Securitization People and Markets

Deutsche Bank has hired London-based asset-backed securities banker Michael Jinn. He joins after a one-year stay at Merrill Lynch. Prior to working with Merrill Lynch, Jinn worked at Deutsche Bank for two-and-one-half years. Jinn's new title is director in the European ABS group. Michael Raynes, who heads the group from London and to whom Jinn reports, says that the position is newly-created. Raynes says his bank may add another ABS trader, but on the banking side, future hires will happen on a more opportunistic basis. Jinn says he decided to rejoin Deutsche due to the boom in the global ABS business, and because he thought Deutsche offered a great platform.

Spreads on bonds of investment-grade paper and forest product companies should beat other industrials over the next three months, according to Akiba Cohen, an analyst at Morgan Stanley, andInstitutional Investor's top-ranked basic industries analyst in the most recent All-America Fixed-Income Research Team survey. Cohen expects the sector, which traded 40-45 basis points wide of the Morgan Stanley Industrial index early last week, to beat the index by 10 to 15 basis points over the next three months. He cites the positive slope in pulp futures prices and relatively low July increase in inventories for North America and Scandinavia as reasons to be bullish about the sector. He also believes that much of the recent merger and acquisition activity has run its course or is in its final stages, allowing companies to focus on debt reduction. Specific credits he recommends because they have finished, or soon will finish, acquisitions and begin to pay down debt include Georgia Pacific (Baa3/BBB-), Domtar (Baa3/BBB-) andBowater (Baa3/BBB).

In an outspoken and lengthy comment letter, the New York Clearing House Association urged the Federal Reserve to use regulatory flexibility to make its big, newly proposed Regulation W less restrictive and "more workable with respect to the myriad transactions engaged in the course of modern banking." The first target for its criticisms was the proposed Reg W's prohibition on a bank's engaging in any new transactions with affiliates at all if at the time it already had transactions aggregating at an amount exceeding 10% of the capital and surplus of the bank. This would be a whole new limit, said NYCHA, going beyond the 20% ceiling permitted by statute. The Clearing House took issue with the Fed on several of the new Reg W's limitations on what constituted collateral for purposes of affiliate transactions. The Fed said that securities issued by the bank itself were not eligible collateral, nor were intangible assets nor letters of credit. NYCHA had disagreements with all these positions. On another subject NYCHA tangled with Reg W over the purchase of low quality assets. "The proposal would appear to contain an absolute prohibition" against buying them from affiliates. The Clearing House pointed out that the law permitted an exclusion from 23A for such purchases and suggested it be enlarged.

Fixed-income retail analysts and investors were stunned last week when Standard & Poor's upgraded Target Stores from A to A+. "From a balance sheet and cash flow perspective, it's tough to look at the story and believe they merit an upgrade," says Matt Clark, an analyst at Morgan Stanley. Several observers note that the discount retailer was not on review for an upgrade, and had only a "stable," rather than "positive," outlook from the agency. As the economy continues to slump, an upgrade to an increasingly leveraged retailer struck many as bizarre. Standard & Poor's own retail group head Jerry Hirschberg wrote in a report last month that "the outlook for credit quality [in the sector] is bleak."

Scotia Capital, the securities arm of The Bank Of Nova Scotia, has hired former Nomura Securities International repo trading chief Keith McCluskey to build a repo trading operation in U.S. Treasury bonds. McCluskey, who will be based in New York, will report to Frank Pinon, the firms' funding and debt-markets trading chief. Pinon was unavailable for comment. McCluskey notes that although he joined the firm in mid-July, "we're just getting going now, in terms of building desk infrastructure and trading relationships."

Valero Energy will issue close to $1.5 billion in debt early next year to finance its acquisition of Ultramar Diamond Shamrock Corporation, according to Lee Bailey, v.p. investor relations. Valero thus becomes the latest in a lengthy list of investment-grade energy companies that have announced plans to raise capital via debt offerings to finance acquisitions. Analysts on the buy- and sell-sides say some $8 billion will come to market in the next six months, the largest surge in issuance for a six-month period in roughly four years, according to Mark Pibl, analyst at Barclays Capital. However, Pibl and Paul Tice, an analyst at Deutsche Banc Alex. Brown, say the market will have no trouble digesting the new issuance.

Laidlaw is in talks with several U.S. and Canadian banks about arranging a $250 million revolving credit facility and a $500 million high-yield bond issue for when it emerges from Chapter 11 bankruptcy, according to BW sister publication Loan Market Week. Geoff Mann, v.p. treasurer for the Burlington, Ontario-based transportation company, said Laidlaw has just obtained a $200 million two-year secured revolving debtor-in-possession facility that will provide liquidity while the company is in court proceedings. The plan has not yet been voted on to put in place the exit facility, but it is expected to be a syndicated $250 million revolver, he added, declining to name the potential banks to lead the facility or bond offering. Laidlaw intends to exit from bankruptcy proceedings within six months to a year, he noted.

Morgan Stanley has unified its high-yield, investment-grade and emerging markets fixed-income research and trading coverage of a number of "crossover" companies--credits that shift back and forth between high-grade and high-yield. Stephen Penwell, global head of credit research atMorgan Stanley, says the firm is looking to capture an area of the market that it had previously overlooked. The firm sent out its first crossover research piece, on British communications equipment-maker Marconi, earlier this month.

Barclays Capital has hired Kevin Roach, a senior utilities analyst. He joins from Deutsche Banc Alex. Brown after working at that firm since May. The hiring of Roach, an Institutional Investor All-America Fixed-Income Research Team runner-up in 2000, follows the recent addition of Mark Pibl, a top-ranked energy analyst from Merrill Lynch, who was brought in to lead Barclays' U.S. investment grade research effort (BW, 7/16).