Securitization People and Markets

Senior corporate bond officials at Banc of America Securities are considering starting a proprietary hedge fund that would invest in the credit markets, according to an official at the firm. He declined further comment, and referred calls to Tara Burke, a firm spokeswoman, who declined comment. One fixed-income official familiar with the situation compares the proposed vehicle to UBS Principal Finance (see story, page 2) and to CLCM Credit Management, a new multi-billion-dollar operation just started by Credit Lyonnais (BW, 4/14), in that it would use the investment bank's capital, but be independent from the firm's secondary trading operations. The possibility of a B of A vehicle modeled after UBS Principal Finance and CLCM Credit Management is the latest sign that investment banks are increasingly investing their own capital in the credit markets.

One trader says nearly all of the trading last week was in five names: WorldCom, Tyco, Dynegy, Calpine and Adelphia. "If you didn't trade one of those names you could throw a line in the water and start fishing it was so slow," he added. Spread sensitive names backed up with Treasury yields, and telecommunications towers were weaker after poor numbers. Below is some of the action.

HSBC Securities lost the last senior member of its capital markets origination desk last week when Usman Ghani left the firm to join Bob Post, his former boss at Bear Stearns, in the financial institutions group of the capital markets division. He had been with HSBC over five years and declined comment on the reason for his departure. As of last Wednesday, the only remaining person on the HSBC origination desk was Hugo Moore, an associate, who is roughly two years out of college.

A buy-side and a sell-side analyst say investment-grade telecom and cable names are trading too far apart on a spread basis, given their overall similarities. Both analysts say the sectors have high fixed costs and high leverage. In addition, they say both industries are claiming growth that is difficult to discern due to M&A activity, and both face questions as to what extent consumers are really interested in their products.

UBS Principal Finance, a proprietary fund owned by UBS Warburg, continues to add seasoned credit veterans to its lineup. The latest hires are Joe Mullally, formerly a senior emerging markets trader from Citicorp Financial, and Chris Melendes, former executive director and high-grade utility analyst at Morgan Stanley. Jim Switzer, head corporate bond trader at BNP Paribas, was also widely rumored to be joining the group, though he could not be reached. Mark Wisniewski, spokesman for BNP Paribas, would not confirm Switzer's reported move. Calls to Peter Abramenko, managing director and head of the credit team at UBS Principal Finance, were referred to Kris Kagel, a firm spokesman, who would not confirm any of the hires.

Steve Kolhagen, the head of Wachovia Securities' derivatives and high-grade bond businesses, has decided to retire after 20 years on the Street to write mystery novels with his wife. Kolhagen says that he was simply ready to "pursue something that I've had an interest in for about 10 years now," noting that although his wife has written two books, he will be learning as he goes. He says the retirement will take effect July 31, and that he will be a consultant to the firm for the balance of the year. Kolhagen says the firm is currently undertaking a search for a suitable candidate who would be based in Charlotte.

It was dead quiet in the market, with just $2.3 billion in investment grade supply priced. Average deal size continues to trend down (just $314 million for the week) reflecting the fact that the calendar is dominated by smaller, off-the-run issuers. The sudden drop in supply reflects the reluctance of issuers to test the primary market in size during the current market turmoil. This is particularly true of the beleaguered telecom sector where Deutsche Telekom is waiting on the sidelines to launch a deal that will reportedly be in the EUR5-8 billion range. In investor presentations in Europe last week and the US this week DT has confirmed that the deal, when launched, will be split between dollars and euros but has made few other references to potential structure or confirmed timing, acknowledging that the market mindset is currently too distracted to ensure a successful reception.

Credit Suisse First Boston is looking to hire an asset-backed securitization banker specializing in the Spanish market for its London ABS team, says an industry official. The new hire, who will replace a banker who has moved internally, will report to Lourdes Moreno, co-head of securitization in London. Calls to Moreno were not returned.

Credit Suisse First Boston has brought all of its European debt businesses together into one unit, including origination, securitization and credit derivatives. John Zafiriou, head of European fixed-income, says the firm is moving to one platform to take a unified approach to clients. The unified group will also include treasuries and short-term instruments, foreign exchange, asset finance, liability management, corporates, financial institutions and sovereigns. J.P. Morgan Securities has a similar organizational structure. No layoffs are believed to be involved in this move.