Securitization People and Markets

Laurent Gauthier, former MBS analyst with the recently shuttered fixed income unit of Prudential Securities in New York, has joined Banc of America Securities in New York. He describes his new position as an " all-around MBS strategist," where he will concentrate on the pass-through and CMO markets. He will report to Sharad Chaudhary, the residential MBS research chief who is based out of Charlotte. Chaudhary says he is replacing former prepayment modeler Warren Xia, who recently left the firm. At Prudential, Gauthier reported to MBS research head Inna Koren. Prior to that, Gauthier was an MBS analyst at Goldman Sachs.

Schlumberger, the oilfield services company that last week bought Sema Group, an information technology company, has no publicly traded debt outstanding but will most likely need to tap the bond market in the near future to diversify its leverage away from bank debt, says Carol Levenson, analyst at Gimme Credit in Chicago. If it does so, investors should be wary. She argues that the company will leverage up both rapidly and, perhaps, frequently. She pegs the likely rating of the company at "not much better than triple-B." Most of its existing leverage comes from bank debt. "I'm sure it won't be hard for their investment bankers to convince them the bond market is just dying for some Schlumberger paper," she says. Calls to Schlumberger were not returned by press time.

Oft-traveled supply-side economist Larry Kudlow has left ING-Barings to form an economics-consulting group. Kudlow declined to specify the reasons for the departure, and provide specifics of the new venture, but an executive at ING-Barings points to the firms uncertain future as a cause for the departure, with the firms well publicized inability to find a buyer all but sealing its doom. ING-Barings was Kudlow's third stop in the last several years; he had previously worked at Schroeder & Co., and buyside asset-manager and life insurer American Skandia.

Comptroller of the Currency John Hawke urged lenders not to turn away creditworthy borrowers despite concerns regulators have about balance sheet problems. He recalled how a decade ago the Office of The Comptroller of the Currency reacted very sharply after national banks got into lending difficulties in the Northeast. The banking system is in far better shape now than it was then, he said. Hawke spoke at a meeting on financial services modernization sponsored by the American Law Institute and the American Bar Association.

Has the Bear Stearns European credit research team gone out to breakfast? The head of the department, Phil Crate, says the group had "a mind blowing experience" that ended in the revamping of the look of its morning briefing, as well as getting a chance to poke fun at the team's new U.S. paymasters. Their morning notes are now called the Bagel Bar, and feature a large cup of coffee and two bagels with the words 'credit' and 'news' on them, and can be found on investors' computers everywhere. The team recently switched from BNP Paribas. "I like the new look," says Esperanza Duncan, analyst at J.P. Morgan Asset Management in London. "But, the truth is I would have read it even if it didn't feature the food because I like their research."

European telecom companies appear to be on the verge of issuing a new type of securitized debt backed by customer receivables, and this is making some market players edgy because the securities would carve out assets that unsecured bonds currently have first call on. The impact has yet to be felt on secondary prices because the deals haven't been finalized and many buysiders are unaware of them. "There has been no reaction in the bond market on the news because there hasn't been any news yet," says Tony Moverley, telecom analyst for Merrill Lynch in London.

Corporate bond players, who have reveled in the good fortune--and spread tightening-- of the energy sector, are now worried that oil companies may use excess cash flows to boost lagging stock prices through stock repurchase programs and increased capital expenditures. Traditionally, bondholders would rather see the companies pay down debt to maximize cash flow. "Equity buybacks hurt bondholders because they just prop up the price of the stocks and do nothing for the value of the company," says Michelle Cunningham, portfolio manager at California State Teachers' Retirement System in Sacramento.

Securities firms, unlike commercial banks, have strong objections to the regulators' final version of their interim rule for merchant banking, issued January 10. Twenty days later the Securities Industry Association wrote to the regulators that the final rule falls far short of providing the "two-way street" envisaged by Gramm-Leach-Bliley to allow investment bankers into commercial banking.

Veteran MBS analyst Evan Firestone has leftMerrill Lynch the firm. Firestone, who had been an MBS analyst for over 17 years, making him one of the Street's longest serving veterans, told the firm he wanted to take time off and possibly do something in the film industry, a field in which he holds a graduate degree. His boss, mortgage research head and U.S. fixed income strategist Ken Hackel, says the parting was amicable and the firm is currently debating whether to hire a replacement or shift someone over to his slot internally. Prior to joining Merrill, Firestone was at Greenwich Capital Markets and First Boston. Calls to Firestone's home were not returned as of press time.