Securitization People and Markets

A National Association of Securities Dealers panel has ruled against Credit Suisse First Boston in several key elements in the case of Rogers v. CSFB. The case centers on issues relating to the alledged wrongful termination of two ex-CSFB junk traders, Brian Rogers and his supervisor, desk chief Sal Abbatiello, in marking over $150 million worth of bonds in 1998 (BW, 8/6). Hearings to determine the amount of damages have yet to be scheduled. Rogers is represented by Jeffrey Liddle, of Liddle & Robinson in New York, who declined comment, citing the upcoming hearings.

A pair of sell-side analysts say Lucent Technologies' bondholders are too optimistic in the wake of that company's much discussed $1.9 billion convertible preferred offering. Basil Chaltas, portfolio manager at Lincoln Capital Management in Chicago, says he likes the deal because it provided the company with more financial liquidity while protecting the place of straight bondholdes within the capital structure. Still, Chaltas says he did not add to his position over concerns about Lucent's business plan. Last Thursday, the Lucent 7.25% notes of '06 traded up to $86. On July 30, before the deal was announced, they were at $80.

High-yield and corporate credit market analysts expect spreads to narrow significantly by early next year, if not sooner. John Lonski, chief economist at Moody's Investors Service, says high-yield spreads could contract by as much as 100 basis points by early 2002. Lonski notes that corporate borrowing costs are extremely low. Three-month LIBOR, he says, is at its lowest point since February 1994, and is down 3% from a year earlier--the steepest year-over-year decline since 1992. He also expects issuance to decline as companies become more cautious in their use of leverage. These factors, he says, point to a decline in the ratio of downgrades to upgrades, and a narrowing of yield spreads.

Deutsche Bank has hiredSteve Weinreich as an associate in its collateralized debt obligation distribution area in New York. Weinreich moves joins from Morgan Stanley, where he was a CDO research analyst. Michael Herzig, CDO distribution head and Weinreich's new boss, said Weinreich's job will consist of supporting sales for institutional clients in the U.S. and globally. "We have already closed seven [CDO] transactions this year and Weinreich's position was created to provide extra support in our post-closing efforts," says Herzig.

Jim Kochan, R.W. Baird's fixed-income strategist since 1991, has left the firm to join Strong Capital Management in Milwaukee in the new position of senior v.p. in the client services group. Kochan will be responsible for developing investment strategies for the firms fixed-income customers. He will report to Larry Zuntz, group chief, who is based in Chicago. Strong Capital Management has approximately $50 billion under fixed-income management. Prior to his tenure at R.W. Baird, Kochan was Merrill Lynch's chief fixed-income strategist, and was the first bond strategist picked for the Institutional Investor fixed-income research all-star team in 1989.

Salomon Smith Barney is prepping its third trust-preferred capital securities collateralized debt obligation deal for October according to Street syndicate officials. Pricing should take place in late October with the deal closing in early November, they say. The targeted size for the deal is $500 million. TRUPS CDOs are backed by a pool of securities issued by U.S. commercial banks at the holding company level, and were initially structured and brought to market by SSB in September 2000.

Trust Company of the West is in the process of buying a first portion of the collateral for its own TCW Global Project Fund, says Art Carlson, portfolio manager with a Los Angeles division of TCW, the asset manager that created and closed this CDO June 27. Carlson mentions that his firm plans on buying $75 million of the collateral between now and December. The total CDO size is slated to be $500 million.

Is The Fed Still Too Tight?

Van Kampen Investments has laid off its Oakbrook Terrace, Ill. taxable fixed-income team and shifted the assets they manage--some $6.5 billion divided between several high-yield, government, and investment-grade funds--to fixed-income managers at Miller Anderson & Sherrerd (MAS), in West Conshohocken, Pa., according to a Van Kampen spokeswoman. The managers laid off as a result of the changes are Ted Mundy, manager of several government funds, investment-grade manager Kelly Gilbert, and high-yield manager Robert Hickey referred all calls to the firm spokeswoman. Van Kampen and Miller Anderson are subsidiaries of Morgan Stanley Investment Management. The spokeswoman says the move was not a cost-cutting measure nor related to poor performance, but rather was done to consolidate the firm's fixed-income operations in the hands of the managers with the most resources.