Securitization People and Markets

A pair of sell-side analysts say the bonds of Electronic Data Services are well oversold in the wake of a drastic reduction in earnings guidance last month. "EDS is about the cheapest single-A we've got in the corporate bond market," says Mark Altherr at Credit Suisse First Boston. He says it is difficult for EDS' clients to look elsewhere for a company that provides similar services. While Altherr sees the prospect of a one or two notch downgrade, he says the bond market is treating the credit like a low triple-B. The 7.125% notes of '09 (A1/A+) were bid at 92 last Monday and have widened 350 basis points since it lowered earnings guidance on September 18. Altherr says the bonds will retrace at least 260 basis points over the next six months. "The bond market is saying this is an EDS problem that will get worse. We think it is a market problem with some EDS component to it, not a severe credit event."

Standard Chartered Bank is developing an asset-backed securitization business in London and Hong Kong through which it aims to execute deals in Asia and emerging Europe, the Middle East and Africa (EMEA). Noel Edison, head of asset securitization for EMEA and South Asia, says the ABS push is part of the bank's overall strategy to build out its fixed-income platform. Edison says the bank has traditionally been very active in consumer and commercial banking in emerging markets and now these markets have matured to a point where securitization is viable.

TD Securities has made wholesale changes to its U.S. high-yield business--merging its bond and bank loan units. Additionally, Derrick Herndon has been reassigned from his position as head of debt distribution to a new role managing the firm's $13 billion credit portfolio. Herndon will work with an investment team of what he estimates will grow, through internal moves and some 10 new hires, to 25 people, who will work with another 60 professionals in Canada, Europe and Asia. The portfolio will now be actively managed, where it had been passively held.

Wachovia Securities is merging its real estate financial services group into the fixed-income division as part of a broader re-alignment of its entire bond platform by business lines rather than function. The adoption of a model used by many of its more established competitors is a response to the firm's growth over the past several years, says a banker at the Charlotte-based investment bank. Ben Williams, the recently crowned head of the expanded fixed-income division, says the main effect of the move is the integration of structured product origination and distribution.

Rich Roche has left Barclays Capital, where he was an investment-grade trader based in New York, according to people at the firm. Roche was a director and head trader last year, but his title at the time he left could not be determined. Barclays has made some senior trading hires from Deutsche Bank in recent weeks (BW, 8/11, 9/15) including Mark Jicka, who is slated to become head of the desk once he joins the firm. John Stathis, head of fixed-income sales and research for the Americas, declined comment.

UBM, the investment banking arm of Unicredito Italiano, is studying the viability of launching an asset-backed commercial paper conduit. Massimo Bianchi, head of debt capital markets in Milan, says, the firm currently is trying to understand whether such a vehicle would be worth establishing and is drawing up a business plan. He declined further comment. A banker at a rival firm in Milan notes that there are a lot of prospects for ABCP conduits in Italy, especially among medium-sized corporates. Strategically, the establishment of an Italian-domiciled ABCP would be good for UBM because the banker expects a huge development in the Italian market for this kind of vehicle. He notes that it is more cost-efficient for medium-sized Italian corporates--that are increasingly seeking to securitize trade receivables--to use ABCP rather than a term securitization.

Lehman Brothers has made a number of personnel changes to its high-yield research and trading groups.

Lehman Brothers has placed two of its short-term agency traders, Brian Stocker and Patrick Scheideler, on administrative leave pending the conclusion of an internal investigation involving charges that the two improperly traded bonds with Randy Pitino, an agency broker at Euro Brokers, who was let go. The allegations and investigation were confirmed by several Lehman executives. Central to the allegations is the charge that Stocker and Scheideler improperly gave Pitino trading authority over a large block of notes which they had originally purchased and positioned. Pitino, reached at his home, confirmed that he has been dismissed, but said that the allegations that it was for anything illegal are "totally inaccurate." He says he has never heard of the two Lehman traders. He declined to name his supervisor at Euro Brokers, saying, "I don't think he's there any longer." A Lehman employee said the two traders were not reporting to their desks for the duration of the investigation. Stocker did not respond to a message left at his home; Scheideler was not able to be located for comment. Woody Jay, the head of government and agency bond trading at Lehman, said "I can't comment on this matter right now, on or off the record. It is a highly sensitive issue, being handled internally by compliance." The leaves at Lehman are said to have been enacted in the last week of September, although it could not be learned when the trading activity in question is alleged to have occurred.

The £1.2 billion securitization of future government payments to the infrastructure consortium mandated to upgrade and maintain the London Underground network is set to be priced next month. The Metronet deal is being lead-managed by Deutsche Bank, Royal Bank of Scotland and UBS Warburg and will feature monoline wraps from AMBAC Asset Assurance and Financial Security Assurance, thus garnering a triple-A rating. It will be launched "sooner rather than later," unless some unforeseen legal problems arise, according to a banker involved in the deal. This banker