Securitization People and Markets

John Deuschle has left HSBC Securities in New York where he was head of corporate bond sales. He will join Stephens Inc., a Little Rock, Ark.-based investment bank. Deuschle says his wife is originally from Little Rock, and he wanted to return there to raise his family. His eventual duties at Stephens have not yet been determined. Deuschle will not be replaced at HSBC, says an HSBC official. Pat McDonald, HSBC head of U.S. fixed-income sales, declined comment.

Barclays Capital Markets is beefing up its newly formed emerging market fixed-income trading desk with the hiring of J.P. Alvarado, a director, from Credit Suisse First Boston. Alvarado, who starts today, will report to Diego Gradowczyk, managing director and head of the desk. At CSFB, Alvarado was a New York-based director and a sovereign trader. Gradowczyk says Alvarado will be trading emerging market sovereign debt from Mexico and Latin American exotic countries.

John Wotowicz, managing director and head of European leveraged finance at Morgan Stanley, will move back to New York to assume "a very senior role in covering some of the firm's most important leveraged finance clients," according to a senior firm official, who would not be more specific. The reassignment of Wotowicz is the latest move in an effort by the company to rebuild its leveraged finance business. Morgan Stanley fell from fourth place in the U.S. high-yield underwriting league tables in 2000 to sixth place in 2001. So far this year, the firm is in eighth place, according to Bloomberg. Competitors say it became very cautious after it suffered some high profile losses in its trading group. The official says additional changes in the leveraged finance group will be announced in the next few weeks, but he would not give further details. "It's more of an incremental repositioning than a wholesale restructuring," he says.

Morgan Stanley has created a new management structure for its corporate bond research group, organizing analysts into teams across sectors and across the credit curve from high-yield to high-grade. The goal is to help investors make relative value comparisons across industries, and across the increasingly narrow divide between junk and high-grade credits, according to Bill Reiland, the firm's head of U.S. credit research. Morgan Stanley started to address the gap between high-yield and high-grade last year (BW, 8/19).

Orrick, Herrington & Sutcliffe has expanded its structured finance group by hiring Michael Miran in a "of counsel capacity," a position junior to partner. He will focus on insurance-related securitization, says Ed DeSear, partner, who heads a 30-person structured finance unit for the New York-based law firm and to whom Miran will report. In his new function, Miran will help structure securitizations utilizing insurance products and insurance-like structures. His main focus will be to provide credit enhancement, or bring lower-rated securities to a higher rating level by providing credit support to the structure. The position is a newly created one reflecting the expansion of the securitization practice within the firm, says Miran.

Fixed-income strategists disagree over whether the prospect of declining foreign investment as a percentage of total new issuance in the U.S. corporate bond market will significantly impact spreads. Last year's increase in foreign investment was critical to helping the market absorb a record year in corporate bond issuance, says Louise Purtle, head of U.S. credit strategy at Creditsights, an independent fixed-income research firm. Still, Purtle sees that trend reversing for two reasons. First, she says negative carry in the dollar versus the euro will reduce incentives to invest in dollar-denominated issues. Also, she believes the foreign investors were attracted to the U.S. market because it gave them an opportunity to diversify their sector allocation and credit risk. However, much of the recent surge in issuance is in high-quality, financial institutions seeking to reduce their reliance on commercial paper. Purtle says foreign investors have sufficient opportunity to invest in such credits in their home countries.

Following Fiat's announcement of a 20% drop in sales for March, London-based analysts say it is time to sell its bonds. Despite enjoying a massive spread tightening last month when Moody's Investors Service put Fiat on review for downgrade--its bonds tightened by 50 to 60 basis points--analysts expect the auto-maker to be downgraded one notch from Baa2 and its spreads to blow out. "It's time to get out," says Cyril Benayoun, an analyst at BNP Paribas. Much of Fiat's tightening to date has nothing to do with the credit's fundamentals, but has come on the back of general positive sentiment on the economic recovery, which caused spreads throughout the sector to contract, he adds.

Sell-side cable analysts are sharply divided in their outlook for the bonds of Adelphia Communications, in the wake of the cable company's disclosure of $2.3 billion in off-balance sheet debt. David Allen, high-yield cable analyst at Morgan Stanley, says that though he does not support the lack of disclosure by the Rigas family (which owns Adelphia) regarding its accounting practices, he believes the bonds are undervalued. He raised his ratings on the company's three senior notes issues from "outperform" to "strong buy" after they dropped 14 points in the wake of the recent disclosure, and the announcement that the company would be late in filing its annual report pending a review of its books by Deloitte & Touche.

Sabrina Del Prete has joined Barclays Capital's collateralized debt obligation group in London from J.P. Morgan Securities. She will be a senior product manager reporting to Eileen Murphy, global head of CDOs. Murphy, who is based in New York, says Del Prete's new role will be to coordinate and build the CDO distribution capacity of Barclays out of Europe. Del Prete will coordinate origination and structuring operations with sales and distribution efforts out of London, says Murphy. She says she will add another London senior banker within two months to work with Del Prete.