Securitization People and Markets

Craig Enright, a senior investment-grade corporate bond trader, has left buy-side firm Aegon USA Investment Management in Cedar Rapids, Iowa, to join GE Financial Assurance in Seattle. He reports jointly to Steve Devos in Seattle and Robert MacDougall in Stamford, Conn. They did not return calls, and Enright declined comment. He worked at Aegon for six years, and at the Chicago Board of Trade for 10 years prior to that. Mark Zinkula, head of corporate bond trading at Aegon, did not return calls.

American Express will to launch its first distressed debt fund on May 1, joining a wave of other investors seeking to take advantage of the growing opportunities in the distressed market, according to BW sister publication Loan Market Week. The fund currently stands at $52 million but will be open to investors for up to $250 million in assets under management. The new fund focuses on top positions in the capital structure with 80% of the portfolio dedicated to senior secured bank loans and bonds, according to John Engelen, the fund's senior portfolio manager. Engelen joined American Express in May 2001 to prepare the fund, after a stint running Salomon Smith Barney's global distressed effort.

Kirk Hartman has joined Wells Capital Management in the new position of director of portfolio management, where he will oversee all the portfolio managers of the firm's more than $110 billion in equity and fixed-income assets--including some $70 billion in fixed-income. He will report to Robert Bissell, the firm's president.

High-yield portfolio managers have conflicting views on whether the recent resurgence of smaller high-yield issues in the primary market is a good thing. Michael Collins, high-yield portfolio manager at Prudential Financial, worries that small deals are illiquid, and require more time from the firm's own analysts to understand than they bring in returns. He points to the recent $150 million 9.75% notes of '12 by Alltrista, a home canning equipment company, as an example of a deal that can be a drain on analytical resources: "You don't follow the sale of home canning equipment as part of your regular job." Collins says he cannot rule out small deals, but feels more comfortable investing in fallen angels, particularly Tyco International and Qwest Communications, because they are well-covered and have stable underlying cash flows. He says Prudential has been "in and out" of these names, but would not give details.

Portuguese bank bonds are said to show significant value in comparison to their lower tier-two peers, especially those in Spain with exposure to Latin America. Banco Comercial Portugues (BCP) and Banco Espirito Santo (BES) offer both yield and stability in the lower tier-two market, which is otherwise quite rich, says Carlo Mareels, analyst at Morgan Stanley in London. He believes BCP and BES will likely maintain stable credit profiles in the near- to medium-term, whereas continued uncertainty in Argentina could adversely affect Spain's Banco Santander Centro Hispanio (BSCH) and Banco Bilbao Vizcaya Argentaria (BBVA). His top pick is BES' euro-denominated lower tier-two debt due in '11, which as of last week was offered at roughly Euribor plus 70 basis points, five basis points wider than similar debt of BSCH.

Schroder Investment Management in London has hired Christina Bastin as a European credit research analyst from Commerzbank, where she was a sell side credit analyst. The firm will launch an euro-denominated corporate bond fund and a global corporate bond fund, both domiciled in Luxembourg, in the second quarter, according to Christopher Wyke, fixed income product manager. He declined to elaborate on the fund launches. Schroder is also looking to hire an unspecified number of additional credit analysts during this year. "Schroder built its reputation on corporate analysis and we want to be a leading credit player." He continued, "we see a shift in markets and investors wanting to invest in corporate bonds rather than government bonds." Governments are issuing less debt, which is the opposite of what corporations are doing, he added.

Threatened U.S. military action in Iraq and ongoing tensions in Israel could push up oil prices further--as high as $30 per barrel--causing corporate credit spreads to widen. Though oil is not a dominant factor in the European market, slow economic growth and high inflation combined with high oil prices could bring spreads under pressure, says Geraud Charpin, credit strategist at BNP Paribas in London. Good sentiment toward corporate bonds is largely a result of expectations of a sustained recovery that will underpin credit quality and support demand. An oil crisis could jeopardize that recovery, says Charpin. Autos will likely be most affected by high oil prices. "If gas prices at the pump were hiked by 20% or so, these barely profitable companies will be hit," Charpin says of the auto sector.

The European market looks to be following the U.S.' lead, with more issuers opting to phase out short-term commercial paper, replacing it with longer-term straight bond or asset-backed financing, say bankers and analysts. "When business goes bad, or gets tight, a company can't roll over its CP, and when it can't do that, it's out of business," says Steve White, co-head of European ABS at Morgan Stanley in London, of the shift in the market. "You can't fund a long-term business plan with short-term funding," he adds.

Fitch Ratings has hired Charles Kassouf, associate director, as a collateralized debt obligation analyst for its New York office. David Howard, managing director, who heads the CDO group for the rating agency, says Kassouf will cover cash-funded high-yield CDOs. He started last week and reports to Beth Russotto, director, who overseas cash-funded CDOs, market value CDOs and middle-market collateralized loan obligations.