lewis Booth said. “We’ve got a lot of steps to go before we get to investment grade,” Booth said today in an interview at Bloomberg’s headquarters in New York. “This is not a months issue. It’s some years away.” While Ford bonds are trading as if they are two steps higher than their B3 rating from Moody’s Investors Service, the company’s $50 billion in debt was 13 times earnings before interest, taxes, depreciation and amortization in 2009. Ford is pegging its rebound to a “fragile” economic recovery, Booth said. Ford, the only one of the three largest U.S. automakers to avoid filing for bankruptcy, was the biggest issuer of junk securities in 2009, selling $4.6 billion worth through Ford Motor Credit Co., according to data compiled by Bloomberg. The company’s standing with investors has been climbing since early 2009 as it cut $9.9 billion of debt through buybacks of term loans and bonds. Dearborn, Michigan-based Ford’s $1.8 billion of 7.45 percent notes due in 2031, which traded at 15.4 cents on the dollar in November 2008, have soared to 93.3 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The yield has plunged to 8.1 percent from 48 percent. Wal-Mart Offering Standard & Poor’s raised Ford’s credit rating in November to B-, six levels below investment grade. That came almost seven months after its previous upgrade. Moody’s boosted Ford on March 17, its third increase since September, and said it may lift it higher. Elsewhere in credit markets, Wal-Mart Stores Inc. , the world’s largest retailer, and Anheuser-Busch InBev NV , the biggest brewer, led about $10 billion of U.S. corporate bonds marketed or sold today. Pacific Investment Management Co. said corporate-bond buyers should upgrade the credit-quality of their investments as economic growth is hampered by higher government debt levels and the unwinding of stimulus programs. Almost half of U.S. companies that defaulted last year had private-equity backers, which tend to use more leverage than other owners, according to Moody’s. Yields on Fannie Mae and Freddie Mac mortgage securities jumped the most in almost four months as rates on benchmark U.S. government notes soared following a record-tying Treasury auction, signaling rising borrowing costs for new home loans. Fitch Cuts Portugal The cost to protect Portuguese sovereign debt using credit- default swaps rose after Fitch Ratings cut the government’s credit grade one step to AA- and placed it on a “negative” outlook because the nation’s prospects for economic recovery are weaker than 15 European Union peers. Five-year contracts on Portugal climbed 4 basis points to 138 basis points, or $138,000 a year to cover securities with a face value of $10 million. Portugal’s deficit is 9.3 percent of gross domestic product, more than triple the European Union’s 3 percent limit. Fitch’s downgrade puts it one step below the Aa2 rating assigned to it by Moody’s and a level higher than the A+ rating at Standard & Poor’s. A benchmark indicator of U.S. corporate credit risk rose. The Markit CDX North America Investment Grade Index Series 14, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, climbed 2.6 basis points to a mid-price of 88.6, according to Markit Group Ltd. In London, the Markit iTraxx Europe Index Series 13, linked to swaps on 125 investment-grade companies, fell 1 basis point to 78.6, Markit data show. Bondholder Protection Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company or country fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. An increase indicates deterioration in the perception of credit quality; a decline, the opposite. Ford managed to avoid the fate of its U.S. rivals by borrowing $23 billion in late 2006 before credit markets froze. The automaker put up all major assets, including the Ford name, as collateral to build a cash cushion to withstand losses while developing new models. Ford’s credit rating is being held back by a debt load that Moody’s calculates to be about $50 billion from its automotive operations, including a $12 billion unfunded pension liability and as much as $5 billion from leases on buildings and equipment, said Bruce Clark , Moody’s senior vice president in charge of rating Ford’s debt. February Sales Leader “We are talking years, not months before Ford would have the kind of credit metrics that would be reflective of an investment-grade rating,” Clark said in an interview. “Their credit metrics are still very weak despite their improving performance.” Ford bonds are trading as if the company were rated B1 by Moody’s, according to the ratings company’s capital markets research group. Ford ended three years of losses in 2009 with net income of $2.7 billion and forecasts a pretax operating profit this year. The company passed General Motors Co. in February to lead U.S. monthly auto sales for the first time since 1998. Asset-Backed Securities Ford has sold $2.8 billion in asset-backed securities tied to dealer payments this year through a Federal Reserve program to unlock lending. The Fed’s Term Asset-Backed Securities Loan Facility, or TALF, ended this month. A $1.5 billion bond issue backed by lease payments was sold outside of TALF in January. “There are both internal and external headwinds which are going to keep them a solid high-yield credit at least for the next few years,” said Mirko Mikelic , senior money manager at Fifth Third Asset Management in Grand Rapids, Michigan, who helps manage $14 billion in fixed-income assets. “Slowly, if they get their house in order, they’re going to grind their way back to investment grade. But it’s not going to be anything easy or quick.” High-yield, or junk, bonds are rated below Baa3 by Moody’s and lower than BBB- by S&P. Ford was unchanged at $13.90 as of 4 p.m. in New York Stock Exchange composite trading. The shares have increased 39 percent this year, after rising more than fourfold in 2009. ‘Fragile’ Economic Recovery “There are some hurdles ahead of us and the most obvious hurdle is, how fragile is the economic recovery?” Booth said. Ford is planning for a “modest recovery,” he said. Ford forecast U.S. industrywide sales of 11.3 million to 12.3 million cars and light trucks this year, rising from 10.4 million in 2009, which was the lowest since 1982. The annual average from 2000 to 2007 was 16.8 million. The company gained U.S. market share last year for the first time since 1995 with new models such as the revamped Taurus sedan while the predecessors of GM and Chrysler Group LLC reorganized in bankruptcy with federal aid. Ford also has trimmed 47 percent of its North American workforce since 2006 and is rolling out fuel-efficient small cars such as the Fiesta. “We’re a changed company,” Booth said. “The test for Ford is to be consistent and predictable in our improvements.” Dividend Unlikely Ford is unlikely to restore the dividend soon on its common and preferred shares, Booth said. Ford last paid a dividend on its common stock on Sept. 1, 2006. It paid its last dividend on its Capital Trust II preferred stock Jan. 15, 2009, and said then it would defer payment for as much as five years. “We still have huge demands on our cash,” Booth said. “I wouldn’t want to raise people’s expectations or hopes.” Ford had a debt load of $34.3 billion in its auto operations at the end of last year, putting it at a competitive disadvantage with GM and Chrysler, which had their obligations reduced in bankruptcy, according to Booth. Wal-Mart sold $2 billion of 5- and 30-year senior notes, tapping the U.S. bond market for the first time in eight months, Bloomberg data show. The notes due in 2040 yield 95 basis points more than similar-maturity Treasuries. In July, the Bentonville, Arkansas-based company issued $500 million of 6.2 percent notes due in 2038 in a reopening of an April 2008 offering. Those bonds paid a spread of 130 basis points. Anheuser-Busch InBev sold $3.25 billion of debt in a four- part offering. Proceeds will be used to repay debt and for general corporate purposes. The Leuven, Belgium-based company was formed when InBev BV bought Anheuser-Busch Cos. for $52 billion in 2008. Build America Bonds Pimco recommends buying U.S. bank bonds, taxable municipal securities, federally subsidized Build America Bonds and emerging market corporate debt because the credit fundamentals “are stable and improving” in those areas, Mark Kiesel , global head of corporate bond portfolio management, wrote in a report posted today on the company’s Web site . “Investors should take advantage of the tighter credit spreads and focus on de-risking their portfolios in order to prepare for the increasing long-term secular headwinds stemming from the growing deterioration in public sector balance sheets,” he wrote. Creditors of companies backed by private-equity firms tend to have higher recovery rates than those run by so-called strategic backers, Moody’s analysts led by Christina Padgett in New York wrote today in a report. In 2009, 163 U.S. non- financial companies defaulted, 77 of them backed by private- equity firms, they wrote. Yields on Fannie Mae’s current-coupon 30-year fixed-rate mortgage-backed securities climbed 0.17 percentage point to 4.45 percent as of 5 p.m. in New York, the biggest change in percentage terms since Dec. 1 and the highest since Jan. 8, Bloomberg data show. Mortgage-bond yields followed Treasuries’ higher as 10-year interest-rate swap rates, another benchmark, widened their discount to U.S. government debt after the auction produced higher yields than forecast. To contact the reporters on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net ; Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net

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Commercial Mortgage Debt Rallies as TALF Draws to a Close: Credit Markets

March 14, 2010

By Sarah Mulholland March 15 (Bloomberg) — Commercial mortgage-backed bond returns are accelerating as the Federal Reserve ends support for the $700 billion market, showing growing confidence that loan defaults won’t derail the economic recovery. The securities, derived from debt on skyscrapers, shopping malls and hotels, returned 7.41 percent through March 12, compared with 2.55 percent in the fourth quarter, according to a Barclays Capital index . Top-rated securities are yielding about 3.03 percentage points more than Treasuries, the lowest spread since August 2008, according to Morgan Stanley data . Commercial mortgage-backed securities are rallying as the Fed’s Term Asset-Backed Securities Loan Facility to buy older debt draws to a close. The jobless rate is holding at 9.7 percent, indicating employment may be stabilizing. Bond prices were pummeled during the credit crisis and even in “pretty upsetting” scenarios, the safest debt isn’t likely to lose money, said Scott Simon of Pacific Investment Management Co. “CMBS has been doing well on its own, and it’s not on the back of TALF,” said Simon, managing director and head of mortgage- and asset-backed securities at Pimco in Newport Beach, California. “The program had more of a psychological impact rather than brute force.” TALF provides Fed loans to purchase top-rated securities, enabling investors to boost returns with the borrowed cash. About $11.4 billion of older commercial real estate debt has been bought through TALF since the program started in July, according to Morgan Stanley. So-called legacy bonds are those that were issued before Jan. 1, 2009. Delinquency Rate The delinquency rate on commercial real estate loans bundled and sold into bonds rose 31 basis points to 5.73 percent in February, lower than the average increase during the previous five months of 44 basis points, Moody’s Investors Service said March 12 in a report. The delinquency rate a year ago was 1.32 percent, according to the New York-based ratings company. Elsewhere in credit markets, the extra yield investors demand to own company bonds rather than government debt fell 5 basis points last week to 158 basis points, or 1.58 percentage point, as of March 12, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Average yields are 4.04 percent, the data show. Corporate bond sales worldwide totaled $79 billion last week, the most since the period ended Jan. 15, bringing the March total to $130 billion, according to data compiled by Bloomberg. Companies have sold $580.6 billion of debt this year, compared with $810.7 billion in 2009. Leveraged Loans Prices on the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index , which tracks the 100 largest dollar-denominated first-lien leveraged loans, ended the week at 90.23 cents on the dollar, the highest since July 7, 2008. The index’s total return was 2.9 percent for the year. The cost to protect against defaults on U.S. corporate bonds fell for a second week as retail sales climbed last month, signaling consumers will contribute more to economic growth. Credit-default swaps on the Markit CDX North America Investment Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, was unchanged at 83.2 basis points on March 12, after falling 2.1 percentage points for the week, according to CMA DataVision. The index declined 6.2 basis points in the week ended March 5. Retail Sales Shoppers braved blizzards in February, as purchases increased 0.3 percent, the fourth gain in the past five months, U.S. Commerce Department figures showed. Results for the prior two months were revised lower. Sales excluding autos rose 0.8 percent, exceeding all economists’ estimates . In London, credit swaps on the Markit iTraxx Europe index of 125 companies with investment-grade ratings fell 2 basis points to 73.75 basis points, the lowest since Jan. 18, JPMorgan Chase & Co. prices show. The indexes typically falls as investor confidence improves and rises as it deteriorates. Credit-default swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point is 0.01 percentage point and equals $1,000 a year on a contract protecting against default on $10 million of debt for five years. Two corporate-debt issuers, one in Canada and the other in Argentina, defaulted last week, raising the global total to 19 for the year, according to Standard & Poor’s. The 12-month trailing rate for high-yield, high-risk global defaults was 9.2 percent as of March 11, S&P analysts led by Diane Vazza in New York wrote in a report. The U.S. rate was 10.9 percent, which the analysts predict will fall to 5 percent by yearend, though they said that doesn’t mean that corporate default risk is permanently lower. Fannie Mae Spreads on Fannie Mae and Freddie Mac’s benchmark corporate notes widened 2 basis points last week to 24 basis points, according to Bank of America Merrill Lynch index data. The spread has widened from 17 basis points, the lowest in at least 10 years, in October. It reached a record 183 basis points in November 2008. The most “likely” reason the yield gap has widened is that “spreads had simply reached levels that were too tight, especially given the prospect of the Fed’s exit” on March 31 from a program in which it’s buying $175 billion of the debt, Rajiv Setia and James Ma , analysts in New York at Barclays Capital, wrote in a March 12 report. Lyondell Chemical Lyondell Chemical Co. seeks $2.25 billion of notes and a $1 billion six-year term loan to help it emerge from bankruptcy, according to people familiar with the request. The chemical and fuel company also wants a $1.75 billion asset-based revolving line of credit that won’t be funded at closing, said one of the people, who declined to be identified because the discussions are private. It also seeks a European securitization facility, the people said. Prices on top-rated commercial mortgage-backed securities have soared to about 92.5 cents on the dollar from 61.7 cents in March 2009 before the Fed committed to financing the securities through TALF, according to Barclays Capital data. Spreads have narrowed from 12.3 percentage points a year ago, according to data from Morgan Stanley. “While the rally was seemingly ignited by the introduction of governmental plans to reintroduce leverage into the system, its longevity was fanned by investors’ continually improving view of the world, albeit from an exceedingly dismal starting point,” JPMorgan analysts led by Alan Todd in New York said in a March 5 report. The U.S. unemployment rate held at 9.7 percent in February and the economy lost 36,000 jobs, fewer than economists anticipated, a Labor Department report showed on March 5. Lack of Sales There have been no new sales of commercial-mortgage backed securities this year. The portion of TALF for newly issued commercial mortgage-backed securities was extended through June. The final round of a separate TALF program for asset-backed securities, or bonds tied to consumer and small-business loans, was held earlier this month. Sales of commercial mortgage-backed securities plummeted to $11.15 billion in 2008 from a record $232.4 billion in 2007 as the credit market seized up, Bloomberg data show. Even with U.S. government aid, only $3.04 billion of the bonds were sold last year. The lack of transactions chokes off funding to borrowers with maturing debt. About $28 billion in commercial mortgages packaged into bonds mature this year, according to Credit Suisse Group AG data. Even as economic concern abates, Barclays Capital analysts said the delinquency rate will continue to climb as borrowers struggling with debt loads hand over loans to special servicers, firms that handles troubled loans. A $3 billion mortgage on the Stuyvesant Town-Peter Cooper Village apartment complex in Manhattan, the largest loan in the commercial-mortgage bond market, was transferred to a special servicer in late January, and isn’t yet classified as delinquent, the analysts said in a March 3 report. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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HSBC Sells First Kangaroo Bonds as Asia Default Risk Drops: Credit Markets

March 4, 2010

By Gabrielle Coppola March 5 (Bloomberg) — Teco Energy Inc. , the parent of the electricity provider serving west-central Florida, leads issuers selling the most utility debt in six weeks as investors seek to curb risk by buying the bonds of regulated companies. Teco, which sold $550 million of 6- and 10-year notes through its Teco Finance Inc. unit, has the largest of five utility offerings totaling about $1.62 billion this week, according to data compiled by Bloomberg. Newark, New Jersey- based Public Service Electric & Gas Co. , the state’s largest utility, sold $300 million of 30-year bonds on March 2. Investors are buying utility bonds amid mixed signals on the strength of the U.S. economic recovery. While initial jobless claims fell last week, pointing to a strengthening labor market, pending sales of existing homes dropped in January. Debt from electric and gas companies represents a middle ground for investors looking to pick up yield while curbing risk, said Bill Larkin , a portfolio manager at Cabot Money Management. “The thing that’s attractive about utilities is that it’s regulated, in place,” said Larkin, who helps oversee $500 million for the firm in Salem, Massachusetts. “It’s the perfect business model for fixed-income investing.” Teco’s offering was its first in almost two years, Bloomberg data show. The utility sold $250 million of six-year, 4 percent notes at 180 basis points more than similar-maturity Treasuries, and $300 million of 10-year, 5.15 percent bonds at a 160 basis-point spread. Rick Morera, a spokesman for Tampa, Florida-based Teco Energy, didn’t return a call seeking comment. Credit Risk Elsewhere in credit markets, the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, increased 0.25 basis point to a mid-price of 88.75 basis points, according to Barclays Capital. The gauge typically increases as investor confidence deteriorates. In London, the Markit iTraxx Europe index of swaps on 125 companies with investment-grade ratings rose 1.75 point to 81 basis points, according to JPMorgan Chase & Co. The cost of protecting Asia-Pacific bonds from default fell today to the lowest in at least five weeks. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 4.5 basis points to 102 basis points as of 8:20 a.m. in Hong Kong, the lowest since Jan. 25, according to Citigroup Inc. and CMA DataVision prices. Credit-swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting against default on $10 million of debt for five years. Greek Bonds Swaps contracts to protect against default on Greek government debt rose 12 basis points to 306.5 basis points yesterday, according to CMA. Greece sold 5 billion euros ($6.8 billion) of 10-year bonds after Prime Minister George Papandreou ’s promises to reduce Europe’s largest budget deficit by cutting wages and spending prompted protesters to occupy the Finance Ministry. The government priced the notes at 300 basis points more than the mid-swap rate, or a yield of 6.385 percent. That compares with 6.09 percent interest on Greece’s existing benchmark issue due July 2019, Bloomberg data show. European Central Bank President Jean-Claude Trichet phased out some of the emergency tools used to fight the financial crisis and said it would be inappropriate for the International Monetary Fund to give help to Greece. The ECB will tighten the terms of its three-month market operations next month by returning to the pre-crisis practice of offering the funds at a variable rate. In its main seven-day operations, the ECB will keep lending commercial banks as much money as they need at its benchmark rate for at least seven months. The ECB left that rate at a record low of 1 percent yesterday. TALF Deals In the loan market, Revlon Inc. , the cosmetics company controlled by Ronald Perelman , reworked the discount offered on an $800 million term loan, according to people familiar with the change. The debt, which now has a five-year maturity, will be sold at 98.25 cents on the dollar, the people said. The loan was originally marketed by the New York-based company as a seven-year obligation to be sold at a discount of 99 cents, one of the people said. The Federal Reserve received $4.1 billion, the most in six months, in loan requests from investors for the final round of its program to unlock the market for asset-backed securities. A total of $1.8 billion of requests for financing of student-loan securities accounted for the largest category of debt sought, the New York Fed said on its Web site. CIT Group Inc., SLM Corp. , Ford Motor Co. and Chrysler Financial Corp. were among borrowers selling debt eligible for the Fed’s Term Asset-Backed Securities Loan Facility. Pending Home Sales Fewer Americans than expected signed contracts to purchase previously owned homes in January, indicating the extension of a tax credit is doing little to lure buyers. The index of purchase agreements, or pending home sales , dropped 7.6 percent after a revised 0.8 percent increase in December, the National Association of Realtors said in Washington. Claims for U.S. jobless benefits dropped last week from a three-month high. Initial jobless applications fell by 29,000 to 469,000 in the week ended Feb. 27, in line with the median forecast of economists surveyed by Bloomberg News. This week’s utility offerings are the most since the period ended Jan. 22, when Electricite de France led $2.7 billion of issuance, Bloomberg data show. Utility Bonds Lag U.S. utility bonds returned 0.21 percent in February, lagging the 0.38 return on all investment-grade debt, according to Bank of America Merrill Lynch data. In January, each returned about 2 percent. Utility debt has lost 0.14 percent this month. “The reason it underperformed is because of all the clean air rules,” Cabot’s Larkin said. “Greenhouse gas emission costs, carbon trading, could impact them, but they’re still in a situation where they’re going to be in business,” he said. Public Service Electric & Gas ’s 5.5 percent senior secured bonds due in 2040 rose 1.02 cent to 100.544 cents on the dollar since the sale, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Puget Sound Energy Inc., Southwestern Electric Power and Western Mass Electric Co. all sold debt on March 3. Utilities are attractive because demand for corporate credit has lowered the yields paid by other issuers that don’t operate in the stability of a regulated marketplace, said Jason Brady , a portfolio manager overseeing $8 billion in fixed-income assets at Santa Fe, New Mexico-based Thornburg Investment Management Inc. Time Warner “It’s certainly as attractive from a business standpoint as a more cyclical but very strong balance sheet company,” Brady said. Southwestern Electric Power’s 6.2 percent debt due in 30 years priced to yield 160 basis points more than benchmarks, Bloomberg data show. The bonds are expected to be rated Baa3 by Moody’s Investors Service, its lowest level of investment grade, and one step higher at BBB by Standard & Poor’s. New York-based Time Warner Inc., returning to credit markets after a three-year hiatus, also paid a 6.2 percent coupon on 30-year bonds that priced to yield 162 basis points more than benchmarks on March 3. The debt is rated Baa2 by Moody’s and BBB by S&P. “With Time Warner at 162 and Southwestern Electric Power at 160 in 30 years, I’ll take Southwestern Power all day long,” Brady said. To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

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End of TALF Spawns $7 Billion ABS Sales Led by CIT, Sallie: Credit Markets

March 2, 2010

By Jody Shenn March 3 (Bloomberg) — CIT Group Inc. , the commercial lender that emerged from bankruptcy, and SLM Corp. , the student lender, are leading the most asset-backed bond sales in six months under an expiring U.S. program that helped unlock credit markets. CIT is selling $667 million of bonds backed by equipment leases this week, its first since exiting Chapter 11 in December, said a person familiar with the offering who declined to be identified because terms aren’t public. SLM, known as Sallie Mae, is selling $1.55 billion of securities backed by loans without government guarantees, another person said. Total sales this week may reach almost $7 billion. The Federal Reserve’s Term Asset-Backed Securities Loan Facility, which provides low-cost loans to bond buyers, helped spur $178 billion of issuance last year, according to Bank of America Merrill Lynch. Infrequent issuers or those selling “unusual” debt are unsure if they’ll get yields as low relative to benchmark rates after the program ends tomorrow for non-mortgage debt, said Reed Auerbach of law firm Bingham McCutchen LLP. “People are taking advantage of the final round because there is some uncertainty as to how the markets will react when TALF goes away,” said Auerbach, chairman of the structured transactions group in New York at Bingham, the top lawyer for asset- and mortgage-backed bond underwriters last year based on the number of transactions. Elsewhere in credit markets, the extra yield investors demand to own company bonds instead of government debt yesterday fell 2 basis points to 166 basis points, or 1.66 percentage point, according to Bank of America Merrill Lynch’s Global Broad Market Corporate index. Average yields were 4.04 percent. HCA, Kexim HCA Inc. , taken private in a leveraged buyout in November 2006, sold $1.4 billion of notes due in 2020, 40 percent more than planned, according to data compiled by Bloomberg. The Nashville, Tennessee-based hospital chain tapped the corporate bond market for the fourth time since February 2009 to repay a portion of its $25.7 billion of long-term debt. Issuers sold $9.25 billion of bonds in the U.S. corporate market yesterday, the most since Feb. 4 when volume reached $18.85 billion including $9.5 billion from Kraft Foods Inc. and $8 billion from Warren Buffett ’s Berkshire Hathaway Inc., Bloomberg data show. Export-Import Bank of Korea, the state-run lender known as Kexim, sold $1 billion of notes due in September 2015, Bloomberg data show. The Seoul-based lender’s notes priced to yield 195 basis points more than similar-maturity Treasuries, 5 basis points narrower than planned. AIG Default Risk The cost to protect against a default by American International Group Inc. declined to the lowest since before the company’s government bailout after a $35.5 billion sale of an Asian insurance unit bolstered creditor optimism. Credit-default swaps on New York-based AIG fell 45 basis points to a mid-price of 405 basis points yesterday, according to broker Phoenix Partners Group. The contracts, which typically decline as perceived creditworthiness improves, were trading at the lowest since Sept. 3, 2008, after dropping 146 basis points this week, CMA DataVision prices show. The Markit CDX North America Investment Grade Index, a benchmark that investors use to hedge against losses on corporate debt, rose 1.25 basis point to 89.7 basis points, according to CMA. European corporate credit risk, as measured by the Markit iTraxx Europe index of credit-default swaps on 125 investment- grade companies, fell 1.5 basis point to 81.75 basis points, the lowest since Feb. 3, according to JPMorgan Chase & Co. prices. Deadline Tomorrow Credit-default swaps linked to Greek government bonds fell 24.5 basis points to 320, the lowest since Jan. 19, according to CMA. The Greek government will announce as much as 4.8 billion euros ($6.5 billion) of additional deficit cuts today, bowing to pressure from the European Union and investors to do more to tame the region’s biggest shortfall, a person familiar with the plan said. Credit swaps pay the buyer face value if a borrower defaults in exchange for the underlying securities or the cash equivalent. A basis point equals $1,000 a year on a contract protecting $10 million of debt. The last monthly deadline to obtain TALF funding for non- mortgage securities is March 4, as the Fed seeks to unwind the unprecedented aid to markets that the central bank used amid the worst financial crisis since the Great Depression. The Fed began TALF in March 2009 to revive the market for bonds tied to consumer and small-business loans. Sales of the debt plummeted 42 percent in 2008, choking off funding to lenders, according to Bloomberg data. TALF provides low-cost Fed loans toward the purchase of top-rated securities. It lets buyers boost returns with borrowed cash and provides issuers with lower funding costs. ‘Low-Rate Environment’ The $4.8 billion of eligible debt sold in the first two months of this year also included less-common securities such as those backed by lending to auto dealerships, subprime auto loans and mortgage-servicing payments. Yield spreads on more-traditional asset-backed securities such as credit-card or auto-loan bonds are less likely to widen, said John McElravey , an analyst at Wells Fargo Securities in Charlotte, North Carolina. Spreads on less popular bonds won’t grow much as investors seek extra yield in a “low-rate environment,” he said. Issuers including Chrysler Financial Corp. , which sold $2 billion of auto-lease bonds, are offering classes rated below AAA after a slower thawing of demand for junior-ranked debt, he said. “The spreads could widen out, but if that happens I think you would see investors get back into those sectors and those names at the wider spreads,” McElravey said. CIT, Sallie Mae Top-rated bonds backed by auto loans are yielding about 0.59 percentage point more than Treasuries compared with 5.7 percentage points a year ago, according to Bank of America Merrill Lynch index data. New York-based CIT is seeking yields 1.40 percentage point more than the benchmark euro-dollar synthetic forward rate on a portion of its AAA rated bonds, a person familiar with the offering said. The company said March 1 it expects to report a loss of about $900 million for the fourth quarter of 2009 and $4 billion for the year before the effects of its reorganization. Sallie Mae, which “faces uncertainty regarding the future of its business model due to legislation that could eliminate the company’s ability to originate federal student loans,” adjusted its private-loan practices to require that students make interest payments while still in school after delinquencies on older loans soared, Standard & Poor’s said in a Feb. 26 report. Mortgage Bonds Frozen Martha Holler , a spokeswoman for Reston, Virginia-based Sallie Mae, and Curt Ritter , a CIT spokesman, didn’t immediately return telephone calls seeking comment. Limited issuance in certain portions of the securitization market will add demand to those that have revived, McElravey said. Even amid a separate TALF program for new commercial- mortgage bonds that will run through June, only $3.04 billion of that debt was sold last year, down from a record $237 billion in 2007, Bloomberg data show. Sales of home-loan bonds without government-backed guarantees have been frozen for two years amid record defaults, after peaking at almost $1.2 trillion in both 2005 and 2006. The Fed has also held yield spreads on so-called agency mortgage securities near the lowest on record with its program to purchase $1.25 trillion of the debt, which also ends this month. Demand for traditional asset-backed securities is great enough that some offerings sell out in 30 minutes, leaving investors little time to scour the underlying loans and deal documents, said Jeffery A. Elswick of Frost Investment Advisors. “People are definitely moving in the direction of being more complacent than we’d like to see,” said Elswick, the director of fixed income at the San Antonio, Texas-based asset manager, which oversees $6.5 billion. To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

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Francine McKenna: Are You Gonna Make My Day? The Auditors And SEC Enforcement

February 6, 2010

Any business news in mid january was overshadowed by the devastating news from Haiti. There are a number of ways you can help – from donating via your mobile to the Red Cross to an effort that is local to Chicago, Project Eden . Please help. I watched the Financial Crisis Inquiry Commission hearings in Washington and tweeted quite a bit. One of the Commissioners, Keith Hennessey, solicited questions for the bankers. I added my suggestions to his site. All in all it was a very interesting exchange. I’ll write more later. In the meantime, you can take a look at Mark Leibovich’s article in the New York Times. In the afternoon, the SEC held a news conference to announce several changes and initiatives in their Enforcement Division. After a public news conference, a few select bloggers were invited to a special briefing with Robert Khuzami, the Director of the Division of Enforcement. Doug Cornelius documented the participants and questions here . Edith Orenstein , Bruce Carton , and Broc Romanek have provided some analysis. My focus, as always, is on enforcement actions against the audit firms and their professionals. The Big 4 (and to a lesser extent the next tier firms) and their partners are still pretty lucky, continuing to dodge any truly deadly SEC enforcement bullets. My question: “We have two high profile cases here in Chicago: Deloitte’s lawsuit against their own Vice Chairman Thomas Flanagan for breach of contract related to inside trader charges and the SEC’s recent actions against six Ernst & Young partners regarding the Bally’s fraud. In the Deloitte case, although the lawsuit against their partner was initiated as a result of SEC inquiries at their clients, Mr. Flanagan is reported to have made more than 300 trades over several years. In the Bally’s case, the enforcement actions/settlements are coming more than six years after the fraud occurred. These delays mean the firms and the professionals can use the excuse, “It’s all behind us,” and remedial actions and disciplinary proceeding lose impact. How will the changes announced today help make investigations and enforcement actions more timely? ” Mr. Khuzami answered that I was preaching to the choir. He said he is very focused on bringing investigations and any related actions to a close more quickly. In fact, he said, when he took his current position, he implemented a new rule that required staff to get his personal permission to extend time lines when filed cases may be approaching their statute of limitations. In the past it seems it was routine to drag things out as we saw in Madoff . Finally, he reminded me that the timeline is not always in the SEC’s hands when there is a parallel criminal investigation. Mr. Khuzami’s intention is that organizing the SEC Enforcement Division around key issues and the expertise needed to investigate them will accelerate the process and improve it. It’s a worthy goal…because I know how delays can be tactics rather than just poor follow-through. I was a member of the ” PwC the Client” internal audit team in 2005-2006. In retrospect, I realize that some of the frustrating delays in getting reports out and seeing action on my findings were actually strategic moves to get rid of difficult, sensitive issues by diluting them with time. During my tenure at PwC, I led audits of some interesting internal firm areas, including some legal and regulatory compliance activities. Most of the reports I wrote were issued. However, one report in particular went around in circles, being revised, re-revised, back to the first partner’s version, back to my original version, and eventually issued in a very watered down form. Why? By the time the merry-go-round stopped, I was dizzy and the partners I had cited for violations had ample time to clean up their act or remove evidence of violation. I was accused of making it all up. Oh, and also of being a very bad writer. In the case of the recent settlement by the SEC with Ernst and Young, although six partners were cited in the settlement, three of those partners are now retired. And, of course, EY repeated the tried and true response to such unpleasantness and the prospect of having a monitor futzing around making a good show of remediating their faults: Chicago Tribune: Three Ernst & Young partners who were charged remain at the firm. They are Randy Fletchall, who was in charge of its national office in New York, and two based in Chicago, Mark Sever, Ernst & Young’s national director of area professional practice, and Kenneth Peterson, the professional practice director. The other three from the Chicago office are no longer with the firm. They are Thomas Vogelsinger, the area managing partner until October 2003, William Carpenter, engagement partner for the 2003 audit, and John Kiss, the engagement partner for the 2001 and 2002 audits…In a statement [Ernst & Young] said, " These settlements allow us and several of our partners to put this matter behind us and resolve issues that arose more than five years ago.” While we’re at it … A few more comments about the Ernst & Young/Bally’s enforcement actions. Jim Peterson over at Re: Balance comes down, I think, in sympathy with Ernst & Young and what he sees as the make-work required by the settlements. What messages are sent to the profession’s quality and risk functions? Ought they to reduce the exposure of their senior personnel, by hanging out the line operators to struggle on their own? And by the way, who would aspire to the headaches of a consultative role, if only to finish a long career by dangling from the SEC’s noose? One of E&Y’s undertakings in Bally is to re-visit, under the scrutiny of an outside examiner, its documentation of higher-level issue consultations. So, under a sanction that only a bureaucrat could love, Ballywill impel the Big Four’s national office boffins to “re-audit” information they receive from the field, and to build a fortress of memoranda to defend against the assaults of later second-guessing. Let’s take a look back at the Ernst & Young risk and quality process employed in this case by the three partners who remain at the firm. They are leadership partners whom others look to for advice and guidance. Rather than being independent, experienced, objective consultants with a “buck stops here” attitude of upholding firm, professional, and legal/regulatory standards, these three were portrayed in the SEC press release of the settlement as conflicted and self interested. The SEC shames them, and in very damningly specific terms, because they were clearly seeking to protect not only their colleagues’ reputations but their own. Ernst and Young now has three strikes against them for SEC enforcement actions, sanctions, and fines related to independence violations. Two of the three leadership partners held leadership and committee positions in the AICPA and PCAOB. Famous Floyd Norris at t he New York Times quotes an anonymous “veteran SEC official” who says he believes the EY/Bally’s sanctions are the first time an audit firm’s National Practice Partner was cited by the SEC. This “official” admits he had not checked the records. Floyd quotes him anyway. Not true. Floyd…next time call me. Mr. Fletchall, who remains with Ernst, was in charge of resolving technical accounting issues in the United States. He was censured by the commission. A veteran S.E.C. official, speaking on condition he not be named because he had not checked records for the entire history of the commission, said he knew of no previous enforcement cases in which a partner of a major firm was cited for his actions as head of a national office. Back in September of 2007 I wrote about KPMG and Xerox and an SEC investigation that had been going on since 2003 that also named their National Practice Partner as a defendant. Mr. Conway had also been a partner on the account. The fraudulent activities had occurred in 1997-2001. KPMG finally settled the SEC case in 2005 and the shareholder litigation in early 2008. The sanctions against Mr. Conway were more severe than Mr. Fletchall’s. Is he already back auditing again? Did he ever leave KPMG? The firms are so forgiving of bad accountants. A re: The Auditors reader, commenting on the Flanagan inside trader case, made the following observation and I responded as best I could: Mr. Khuzami: If I don’t start seeing faster, stronger, more decisive once-and-for-all enforcements against the audit firms and their partners, I’m going to start believing that the snowjob is more often due to evil plans rather than benign neglect. Main Page Photo Credit “Do you feel lucky, punk?” Clint Eastwood Dirty Harry (1971)

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End of TALF Means Bond Sales With Spreads Five Times Wider: Credit Markets

February 3, 2010

By Sarah Mulholland Feb. 4 (Bloomberg) — The end of a Federal Reserve program that helped unlock credit markets is spurring sales of asset- backed bonds with relative yields five times wider than on debt secured by car loans. The expiration of the Fed’s Term Asset-Backed Securities Loan Facility is driving companies to sell bonds tied to loans that would otherwise require higher yields. Borrowers are offering bonds backed by subprime auto loans, mortgage-servicing payments and assets that have proved hard to sell after the worst credit seizure since the Great Depression. “What we are seeing in the last couple of rounds are issuers in non-traditional asset classes and weaker issuers looking to fund as much as they can before the window closes,” said James Grady , a managing director at Deutsche Asset Management in New York. The firm has $240 billion in assets under management, including asset-backed securities. Ally Bank, a Midvale, Utah-based unit of GMAC Inc., is selling $750 million in so-called floorplan securities backed by payments on loans that finance cars on lots. Nissan Motor Co. , in Yokohama, Japan, issued $900 million of the debt last week. Sales total $3.35 billion this year, including deals being prepared, compared with $3.9 billion all of last year, according to Informa Global Markets in New York. The bonds offer investors higher relative yields because the collateral is considered riskier. Ally Bank’s sale of AAA debt backed by floorplans may yield 1.75 percentage points more than swap rates, compared with a spread of 0.35 percentage point for top-rated auto-loan bonds, according to Bank of America Corp. data. TALF Expires Investors have a deadline of today for taking out loans through TALF this month. The program, which provides loans to investors buying the debt, began in March 2009 and expires March 31. Elsewhere in credit markets, the yield spread on company bonds narrowed 1 basis point yesterday to 164 basis points, Bank of America Merrill Lynch’s Global Broad Market Corporate Index showed. The gap has widened from this year’s low of 160 basis points, or 1.6 percentage points, on Jan. 14. The average yield yesterday was 4.12 percent, up from the low this year of 4.06 percent on Jan. 11. The cost to protect North American company bonds from nonpayment fell yesterday for the third straight day, the longest stretch since the four days ended Jan. 6. Standard & Poor’s said the default rate on speculative-grade debt held steady last month at 10.7 percent. Kraft Foods Inc. may complete the sale of $4 billion in debt today to pay for its acquisition of Cadbury Plc. Choking Off Funding TALF was started to jump-start the market for bonds tied to consumer and small-business loans after sales of the debt plummeted 42 percent in 2008, choking off funding to lenders, according to data compiled by Bloomberg. The program spurred $178 billion of securities sales, according to Bank of America. TALF provides low-cost Fed loans toward the purchase of top-rated securities. It allows buyers to boost returns with borrowed cash and provides issuers with lower funding costs. Companies selling debt through TALF this month include AmeriCredit Corp. , the Fort Worth, Texas-based lender to car buyers with poor credit, and Ocwen Financial Corp., a West Palm Beach, Florida-based company that acquires and services troubled mortgages. Ocwen’s sale is backed by payments connected to delinquent home loans. The program is becoming less useful as investors gain confidence in the economy and use more of their own cash to buy the debt. Yields on top-rated auto-loan securities relative to Treasuries have narrowed to 0.69 percentage point from 6.4 percentage points a year ago, Bank of America Merrill Lynch index data show. JPMorgan, GE Companies including New York-based JPMorgan Chase & Co, Fairfield, Connecticut-based General Electric Co., New York- based Discover Financial Services and Dearborn, Michigan-based Ford Motor Co. sold debt backed by loans and leases outside the program during the past six months, Bloomberg data show. In making the decision to end TALF and three more programs like it, the Fed said in a statement on Jan. 27 that the economy “has continued to strengthen,” while “the pace of economic recovery is likely to be moderate for a time.” The central bank also said it’s “prepared to modify these plans if necessary to support financial stability and economic growth.” Other parts of the asset-backed debt market are also likely to make a comeback as investor sentiment improves. Sales of securities backed by U.S. home loans lacking government-backed guarantees, which stopped two years ago as subprime mortgage defaults surged, may resume this year, industry executives said at a conference this week. ‘Dipping the Toe’ “You’re going to see people come to market to some extent but it’s just going to be dipping the toe in the water,” Bill Felts, a senior vice president at Citigroup Inc.’s mortgage unit, said at the American Securitization Forum conference in Washington. Sales of so-called non-agency bonds backed by new home loans peaked at almost $1.2 trillion in both 2005 and 2006 before freezing as the worst U.S. housing slump since the Great Depression sparked losses and curbed lending, according to the newsletter Inside MBS & ABS. In the credit-default swaps market, contracts on the Markit CDX North America Investment-Grade Index Series 13, which is linked to 125 companies and used to speculate on creditworthiness or to hedge against losses, fell 0.5 basis point to 92 basis points. Credit Quality A basis point on a credit-default swap protecting $10 million of debt from default for five years equals $1,000 a year. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to meet its debt agreements. A decline signals improvement in perceptions of credit quality. The default rate on speculative-grade debt was little changed at 10.7 percent last month, and may decline to 5 percent by December 2010, S&P said yesterday. During January, seven companies defaulted, compared with 14 at this time in 2009. “Credit metrics in the U.S. are showing the first indications of strengthening credit quality, as well as stronger lending conditions and signs of life among speculative-grade new issuance,” wrote Diane Vazza , head of S&P’s Global Fixed Income Research Group. Companies in the U.S. are marketing at least $6.7 billion of high-yield bonds following a record $16.4 billion in January, according to data compiled by Bloomberg. Speculative grade bonds are rated below Baa3 by Moody’s Investors Service and BBB- at S&P. Kraft Bonds Kraft is rated Baa2 by Moody’s and BBB by S&P. The Northfield, Illinois-based company may finish the sale of debt due in 3.25, 6, 10 and 30 years today, said a person familiar with the transaction who declined to be identified because terms aren’t set. Kraft plans to issue a minimum of $1 billion in each maturity, the person said. “It’s going to be a big deal, so the question is how robust the demand is going to be,” said Jeff Given , a money manager who helps invest $19 billion in fixed-income assets at MFC Global Investment Management in Boston. “I expect it to go fairly well.” The 3.25-year notes may yield about 150 basis points more than Treasuries, while the 6- and 10-year debt may pay spreads of about 187.5 basis points, said the person. The spread on the 30-year bonds may be about 15 basis points wider than that of the 10-year notes. Last Deal Kraft last sold bonds in December 2008, issuing $500 million of notes due in February 2014. The 6.75 percent notes were priced to yield 525 basis points more than Treasuries of similar maturity, Bloomberg data show. Those securities traded yesterday at 112.11 cents on the dollar to yield 110 basis points more than Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. In Europe, Portugal led a surge in the cost of insuring against losses on European government debt to record-high levels amid concern the country will struggle to finance its budget deficit. Portugal sold 300 million euros ($417 million) of 12- month bills yesterday after indicating it planned to issue 500 million. The securities were sold to yield 1.38 percent, compared with 0.93 percent at a Jan. 20 auction. Credit-default swaps on Portugal soared 29 basis points to a record 196, according to CMA DataVision prices. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments including Portugal and Greece jumped 5 basis points to an all- time high of 93.5, CMA prices show. Spanish government agency Instituto de Credito Oficial increased the yield premium it paid on a 1 billion-euro bond sale to entice investors. Swap Rates Madrid-based ICO, which lends to businesses, paid 65 basis points over the benchmark swap rate, according to data compiled by Bloomberg. That compares with a spread in the low 50-basis- point range offered Feb. 2, according to a banker with knowledge of the transaction who declined to be identified because the terms weren’t set. Snai SpA , Italy’s second-largest gaming and betting company, pulled a sale of high-yield bonds citing “market conditions” and a dispute with Bridgepoint Capital Ltd. Snai planned to raise 350 million euros selling bonds. Bridgepoint asked the company and Snai Servizi Srl, its parent, for 20 million euros in damages for its failure to accept an offer for its gaming activities. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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Company Bond Sales Fall 7% as Greece Drives Spreads Wider: Credit Markets

January 31, 2010

By Caroline Hyde, Sonja Cheung and Sapna Maheshwari Feb. 1 (Bloomberg) — Bond sales by nonfinancial companies fell 7 percent in January as the cost to borrow rose from a two- year low on growing concern that governments struggling to pay their debts will derail the economic recovery. Markets have become “pretty nervous again,” Deutsche Bank AG Chief Executive Officer Josef Ackermann said during a panel at the World Economic Forum in Davos, Switzerland, on Jan. 30. He cited sovereign risk and commercial real estate as areas of concern for investors. Sales dropped to $46 billion from about $49.5 billion in December and about $127 billion a year ago as offerings fizzled in the last two weeks of the month, according to data compiled by Bloomberg. Corporate bonds yield 165 basis points more than government debt, up from 160 basis points on Jan. 14, a Bank of America Merrill Lynch index showed. The gap between the cost to protect high-yield and investment-grade securities from default widened for the first time since August. Prices of so-called leveraged loans declined. After scooping up higher-risk assets early in the month, optimism over the strength of the economy faded as China clamped down on borrowing, the Obama administration proposed limiting the size of banks and Greece’s finances roiled European markets. Bond strategists at New York-based JPMorgan Chase & Co. said in a report dated Jan. 29 that they are now “tactically bearish” on investment-grade debt because of “ongoing regulatory uncertainty and developing risk aversion.” ‘Correction Due’ “We’re due for a correction or some sort of breather” after corporate bond returns surged to a record 16.3 percent last year and the MSCI World Index of stocks gained 27 percent, said Cliff Noreen , president of Springfield, Massachusetts-based Babson Capital Management LLC, which manages about $113 billion. “The unemployment rate is stubbornly high and it hasn’t begun to recede. The deficits that were created also are going to have at some point higher interest costs associated with them.” Elsewhere in credit markets, two-year interest-rate swap spreads are widening. Sales of junk bonds, rated below Baa3 by Moody’s Investors Service and below BBB- at Standard & Poor’s, set a record for the month at $16.3 billion. U.S. asset-backed securities linked to consumer and business loans rose to $9.6 billion in January, according to Wells Fargo Securities, from $5.6 billion. Issuers are rushing to sell the debt under a Federal Reserve program that ends this quarter. Greece, Spain, Portugal Greece, Spain, Portugal and Ireland have had their credit ratings lowered because of rising budget shortfalls. Portugal needs deeper deficit cuts than included in its 2010 budget to avoid a credit downgrade, Moody’s said Jan. 28. Claims of foreign banks on Spain are 3.8 times more than those against Greece, or $240 billion, according to BNP Paribas. While the U.S. Commerce Department said Jan. 29 that the economy expanded 5.7 percent in the fourth quarter, the fastest pace in six years, this week the Labor Department may say the unemployment rate held at 10 percent in January, according to the median forecast of 60 economists surveyed by Bloomberg News. The January decline in corporate bond sales may be temporary, with absolute yields near four-year lows. The yield on the Bank of America Merrill Lynch Global Broad Market Corporate Index ended the month at 4.04 percent, down from 4.37 percent on Dec. 31. “Obviously people have taken note of Greece, there’s no doubt of that, but I don’t think that was one of the factors that really had much of an immediate impact on U.S. corporate debt,” said Vincent Murray , head of U.S. fixed-income syndicate at Mizuho Securities USA in New York. “Investor demand, which is the most important technical as far as I’m concerned to drive this new issuance, is definitely still there.” Down 24 Percent Bond sales in the U.S. last month totaled $118.3 billion, down 24 percent from a year earlier. Now, Media General Inc. , the Richmond, Virginia-based newspaper publisher, and Dutch electricity-operator TenneT BV, are marketing bonds. Media General plans to offer $350 million of senior secured notes due in 2017, according to a statement distributed by PR Newswire. The company, which publishes the Tampa Tribune and Winston-Salem Journal newspapers and is rated B2 by Moody’s, will use the proceeds to repay debt, it said in the statement. TenneT, rated A3 by Moody’s, is offering subordinated and senior bonds denominated in euros that have characteristics of both debt and equity, according to a statement on the Arnhem, Netherlands-based company’s Web site . Enel SpA , Italy’s biggest utility, plans to raise as much as 3 billion euros ($4.2 billion) of notes due 2016. Hybrid Sale “The TenneT hybrid deal, the first corporate hybrid in some time, should be well received,” said Terence Shanahan , the global head of DCM syndicate at Societe Generale SA in London. “It has elements, such as government ownership, that appeal to investors. New-bond issuance is likely to be busier.” The S&P/LSTA US Leveraged Loan 100 Index fell to 89.53 cents on the dollar last week, the first drop since the period ended Nov. 6. Companies are borrowing in the loan market, in part to finance acquisitions. Banks in the U.S. arranged $5.71 billion of leveraged loans in January, more than quadruple the $1.22 billion a year earlier, Bloomberg data show. New loans fell to $171.3 billion in 2009 from $296.4 billion in 2008. “There’s more to come: valuations are down, financing is now available,” said Frederick Haddad , a partner at New York- based GoldenTree Asset Management LP. “These are all ingredients that make for a fairly strong private-equity market.” IMS Loans Goldman Sachs Group Inc. will start talks to price the six- year, $2 billion term loan IMS Health Inc. will use to finance its takeover by TPG Inc. and Canada Pension Plan Investment Board, according to people familiar with the matter who declined to be identified because negotiations are private. Norwalk, Connecticut-based IMS also plans to raise $1 billion in the bond market, Moody’s and S&P said in separate reports. While corporate bond sales are slowing, offerings of asset- backed debt is picking up before the Fed’s Term Asset-Backed Securities Loan Facility expires in March. The central bank began TALF in March to revive credit markets by allowing investors to borrow for purchases of securities tied to consumer, business and commercial-property loans. Detroit-based GMAC Inc.’s Ally Bank will sell $750 million of bonds backed by payments from auto dealers, according to a person familiar with the offering. Others selling debt through TALF include Cabela’s Inc. and Automotive Rentals Inc., people familiar with the sales said. Japan’s Toyota Motor Corp. sold $900 million in bonds eligible for the program last week. Derivatives Caution Of the $178 billion in consumer asset-backed securities sold in 2009, $105 billion was eligible for the program, according to Bank of America Corp. Issuance of asset-backed securities tied to household debt plummeted 42 percent in 2008 as the credit crisis sapped demand, Bloomberg data show. Derivatives indicate that investors are concerned the markets may not be healed enough to withstand the withdrawal of government and central bank stimulus programs, even though S&P said last week the U.S. speculative-grade default rate will decline to 5 percent by the end of 2010, from a previous forecast of 6.9 percent. The difference between what investors pay to insure debt tied to the Markit CDX North America High Yield Index and bonds linked to the benchmark Markit CDX investment grade index climbed 50 basis points last month. That gap, at 482 basis points, had plunged 289 basis points the previous four months to the lowest level since December 2007, according to CMA DataVision prices. Both credit-default swaps indexes are used by investors to hedge against losses or to speculate on corporate creditworthiness. Checking ‘Senses’ “People are grabbing on to their senses,” said Marilyn Cohen , president of Envision Capital Management in Los Angeles, who manages $250 million in fixed-income assets. “After the high-yield market was up 57 percent, what does anybody expect? If they expect a 20 percent return they are really on drugs.” Two-year interest-rate swap spreads, which measure the difference between the rate to convert floating-rate payments to fixed and similar-maturity Treasuries, increased to 25.5 basis points on Jan. 29 from the month’s low of 20 basis points on Jan. 5. Swap rates are typically higher than sovereign yields to reflect the extra risk of trading with a bank instead of the government. To contact the reporters on this story: Caroline Hyde in London chyde3@bloomberg.net Sonja Cheung in London at scheung58@bloomberg.net ; Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

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Aliansce IPO Raises Less Than Planned in Sign Bovespa Rout Damping Demand

January 28, 2010

By Paulo Winterstein and Fabiola Moura Jan. 28 (Bloomberg) — Aliansce Shopping Centers SA is raising less money in its initial public offering than the company planned, adding to signs that the worst Brazil stock market drop in three months is damping demand for new shares. Aliansce and stakeholders may raise 673 million reais ($362 million), 20 percent less than the 845 million reais for the initial sale that the company estimated two weeks ago. The shopping mall owner’s initial offering is the first in Latin America’s biggest equity market this year. Metalfrio Solutions SA , the nation’s biggest maker of commercial refrigerators, canceled its planned share sale and M. Dias Branco SA , the biggest maker of cookies and pasta, postponed an offering in the past week as the Bovespa index fell 8 percent since Jan. 6, the worst slump since October. “This was a small offer with a more restricted pool of investors, but the poor market put some pressure on the stock,” said Eduardo Roche , who helps manage about $400 million at Banco Modal SA in Rio de Janeiro and didn’t buy Aliansce shares. “This could be a sign that investors may demand a bigger discount until the market becomes a bit more solid.” Aliansce is selling shares for 9 reais each, below the expected range of 10 to 13 reais, according to a filing posted on the securities regulator’s Web site. Aliansce is selling 50 million shares and stakeholders will offer as many as 24.8 million, including a possible supplementary offer. Aliansce shares are scheduled to begin trading tomorrow. Biggest Advance Brazilian companies raised more than 23.8 billion reais in six initial offerings last year, according to the Web site of exchange owner BM&FBovespa SA. Brazilian stocks had their biggest annual advance in six years in 2009, with the Bovespa surging 83 percent, as record-low interest rates and government stimulus plans helped Latin America’s largest economy pull out of a recession faster than most nations. The Bovespa has dropped from a 19-month high in the past three weeks as steps by China to curb growth in the world’s fastest-expanding major economy spurred concern that demand for Brazilian exports will weaken. The Bovespa fell in each of the past five trading sessions, matching the longest stretch of declines since October 2008. M. Dias asked to suspend its sale for 60 days, citing “current market conditions,” according to a Jan. 21 filing. Multiplus SA , the frequent-flyer unit of the country’s biggest airline, is expected to sell shares next week. The Multiplus initial offering may not suffer as much because it is a larger sale, expected to raise as much as 1.3 billion reais, Roche said. To contact the reporters on this story: Paulo Winterstein in Sao Paulo at pwinterstein@bloomberg.net ; Fabiola Moura at fdemoura@bloomberg.net

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Ford to Sell $500 Million of Bonds Through Fed as Program Nears Expiration

January 6, 2010

By Sarah Mulholland Jan. 6 (Bloomberg) — Ford Motor Co. is relying on a Federal Reserve program to market securities backed by auto- dealer payments, showing that borrowers may still need U.S. help to issue asset-backed securities as debt markets heal. Ford’s finance arm plans to issue $500 million of the so- called floorplan bonds, linked to loans that finance cars on dealer lots. Offering that kind of debt without U.S. aid may be a “trickier proposition” than selling traditional securities backed by consumer payments, according to Barclays Capital. The Fed’s Term Asset-Backed Securities Loan Facility, which helped fuel sales of $178 billion of debt backed by consumer loans last year, is set to expire on March 31. While the U.S. has breathed life into the asset-backed market, some types of the debt still need support, said Michael Wade , head of asset- securitization origination in the Americas at Barclays Capital. “We’ve come so far and to pull it back now would remove the backstop,” said Wade, who is based in New York. “To say it’s solved all the problems is a little premature.” The National Automobile Dealers Association, a trade group representing car and truck dealers, has urged the Fed to extend TALF for floorplan financing through December 2010. As much as $5.4 billion of the debt is due to refinance this year, and the financing remains “very scarce,” the McLean, Virginia-based group wrote in a Dec. 11 letter to the New York Fed. In TALF sales, investors can take out loans from the Fed to purchase top-rated securities. The sale from the Dearborn, Michigan-based automaker’s credit arm is being underwritten by Bank of America Corp., Royal Bank of Scotland Group Plc, Citigroup Inc. and Goldman Sachs Group Inc., according to a person familiar with the offering who declined to be identified because terms are private. December Sales Soar Ford Motor Credit spokeswoman Margaret Mellott didn’t immediately return a telephone call yesterday for comment. Ford, the only U.S.-based automaker to decline a federal bailout, said yesterday its total U.S. vehicle sales soared 33 percent on an unadjusted basis last month. The Fed program has lowered corporate borrowing costs. Top- rated bonds backed by car loans are yielding about 0.80 percentage point more than Treasuries, compared with 7.7 percentage points a year ago, according to Merrill Lynch & Co. index data. TALF has already been extended once. It was originally set to end Dec. 31, and was pushed out three months for asset-backed bonds and older commercial-mortgage securities. The program will stay open through June 30 for newly issued commercial real estate debt. ‘Non-Issue’ Of the $178 billion in consumer asset-backed securities sold in 2009, $105 billion was eligible for TALF, according to Bank of America Corp. Issuance of asset-backed securities tied to household debt plummeted 42 percent in 2008 as the credit crisis sapped demand, according to data compiled by Bloomberg. For top-tier banks and finance companies bundling loans from borrowers with better credit histories, now accounting for most of the asset-backed market, the end of TALF will be a “non-issue,” said Josh Anderson , a portfolio manager at Pacific Investment Management Co. in Newport Beach, California. The program has “served its purpose,” Anderson said in a telephone interview. Buyers that pay cash rather than borrow to boost returns have returned to the market, allowing companies including New York-based JPMorgan Chase & Co., Fairfield, Connecticut-based General Electric Co. , and Ford to issue securities outside of TALF, Bloomberg data show. Investors aren’t required to take out Fed loans to purchase bonds sold through TALF, and investors have increasingly been using their own cash to buy even those securities being issued through the program. “The smaller, less liquid and more volatile assets that were traditionally purchased by leveraged investors, that is where the uncertainly will rest,” Pimco’s Anderson said. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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Michael J. Panzner: Economists: Wrong Again

November 21, 2009

As if they didn’t cause enough damage by espousing theories that failed to account for the inefficiencies and irrationalities of the real world , many economists are advocating aggressive spend-and-borrow policies to revive the financial crisis-hit U.S. economy that reflect an astonishing degree of na

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London Eateries Slash Wine Prices; Haggis Dim Sum Honors Burns: Food Buzz

November 20, 2009

By Richard Vines Nov. 20 (Bloomberg) — Le Bouchon Breton has joined the ranks of London restaurants lowering the price of fine wines to draw in customers and to get us all drinking again. Among the bargains: La Tache, Domaine de la Romanee Conti 1995, down to 1,293 pounds ($2,150) from 3,900 pounds, and Charmes-Chambertin, Domaine Perrot-Minot 2001, cut to 105 pounds from 220 pounds. Let’s hope our employers appreciate the effort that is being made. Just think: The more you drink, the more you save. Min Jiang is planning a Chinese Burns Night for Jan. 25, 2010, serving dishes with a Scottish twist and matching whiskies. The four-course menu starts with a haggis dim sum platter — featuring delicacies such as haggis and chive won ton — and ends with baked chocolate Macallan tart. It’s 55 pounds. Sweet and whisky sour isn’t on the menu. Well, not yet. Call +44-20-7361 1988 or go to http://www.minjiang.co.uk/home.php . (The evening isn’t listed on the Web site yet.) Toptable.com , the restaurant-booking Web site where you can save on the cost of meals, says profit surged last year as diners logged on for bargains. Net income in the 12 months ended June 30 rose to 960,891 pounds from 325,694 pounds a year earlier. Sales jumped to 6.63 million pounds from 5.51 million pounds, the London-based company said yesterday in an e-mailed release. Eateries pay Toptable for bookings made via the site, where current offers include 50 percent off food at Mango Tree. The curiously named Chinese Cricket Club has opened its doors in the City. In case you wondered what the place is doing in a food column rather than on the sports pages, it’s a Sichuan restaurant in the Crowne Plaza hotel. The kitchen is headed by Brendan Speed, formerly of Zuma Istanbul, who says he’s seeking to achieve a balance between traditional dishes such as twice- cooked pork and dry-fried chili beef and creations such as crispy orange chicken or fried perch with garlic chives. Good luck to him. I’ll give the place a try. Lovers of the spicy western China cuisine are well served in London by eateries such as Snazz Sichuan and Bar Shu, which has reopened after a blaze. Proud Cabaret , an underground venue in the City, promises diverse events hosted by various promoters. Thursday’s “Supper Club” is retro-cabaret, while Fridays and Saturdays offer vintage entertainment and dancing. If you fancy a quiet bite, the student nights (Mondays through Wednesdays from 10 p.m.) may be the ones to avoid. The owner, Alex Proud, says it’s the perfect den of iniquity. Just what the City needs. 4 Minster Court, Mark Lane, EC3R, 7AA. Tel. +44-20-7283-1940. A Tokyo chef won top prize in the Eat-Japan Sushi Awards 2009 at the Olympia Exhibition Centre in London. Tomoyuki Abe, from the Shiodome branch of the Sushi-Zen chain, won for his crispy salmon, marinated in soy sauce and mirin and topped with deep-fried chips of lotus root, avocado and crumbs of tempura batter. Sayan Isaksson of Raakultur, Stockholm, came second. Third place went to Taiji Maruyama of Nobu London. The judges included Jun Tanaka of Pearl, who previously judged a Bloomberg tasting of take-away sushi, when he created the bounce test. Chefs Angela Hartnett and Gary Rhodes were among the guests when brothers Chris and Jeff Galvin held a party at their Spitalfields venue, Galvin La Chapelle , which opened this week. The event was supposed to finish at 8:30 p.m. but the Champagne flowed past 11 and even the kitchen was crowded as culinary stars jostled to look at the shiny equipment. Across town and a few hundred feet up, Gordon Ramsay held a book launch for “Gordon Ramsay’s World Kitchen” on Nov. 16 at the Paramount Club atop Centre Point. His wife Tana stood out in the crowded and noisy room wearing knee-length boots, black trousers and a sequined top. The Harwood Arms, one of my favorite London eateries, has a new winter menu with a 15.50 pound “Plate of Partridge Starters” for two featuring Kiev with marjoram butter; rissoles on licorice; glazed legs and tea with celeriac coleslaw and pickled pear. The Fulham pub’s owners say it’s the only London venue serving British truffles. They’re served with Cornish cod and a wild mushroom and Jerusalem-artichoke heart. Selfridges is selling a new range of stews in the bag, produced by the Soulful Soup Co. The varieties include Moroccan chicken charmoula and Devon lamb. The store says they’re low in sodium and produced with 100 percent natural ingredients. They cost 3.49 pounds. Looking for an unusual Christmas celebration? The Globe Girls — a drag-queen troupe — are providing the entertainment at Gilgamesh on Dec. 14. Tickets cost 55 pounds (plus service) for a three-course meal, a glass of Champagne and an abundance of song and dance. ( Richard Vines is the chief food critic for Bloomberg News. Opinions expressed are his own.) To contact the writer on the story: Richard Vines in London at rvines@bloomberg.net .

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Developers Diversified Sells Commercial Mortgage-Backed Debt Through TALF

November 16, 2009

By Sarah Mulholland Nov. 16 (Bloomberg) — Developers Diversified Realty Corp. sold $400 million of debt backed by shopping centers in the first sale of commercial-mortgage bonds through a U.S. program to jumpstart lending. The $323.5 million top-rated portion priced to yield 140 basis points more than benchmark swap rates, according to people familiar with the transaction who declined to be identified because terms are private. Investor demand allowed the company to reduce the so-called spread from as much as 175 basis points, or 1.75 percentage points, the people said. The offering from Beachwood, Ohio-based Developers Diversified, managed by Goldman Sachs Group Inc. , is the first to use the Federal Reserve’s Term Asset-Backed Securities Loan Facility since it was opened to the debt in June. While representing a “positive for the market,” the transaction won’t necessarily lead to a flood of issuance, said James Grady , managing director at Deutsche Asset Management in New York. “It is a small step in the right direction, but I would caution against making too much out of it,” said Grady, who oversees about $240 billion in investments. “Clearly there was good demand for this deal. But this is a unique deal and that doesn’t mean that another transaction would get similar reception.” Boost Returns Investors can take out loans from the Fed’s TALF to purchase the AAA portion of the bond sale, enabling them to boost returns with borrowed cash. TALF was started in March to revive the market for bonds backed by consumer and small business loans. Buyers aren’t required to take out loans from the Fed to purchase the bonds, and many investors buying the Developers Diversified offering may have paid cash, Grady said. The tighter spread on the debt means that some investors won’t be able to get the returns they were looking for, and it may not be worth it to take out the Fed loan. Spreads were “pleasantly tight,” Grady said, and highlight value to be found in debt sold in previous years before issuance came to a halt. Top-ranked commercial mortgage-backed securities with a similar maturity are trading at about 3.5 percentage points more than benchmarks, JPMorgan Chase & Co. data show. In January, the debt was trading at about 13 percentage points over the benchmark. Older Bonds Spreads on the older bonds should tighten in response to the appetite for the Developers Diversified sale, even with the “potential stigma” attached to securities issued during the boom years, according to a Nov. 13 report from JPMorgan analysts led by Alan Todd in New York. The government has made reviving the commercial-mortgage bond market a priority as plunging property values and a pullback in lending threaten to derail an economic recovery. U.S. commercial real estate prices are down 40.6 percent from the October 2007 peaks, according to Moody’s Investors Service. Sales of commercial mortgage-backed debt slumped to $12.2 billion last year from a record $237 billion in 2007, choking off financing to borrowers with maturing debt, according to JPMorgan Chase. Other companies seeking to sell debt for TALF include Vornado Realty Trust and Inland Western Retail Real Estate Trust, according to company filings. Bank of America Corp. is working to put together a bond offering backed by office and industrial properties in Florida for Fortress Investment Group LLC, though that sale is likely to be sold outside of the TALF, according to a person familiar with the offering. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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Hawksmoor Plans Steak House in West End; Thanksgiving in London: Food Buzz

November 12, 2009

By Richard Vines Nov. 12 (Bloomberg) — Hawksmoor owner Will Beckett and his business partners plan to open a second branch of the steak house in London’s West End next May because the original location in Shoreditch is “grossly oversubscribed.” Beckett said he’s about to sign on the site, which he declined to identify. “We’re turning down more than 1,000 people a week,” he said. “In the year just ended, we were up 21 percent (on revenue) from a year earlier and this year, we’re doing still better. It’s a delicate thing opening at this time, but things are going really well and we’re determined to get it right.” Palm restaurant is serving an “American Thanksgiving in London menu” on Nov. 26 for 30 pounds. For information, telephone +44-20-7201-0710. At Le Cafe Anglais, the special menu is 36.50 pounds. Telephone +44-20-7221 1415 or click on http://www.lecafeanglais.co.uk/PDFs/thanksgiving%20menu1.pdf . Christopher’s American Bar & Grill weighs in with a 40 pounds traditional menu. Telephone +44-20-7240-4222 or click on http://www.christophersgrill.com/valentines_menu.html. Mark Hix plans to open his third London eatery, Hix Restaurant and Champagne Bar, in Selfridges on March 1. It will be located on the mezzanine level that was the Gallery and will serve breakfast and afternoon tea as well as lunch and dinner. Conran Associates is creating the design. Serpentine Bar & Kitchen is erecting a marquee to cover the whole outdoor-seating area to create a pop-up restaurant with a Christmas tree where diners sit at communal tables to enjoy festive food while listening to live jazz and folk. Open from Nov. 19 to Dec. 23, it is timed to coincide with Hyde Park’s Winter Wonderland , which will feature an ice rink, a Ferris wheel, a circus and a Bavarian village offering hearty food. Prism, the fine-dining City restaurant owned by Harvey Nichols, has been reborn as a brasserie. Out go elaborate and expensive dishes in favor of starters such as grilled mackerel, crushed potatoes, lemon, chili and parsley (8.50 pounds/$14.30) and a main of beef burger and chips for 14.95 pounds. From my last visit, in 2007, I recall a dessert called “Richard’s Last Wish” that cost 75 pounds and featured three different dishes with matching cognacs. How long ago that all seems. Jean-Christophe Novelli, the heartthrob French chef, is offering cooking classes in his 14th-century Hertfordshire farmhouse. The daylong intensive course is 995 pounds but there are cheaper options. Alternatively, you can get two free tickets to see him in action at The France Show if you register before Dec. 1. The event will be held at London Earl’s Court. There’s also a competition to join Novelli on stage and to gain a 50 percent discount on any Novelli Academy cooking course. Chef Giorgio Locatelli will create the menu for this year’s Berkeley Square Ball, on Dec. 3, and Nobu Berkeley Street will host the reception at the start of the evening. The Prince’s Trust will be the charity benefiting from the event, whose theme is “A Winter in New York City.” Tickets cost 600 pounds plus VAT, or 5,500 pounds for a table. For information, call Sophia Pasetti on +44-20-7644-1420 or e-mail Sophia.pasetti@vpmg.net . Tom Aikens has teamed up with School Food Matters , a campaign to promote healthy meals for children. The chef will be holding practical cooking sessions for up to 15 pupils at primary and secondary schools in the London borough of Richmond. Laya’lina, a modern Lebanese restaurant and bar, has opened in Knightsbridge serving mains such as Siyyadiyeh, a fish and rice dish that originated in the coastal city of Tripoli. At weekends, there’s a DJ and live music. For information, click http://www.layalina.co.uk/ . In the City, the first London outpost of the Istanbul restaurant Tike is gaining praise for its Turkish cuisine, including a meter-long Adana kofte kebab. For information: http://www.tikerestaurant.co.uk/ . The restaurateur Oliver Peyton will host a Christmas market at Inn the Park on Dec. 19, showcasing produce from farms around Britain. The idea is that you may buy all the elements of a holiday feast under one roof. The market is from 10 a.m. to 5 p.m. at Inn the Park, St James’s Park, SW1A 2BJ. Telephone +44- 20-7451-9999 or click http://www.innthepark.com/index.asp . Raymond Blanc’s Le Manoir aux Quat’Saisons won the Conde Nast Johansens Award for The Most Excellent Restaurant 2010. The village of Bray — population 8,460 — west of London, is best known in culinary terms for the Fat Duck and the Waterside Inn. There’s a third restaurant destination: Caldesi in Campagna , run by Katie and Giancarlo Caldesi. Katie has a new book, “The Italian Cookery Course” (Kyle Cathie Ltd., 30 pounds) that explores the regional cuisines of Italy. Galvin La Chapelle and Cafe de Luxe, the new venue of brothers Chris and Jeff Galvin of Galvin Bistrot de Luxe, will open on Nov. 18. The restaurant is housed in the 19th-century St. Botolph’s Hall, in Spitalfields, with an all-day cafe next door and a connecting aperitivo bar. Telephone +44-20-7299-0400. Champagne maker Philippe Brun is hosting a Roger Brun Champagne dinner at Texture on Dec. 4. It’s 99 pounds for five courses with matching bubbles. Telephone +44-20-7224-0028. ( Richard Vines is the chief food critic for Bloomberg News. Opinions expressed are his own.) To contact the writer on the story: Richard Vines in London at rvines@bloomberg.net .

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Goldman Sachs Manages First Sale of Commercial Mortgage Debt Under TALF

November 9, 2009

By Sarah Mulholland Nov. 9 (Bloomberg) — Goldman Sachs Group Inc. is underwriting $400 million of bonds backed by an Ohio real estate company’s shopping centers in the first sale to tap a U.S. program to unlock lending in the commercial mortgage market. The bond is backed by 28 properties owned by Developers Diversified Realty Corp. , according to people familiar with the transaction who declined to be identified because terms are private. The offering comes a month after Goldman Sachs made a loan to the Beachwood, Ohio-based company in part to repay debt on the properties and others. The Federal Reserve opened its Term Asset Backed Securities Loan Facility in June to newly issued commercial mortgage-backed securities to stimulate lending and avert a wave of foreclosures as borrowers fail to refinance. There have been no new sales of the debt since June 2008, according to data compiled by Bloomberg. “It would be good for the market psyche to actually see a new deal done,” said Kent Born , senior managing director at PPM America Inc., an investment manager in Chicago. “But as a practical matter it’s not going to get us back to the type of deals that were the bread and butter of the market merely two years ago.” Investors can take out loans from the Fed’s TALF to purchase the top-rated securities from Developers Diversified. The TALF was started in March to revive the market for debt backed by consumer and small-business loans. Fortress Sale The Developers Diversified sale comes as Bank of America Corp. puts together a $650 million offering for Fortress Investment Group LLC , backed by office and industrial properties in Florida, according to a person familiar with the transaction. The issue may be sold outside the Fed program, the person said. Both the Developers Diversified and Fortress offerings are different from the commercial-mortgage backed securities sold during the boom in that they’re from single borrowers. Securities sold as the market peaked in 2007 bundled loans from as many as 300 borrowers, according to data compiled by Bloomberg. The process of pooling debt from so many borrowers can take several months, and banks are hesitant to write new loans and hold them on their books, said Christopher Hoeffel , a managing director real estate investor Investcorp International Inc. in New York. JPMorgan’s Plans As credit markets have stabilized and financial institutions make bets the worst has passed, signs are emerging that some banks are willing to take on the risk. During the past two weeks, JPMorgan Chase & Co. began quoting loans to commercial borrowers with the intent of pooling them to be sold as bonds, though no loans have been closed yet, according to a person familiar with the program. “This is a very positive sign for the market,” Hoeffel said. “While it’s only a toe in the water, banks are actually taking the execution risk of a securitized exit.” New underwriting standards are stringent, and the proceeds available to borrowers will not be enough to pay off existing debt for many property owners, Hoeffel said. “There will need to be additional capital from outside the banks, in the form of equity, preferred equity or mezzanine debt, in order to make deals work,” Hoeffel said in an e-mail. Banks wary of holding loans during the time it takes to build a pipeline have limited assets to dedicate to new commercial real estate loans, Hoeffel added. The government has made reviving the commercial-mortgage bond market a priority as plunging property values and a pullback in lending threaten to derail an economic recovery. U.S. commercial real estate prices are down 40.6 percent from the October 2007 peaks, according to Moody’s Investors Service. Sales of commercial mortgage-backed debt slumped to $12.2 billion last year from a record $237 billion in 2007, according to JPMorgan Chase & Co. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net

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USAA Offers $1 Billion Non-TALF Auto Sector Deal (Nasdaq)

November 4, 2009

NEW YORK -(Dow Jones)- USAA Auto Owner Trust is in the market with a $1 billion deal that is scheduled to price later this week. This is the second bond USAA is marketing this year.

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What Investors Should Look for in Today's Fed Statement

November 4, 2009

In an effort to clean up bank balance sheets and encourage new lending, the Fed opened its Term Asset – Backed Securities Loan Facility ( TALF ) to so-called legacy commercial-mortgage bonds. TALF attracts buyers by pumping up returns with …

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TALF Deals Worth About $6 Billion Sold Ahead Of Deadline (Nasdaq)

November 3, 2009

NEW YORK -(Dow Jones)- Consumer loan-backed deals worth about $6 billion sold ahead of a monthly loan-application deadline Tuesday for the Term Asset-Backed Securities Loan Facility, or TALF, a Federal Reserve program credited with boosting securitization markets.

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UPDATE: TALF-Eligible $884.856 Million Ally Bank Deal Sold (Nasdaq)

November 3, 2009

NEW YORK -(Dow Jones)- An auto-sector deal eligible for a Federal Reserve program from GMAC’s Ally Bank has sold, according to a term sheet.

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UPDATE: CNH’s $800 Million TALF-Eligible Deal Sold; Loan Deadline Tuesday (Nasdaq)

November 3, 2009

(Adds analyst comment in the seventh and eighth paragraphs.) NEW YORK-(Dow Jones)- CNH Equipment Trust’s $800 million bond has sold, according to a term sheet.

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UPDATE: Bank Of America’s $2.027 Billion TALF Deal Sold – Source (Nasdaq)

November 2, 2009

NEW YORK -(Dow Jones)- The $2.027 billion Bank of America Auto Trust deal, eligible for a Federal Reserve program, has sold, according to a person familiar with the deal.

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About $6 Billion In Deals Eligible For TALF Emerge (Nasdaq)

November 2, 2009

NEW YORK -(Dow Jones)- About $6 billion in consumer-loan-backed deals will be sold ahead of the loan application deadline for a Federal Reserve program to rejuvenate the asset-backed market.

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AmEx says can issue $12.1 billion more under TALF (MalaysiaNews.net)

October 30, 2009

), the largest U.S. credit card company by purchases, said on Friday it was eligible to issue $12.1 billion more of securities under the Term Asset-Backed Securities Loan Facility plan, or TALF.

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AmEx says can issue $12.1 billion more under TALF (Reuters via Yahoo! News)

October 30, 2009

American Express Co , the largest U.S. credit card company by purchases, said on Friday it was eligible to issue $12.1 billion more of securities under the Term Asset-Backed Securities Loan Facility plan, or TALF.

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NewsDaily: AmEx says can issue $12.1 billion more under TALF

October 30, 2009

American Express Co , the largest US credit card company by purchases, said on Friday it was eligible to issue $12.1 billion more of securities under the Term Asset – Backed Securities Loan Facility plan, or TALF .

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Deals Line up Ahead of Nov. 3rd TALF Deadline

October 29, 2009

Several deals made the round today that include eligible collateral under Federal Reserve s Term Asset Backed Securities Loan Facility ( TALF ). The next loan application deadline for the program is Nov. 3 for the consumer loan – backed …

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NY Fed Rejects 5 CMBS, Accepts 81 For TALF Program (Nasdaq)

October 27, 2009

NEW YORK -(Dow Jones)- The Federal Reserve Bank of New York Tuesday announced which existing commercial mortgage-backed securities would be eligible for cheap funding under its Term Asset-Backed Loan Facility.

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FRB: Press Release–Federal Reserve announces changes to …

October 22, 2009

The Federal Reserve Board on Monday announced two changes to the procedures for evaluating asset – backed securities (ABS) pledged to the Term Asset – Backed Securities Loan Facility ( TALF ). The TALF , which was authorized by the Board on …

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Waiter, There's Some TALF in My Mutual Fund – Morningstar – Fund Spy

October 22, 2009

T. Rowe has set up a private fund that will borrow money on the cheap from the U.S. government’s Term Asset – Backed Securities Loan Facility and reinvest it in higher-yielding, but still triple-A rated, commercial mortgage- backed …

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Federal Reserve announces changes to procedures for evaluating asset-backed securities pledged to the Term Asset-Backed Securities Loan Facility…

October 5, 2009

Federal Reserve announces changes to procedures for evaluating asset-backed securities pledged to the Term Asset-Backed Securities Loan Facility (TALF)

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Fed Asset-Backed Loan Plan Gets $2.3 Billion Commercial Mortgage Requests

August 20, 2009

By Jody Shenn Aug. 20 (Bloomberg) — Investors asked the Federal Reserve for $2.3 billion of loans against commercial-mortgage-backed securities created before this year, an expansion from $668.9 million in its financing program’s first round a month earlier. The central bank got no requests for newly issued bonds backed by loans on skyscrapers, shopping malls, apartments or hotels, the New York Fed said today on its Web site . That part of the Term Asset-Backed Securities Loan Facility, or TALF, hasn’t been used since its start three months ago. “I would not call this a blow-out number by any stretch of the imagination, but certainly relative to what we saw in July it was positive and definitely within the range of what people were thinking,” said James Grady , managing director in New York for Deutsche Asset Management, a unit of Deutsche Bank AG that oversees $240 billion of investments. Wall Street profits and the $700 billion CMBS market, which rallied amid the opening of TALF to the debt and start of Treasury Secretary Timothy Geithner ’s Public-Private Investment Program, may depend on the programs’ results. While the average price of top-rated commercial-mortgage securities is up 8 percent since June to almost 90 cents on the dollar, last week values began weakening as buying in anticipation of investor demand tied to the programs eased, according to Merrill Lynch & Co. index data. Looking Ahead “With dealer inventories now fairly bloated across the Street, we will need to see not only a sizable subscription next Thursday, but will also need the Fed to remain accommodative with respect to the bonds it accepts as TALF-eligible collateral,” Alan Todd , a JPMorgan Chase & Co. analyst in New York, wrote in Aug. 14 report. TALF loan requests of less than $1 billion would be a “disappointment” to the market, while requests of more than $2 billion would probably be “well received,” he said in a telephone interview today before the announcement. Investment banks have been recently buying commercial- mortgage securities being offering for sale “pretty aggressively in the expectation that TALF buyers would materialize,” Grady said in a telephone interview. The investors typically will seek to acquire the bonds a few days before, or the same day that, the Fed accepts requests, he said. Fed Chairman Ben S. Bernanke this week extended the TALF for commercial-mortgage bonds into next year as he seeks to stabilize a market where property values have fallen 36 percent from their October 2007 peak, according to Moody’s Investors Service data. Banks and insurers own more than $2 trillion of U.S. commercial real-estate debt not packaged into bonds. Top Rating Required Last month, the Fed refused to accept only one commercial- mortgage bond as TALF collateral, announcing the decision about a week after disclosing the loan requests without saying why it found the debt too risky. At a minimum, the securities must carry top credit ratings, not be under review for downgrades and rank among the senior-most classes of a securitization. The central bank is receiving advice on the decisions from Trepp LLC, a New York-based research firm, and Pacific Investment Management Co., the Newport Beach, California-based firm that manages the world’s largest bond fund. The PPIP, which the government announced July 8 would begin with nine asset managers raising as much as $10 billion and receiving as much as $30 billion in taxpayer capital and loans, accepts a broader range of commercial- and residential-mortgage bonds originally rated AAA. Sales History The Fed is seeking to revive commercial-mortgage bond sales after issuance halted as the cost to sell the debt became too high to originate new real-estate loans. That choked off financing to borrowers including those seeking to refinance $165 billion of debt this year. In 2007, a record $237 billion of commercial-mortgage bonds were sold, before sales fell to $12.2 billion last year and none this year, according to JPMorgan. The Fed extended the commercial-mortgage TALF to June 30, 2010, from Dec. 31. The Aug. 17 announcement followed a letter to Bernanke from 41 House members — including Financial Services Committee Chairman Barney Frank , a Massachusetts Democrat, and Carolyn Maloney , a New York Democrat who heads the Joint Economic Committee — asking for a one-year extension after property owners stepped up lobbying for a later deadline. Spreads Over Benchmarks Yields over benchmark interest-rate swaps on so-called super senior commercial-mortgage securities issued in 2006 that are likely TALF-eligible were about 4 percentage points earlier today, according to JPMorgan data. Spreads on similar bonds that aren’t eligible were 5.5 percentage points. Since Aug. 7, spreads have widened between about 0.50 percentage point and 1 percentage point, with prices for ineligible debt weakening the most, Todd said. In November, the spreads topped out at record highs between about 13 percentage points and 15 percentage points, he said. The average price of top-rated CMBS securities has eased from a high this year of 91.2 cents on the dollar on Aug. 13, after climbing from a 2009 low of 72 cents in February, according to Merrill Lynch index data. To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net .

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Federal Reserve and Treasury Department announce extension to Term Asset-Backed Securities Loan Facility (TALF)

August 17, 2009

Federal Reserve and Treasury Department announce extension to Term Asset-Backed Securities Loan Facility (TALF)

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Federal Reserve and Treasury Department announce extension to Term Asset-Backed Securities Loan Facility (TALF)

August 17, 2009

Federal Reserve and Treasury Department announce extension to Term Asset-Backed Securities Loan Facility (TALF)

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Quick Take: 10-Year Treasury, Oil Prices, Commercial Real Estate

August 10, 2009

Commercial real estate continues to struggle with mortgage debt refinancing. Extending TALF’s availability for CMBS purchases would provide a measure of relief.

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Indiana Teachers Seeks TALF Manager

July 27, 2009

The Indiana State Teachers Retirement Fund is seeking an investment manager for a TALFPPIP or an expanded TALF investment strategy

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FRB: Press Release–Treasury and Federal Reserve announce launch …

March 3, 2009

In carrying out the Financial Stability Plan, the Department of the Treasury and the Federal Reserve Board are announcing the launch of the Term Asset – Backed Securities Loan Facility ( TALF ), a component of the Consumer and Business …

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FRB: Press Release–Federal Reserve announces the creation of the …

November 25, 2008

The Federal Reserve Board on Tuesday announced the creation of the Term Asset – Backed Securities Loan Facility ( TALF ), a facility that will help market participants meet the credit needs of households and small businesses by supporting …

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