Comings and Goings

I need a little help. Looking for a retail focused b/d to buy bonds (Corps, MBS, Sovereigns, etc.) from - any recommendations? No problem sourcing it at an institutional level, I'm talking about buying for my personal account, some directed trades. I'm tired of dealing with the TDAmeritrades of the world who are great at stocks, but don't know the difference between an MBS and a corporate and want to charge me a 150bp spread everytime I trade or are getting duped on the other side of the trade with an asinine price from the seller.

Don't expect much until after the new year passes. CMBS has been relatively quiet, but it's not dead. This week, we've seen lists that include everything from A4s down through AJs (on one of the TIAA deals), and several small seasoned credit pieces are floating around.

ZH and Sprott have their tin foil hats on again, but I moved mine prominently to my desk for easy access after reading.

Why didn't Peter Cooper Village/Stuyvesant Town default?

Tepper is heavily invested in CMBS - but some of his logic is wrong, or he's talking his book.

All we want for Christmas is some Jingle Mail

Morgan Stanley is turning in the keys to 5 properties that were part of the Blackstone EOP-flip. All are in San Francisco. I'd say these properties are off more than the 50% quoted in the article - they were the peak of CRE market, and they're in San Fran which already has issues that are worse than the average MSA.

My favorite part about the story is this:

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”

They're not defaulting - they're just going to give the lender the keys and stop paying the mortgage payments, permanently, which is the opposite of what was agreed to in the loan docs. He sounds like the traffic cop who explained to me that he was giving me a "simple" speeding ticket, not one of those complicated ones.

The buildings Morgan Stanley is giving up are One Post, 201 California St., Foundry Square I, 60 Spear St. and 188 Embarcadero, Barnes said. The bank will continue to own the five other office buildings it acquired in the deal, Barnes said.

Comings and Goings

Bridger has started making Conduit loans again. First?

Fitch was out this morning with an update on CRE CDOs - delinquencies are just at 12%! I would've guessed much higher. Maybe should revisit some of those bid lists that keep getting dismissed.

Extended Stay examiner, "earned" $4mm, or 10% of the original senior note. What a great job. The new structure looks like it will be a $1.8bln senior, 775mm second, 471mm preferred stock going to the senior mortgage holders... Mezz and preferred stock holders are getting 10% of the new common.

ZeroHedge puts some more CMBS loan updates up. Full disclosure, the loss severities are extremely low (lower than historical averages even in good times) and the information is from the servicer comments and is a little dated (some of the information is almost 2 years old). Still interesting to some people based on the comments on ZH.

Zell has been on the horn all week now that his new fund is getting fat. CRE will recover before employment does is the message.

Stuy Town Update

(Press release from Tishman)


December 14, 2009

Joint Statement from Tishman Speyer, Wolf Haldenstein Adler Freeman & Herz, and Bernstein Liebhard

Re: Amy Roberts et al. v Tishman Speyer Properties et al.

“Representatives of the property owner and counsel for the plaintiffs, Wolf Haldenstein Adler Freeman & Herz LLP and Bernstein Liebhard LLP, today reached an interim agreement to adjust rents in each apartment affected by the recent Court of Appeals decision in Roberts v. Tishman Speyer Properties to an estimated rent-stabilized level for January and February 2010.
The rent adjustment will be reflected in the January invoices that will shortly be sent to residents. During the interim agreement, each affected tenant will also be afforded certain rights available under the Rent Stabilization Law, including the right of renewal and succession rights.

“In addition, Tishman Speyer and BlackRock have reached agreement with counsel for the plaintiffs on a more inclusive, six-month agreement covering a wider range of unresolved issues beyond those addressed in the interim agreement. The six-month agreement, which is intended to achieve an expedited resolution of the Roberts case, is contingent upon consent by CW Capital, the special servicer acting on behalf of the property’s senior lenders.”

Inland pricing rumored

Reuters/BBG reporting the top two classes at +150 and +205, respectively.

Someone hit me back with the structure?

UPDATE (Hotel Tango crabsofsteel)

Amount Rating (S&P/Realpt)
Class ($Mil.) sprd
A-1 58.354 AAA S+150
A-2 330.646 AAA S+205
B 24.100 AA S+360
C 42.900 A S+420
D 44.000 BBB-

NAIC - "We'll just rate our own bonds!"

Risk.net reports: You have to have sympathy with their plight - the US National Association of Insurance Commissioners (NAIC) sat down a long time ago and put restrictions dictating how much an insurance company must keep in reserve based on an investment's rating; a rating determined by NRSROs.

Obviously, in hindsight, and even just with sound investment management practices, no one should make an investment solely based on a rating. Nonetheless, that is how virtually all funds are set up to some extent ("Investment Grade" fund, "AAA" portfolio, you see it over and over).

On the other hand, the new methodology has a little bit of the Fox watching the henhouse feel to it, despite being implemented by PIMCO. They're already using it for RMBS, and they're looking at moving it to CMBS.

In an exclusive interview with Life & Pensions, Kermitt Brooks, first deputy insurance superintendant (sic) for New York State Insurance Department, speaking on behalf of the NAIC, said that after evaluating the performance of its new agency-independent capital requirement regime for residential mortgage-backed securities (RMBSs), the regulators would consider expanding the methodology to other structured securities.

"The NRSROs did a good job on single-name securities like corporate bonds, but not on structured products. Let's see how the new approach with RMBSs works – if it does, we will consider whether we want to expand into other structured products, like CMBSs."

On a side note, hopefully this will hasten the demise of the rating agencies...

p.s.s. another win for PIMCO. After TCW's epic fail this week, customer's who are fleeing TCW will naturally be attracted to PIMCO. Despite outperforming PIMCO time and time again, PIMCO carries much better brand recognition as a fixed income powerhouse.

SPG taking down Prime Outlets

I didn't see that coming - Simon paying $700mm, $2.325 bln total valuation. Lightstone needed cash from somewhere because no one would accidentally confuse them with savvy real estate investors. Probably a real good deal for Simon.

Prime Outlets Property Roster

Property	City / State	GLA (sq. ft.)
Prime Outlets Orlando	Orlando, FL	773,368
Prime Outlets Birch Run	Birch Run, MI	681,621
Prime Outlets San Marcos	San Marcos, TX	672,093
Prime Outlets Grove City	Grove City, PA	532,152
Prime Outlets Williamsburg	Williamsburg, VA	521,604
Prime Outlets Hagerstown	Hagerstown, MD	484,906
Prime Outlets Ellenton	Ellenton, FL	476,755
Prime Outlets Jeffersonville	Jeffersonville, OH	409,869
Prime Outlets Pleasant Prairie	Pleasant Prairie, WI	401,436
Prime Outlets St. Augustine	St. Augustine, FL	338,414
Prime Outlets Barceloneta	Barceloneta, PR	331,813
Prime Outlets Gaffney	Gaffney, SC	303,602
Prime Outlets Gulfport	Gulfport, MS	302,783
Prime Outlets Queenstown	Queenstown, MD	298,409
Prime Outlets Huntley	Huntley, IL	278,759
Prime Outlets Calhoun	Calhoun, GA	253,667
Prime Outlets Lebanon	Lebanon, TN	226,869
Prime Outlets Lee	Lee, MA	224,519
Prime Outlets Florida City	Florida City, FL	207,873
Outlet Marketplace	Orlando, FL	204,866
Prime Outlets Pismo Beach	Pismo Beach, CA	147,416
Prime Outlets Naples	Naples, FL	145,966
Total		8,218,760

CRE Mortgage Market Share

Bad Comparisons - MBA Edition

The MBA is out with their little delinquency chart that tells you nothing. It's like saying the apples at the corner market cost more than the steak at the butcher?!?! I know that they now disclaim as much, but why bother putting out a useless chart in the first place.

I'm not sure why they don't just put out a chart that compares, say, 60+ day delinquencies for each lender group. I've asked, and they claim not to have the data, which makes me wonder where they get the data from that they do have - any source should have both.

Comings and Goings

The current CRE crisis will be over in 2011.

This guy says you should buy REIT equity now! I couldn't disagree more.

Banks fully understand their CRE risk, and it's manageable. Nothing to worry about there. Defaults are not expected to exceed 11.3%. Interestingly, in another article out by the same rating agency (Fitch) on the same day, is also quotes max losses for recent vintage CMBS at 8.7% and max CRE related losses at Insurers (presumably including their CMBS) at 8.37%.

GGP may come out of this whole thing mostly intact, despite angling by a number of players including Ackman, Brookfield, Simon, and Westfield.

Istithmar owns a number of trophy properties in the U.S. and is a subsidiary of Dubai World's. We saw a couple of sell-side reports listing CMBS exposures, but they were not consistent with each other and both were missing one property that we know of - as time allows, we'll publish a combined list. Most of the properties are in NYC, most are recent vintage, highly levered, and underwritten poorly. Some will default imminently.

Wheeler to join Amherst Securities

From Bloomberg (no link):

Wheeler will join the company early in 2010 as head of CMBS strategy and “the company intends to build a comparable operation” to its residential-mortgage bond business, Amherst said today in an e-mailed statement...
... “We are very pleased to welcome an executive of Darrell’s caliber,” Amherst Chairman and Chief Executive Officer Sean Dobson said in the statement. “Together with Laurie Goodman, who oversees our RMBS strategy efforts, we believe Amherst is
now poised to provide more knowledge, insight and reliable data on the entire mortgage industry than any other broker-dealer.”

$625MM Inland Deal

The 3rd CMBS deal A.D. is coming from Inland - also looks like it'll be non-TALF. From the WSJ:

The $625 million in 10-year financing is backed by 55 retail stores owned by Inland throughout the country, and represents 75% of the property's value. The loan-to-value ratio is higher than the 50% of the Developers Diversified offering, which was collateralized by 28 shopping centers. Despite the relative high leverage, the Inland debt was underwritten based on factors including current property values, rent rolls and the potential for more downward pressures on cash flow as the health of commercial real estate typically lags behind that of the overall economy by a year or two.

$460MM Flagler Deal

Class	Size ($MM)	Ratign (F/S)	WAL	Px Talk
A	$ 350	AAA/AAA	6.67	S+190-210
B	$ 30	AA/AA	7.11	S+385-405
D	$ 33	A/A	7.11	S+435-455
D	$ 47	BBB-/BBB-	7.11

LTV= 51.48%
DSCR 2.10x

Florida.

Office (65.6%), Industrial (11.8%), RoW/Excess Rail (22.6%). 44 Properties and multiple parcels.

Flagler's a subsidiary of Fortress, which bought it and affiliates back in 2007 for $3.5 bln. Obviously the WAL is longer than any TALF loan, so unlikely to get much TALF interest, if any.

Comings and Goings

Honestly I wasn't around last week and I missed some of the excitement. It sounds like the Dubai World fiasco caught some market players by surprise, although it is not clear why anyone would be surprised that a resort surrounded by barren desert with man made ski resorts, gargantuan man made islands in the shapes of palm trees and continents, and really not much else - all conveniently in the middle of a bunch of conservative islamic states (although Dubai is an exception, I know) that would poo-poo all over anything Europeans or Americans would consider fun. Further, it's just 7 hours away (in your Gulfstream, 20 hours with layovers in Cairo or Moscow if you fly commercial) from any place that has a base of wealthy enough citizens to actually enjoy such hoopla. Really. Really, I don't have a crystal ball, but the very first time I heard about The World, I wondered to myself how that was ever going to be successful. Maybe it has been, but its just a little off-the-charts insane. All that aside, Dubai World owns a number of U.S. assets, mostly through Istithmar. A lot of the properties are in CMBS deals, most are "trophy" assets, and many are struggling. If you're up to your eyeballs in CMBS you already know this, but even if you're not, you'll recognize properties they own, such as Mandarin Oriental, 280 Park Avenue, and the W Hotel in NY. Expect to see these in the news in coming weeks as journalists recover from their tryptophan induced comas. Some of the better journalists may start digging into the transfer of assets and executives from Nakheel into Istithmar just a few months ago - there is some dirt worth digging up there.

Also, over the last couple of weeks, GGP has been making headlines. All of their loans maturing over the next 4 years have been extended to at least 2014 - we took a closer look at that here. That is substantially all (92.22%) of their CMBS debt outstanding, so if you have GGP exposure and you own current pay or next pay bonds, you may have just got slapped in the face - even worse if you bought the bonds with a 3-year TALF loan and now you have a maturity at least 5 years away. On the other hand, most longer bonds and IOs both benefit from the news.

Maturing Debt in Billions:


The more important GGP news is the announcement from Simon that they have hired advisers to look at buying all or part of GGP. We really went all out and even made a cute little map to show the overlap between Simon and GGP, and after that we started talking to folks and realized we should have included Westfield too. Sounds like we are more likely to see GGP get split up between Westfield and Simon, and maybe some other players. We'll come back to that and update it when we have time. I do think we'll see a lot of loan assumptions, especially given the terms on the newly extended low coupon loans on GGP's portfolio. That is good in terms of the loans having a better sponsor. Either way, I think we'll see GGP come out of bankruptcy before Christmas, and our equity stakes in the bankrupt company will continue to move up while our CMBS exposures will improve in terms of credit quality.

Fitch came out with a report on European CMBS (no link) that was not that revealing, but just reiterated the fact that CMBS on that side of the pond is very different than on this side. They have triggers based on periodic property valuations, shorter terms, floating coupons, and they're just really struggling.

Not sure what happens this week, but expect to see more selling as traders continue taking profits to shore up their year-end bonuses and real money buyers wait to see what their CMBS allocations for 2010 will be.

Heard retail sales for Black Friday were up from last year. I spent all day shooting skeet and trap with a very nice Beretta 391 gas powered semi-automatic 12 gauge with a complex adjustable recoil pad while you nancies stood in line for a good deal at Wal-Mart or wherever, so I'll rely on your feedback regarding how busy retailers were.

One final note, where have all the researchers gone? We realized today that Darrell Wheeler must have left Citi, and he was definitely there just a couple of weeks back. No word on his current location. Edwin Anderson left Bank of America earlier this year, Lisa Pendergast landed at Jefferies (but we're either not on her list, or they're not publishing), and Howard Esaki's current location is unknown. I think the only one that stayed put, kinda, is Roger Lehman at Bank of Amerillwide. I think Masumi Goldman may have stepped out of this market too. If they all changed careers out of CMBS, that probably doesn't bode well for the future of the CMBS market.

TALF Rejections

Okay, I know I'm a little late getting to this (I took my first vacation in 18 months last week and sat on a beach south of Cuba for a few days. No kids, just fruity drinks, bad food, sand, and salty water), but I want it in here for posterity's sake. The Fed continues to keep the market guessing as to their logic, or lack thereof, behind which bonds get accepted (60 in November) and which ones are rejected (3 in November). The real twist this time, is that all of the rejected bonds were previously accepted...

It's really bizarre, two of the rejected bonds (see table below borrowed from Citi's report on the matter - the reached the same conclusions) saw either an increase in delinquencies or an increase in loans with DSCRs < 1.1x since they were previously accepted, and the third bond (BACM 2007-2 A2) actually improved! Citi goes on to point out that several bonds that were accepted had performance declines that greatly exceeded those of the rejected bonds over the same period of time (see second part of the table below).



To quote Jeffery Berenbaum in the Citi report:

So once again we come up short in trying to understand the Fed’s rejection decision process. As we noted above, the uncertainty is even greater this
month, with the rejection of previously accepted bonds, something the Fed has
not done before.

So, you're probably reading that and wondering what happened to Darrell Wheeler. If you're not thinking that, let me know, because he must have hit the road sometime in the last couple of weeks and they have already taken his name off of everything.



All of the prior accepted and rejected TALF bonds can be found here, along with some month-old stats on them.

A Closer Look at Five Random CMBS Loans

ZeroHedge took a close look at five failing CMBS loans, and clearly laid out their reasoning and loss expectations.

I'd be curious to see them draw a more distinct line between the fundamental analysis and valuation of the actual bonds. Things feel a little rich now, but I still feel like there are some good values in 2006 and later vintages at some points in the capital stack.

The Belnord stuck out as one of the rent-control flips. Here is an abbreviated list from a BOA report that lists some more big ones. The actual report had several pages more - it'd be interesting to see where those all stood today.

GGP Extensions

From the WSJ:

Mall owner General Growth Properties Inc. told a bankruptcy court on Thursday it had reached a deal with lenders and servicers to restructure $8.9 billion of mortgages on 77 malls in hopes of removing them from bankruptcy protection by year end.

The pact is the first step for General Growth in extracting from bankruptcy court the 166 malls it put under Chapter 11 bankruptcy protection in April. The company still must strike similar pacts with lenders on another $6 billion of secured debt as well as $6.5 billion of unsecured debt.
...

The upfront cost of the deal for General Growth is at least $350 million, including a $100 million fee paid to the creditors, payment of past-due amortization and reimbursement of their legal fees, according to people familiar with the talks. General Growth will pay those costs from the $692 million of cash it has on hand, according to a separate person familiar with the matter.

The lenders involved in the deal are servicers overseeing securitized mortgages and life-insurance companies including Prudential Financial Inc. The loans range from $10 million to more than $1 billion on malls including Ala Moana Center in Honolulu. Attorney Greg Cross of Venable LLP handled negotiations for the lenders.
...

General Growth is "close" on similar deals with other lenders among its remaining $6 billion in secured debt in the bankruptcy case, this person said.

So, we're looking at all their pre-2014 mortgages getting extended. Feeling pretty good about GGP exposure put on during the last couple of quarters.

Insurer's CRE Exposure

Fitch (sorry no link) noted that:

...Despite a declining outlook for all US CMBS property types and an escalation of losses, the U.S. life insurance sector should be able to manage its exposure to commercial real estate-related losses...

While most life insurers have yet to recognize material losses on their commercial real estate-related investments, a sizeable portion of their assets are entrenched in commercial real estate. And with an increasingly negative outlook in the cards for CMBS over the next couple of years, performance pressure on life insurers is likely to increase over time.

'Commercial real estate (CRE) fundamentals are softening as rents are declining and vacancies increasing in response to the broader economic downturn,' said Managing Director Bob Vrchota of Fitch's CMBS ratings group. 'Without a recovery for commercial real estate fundamentals, recent vintage U.S. CMBS could experience losses averaging 8.7%.'


Some insurers are better off than others. Take Hartford, for instance - not to single any particular firm out, but they had 33% of their structured products portfolio in securities rated lower than AAA at issuance. Virtually all of that has been downgraded to something lower than A-rated today, and thus their RBC ratios have to be shooting through the roof. In addition, about 70% of their structured products portfolio was 2005 vintage or later, i.e. weaker underwriting. According to a 10/24/08 report from Citi, Hartford and XL had the largest CMBS investments of all the Insurers they covered, Hartford had the lowest quality CMBS portfolio (followed by Progressive and AIG), Hartford and Progressive had the highest concentration of IOs, Hartford had the largest CRE CDO exposure (12.3% of shareholder's equity at the time, and 13.1% of their CMBS portfolio) and 11% of them were rated below BBB at the time.

The last stament in the Fitch report that CMBS could experience losses averaging 8.7% seems a little rosy - that is closer to the low-end estimate of average losses in my opinion, and is in line with the average losses experienced during the late 80s/early 90s on senior CRE mortgages. The good news is that most insurers were relatively conservative investors, and further they tended to be CRE guys first, and bond guys second. So, overall I wouldn't expect to see horrible losses in their CMBS portfolios over the long-term.

DDR 2009-DDR1 - Good for the borrower, bad for the investor

ZH sums it up.

Simon and GGP Marriage - With wedding photos and charts

What would this look like?



Something like the above, where the little rusty-red dots are GGP and the Blue dots are SPG. Note that I think the "CUBA" property is really in Italy and the GEO-Coder misinterpreted it - you can click here for an interactive map that includes all their properties, not just domestic.

GGP has substantially lower coupons on their mortgage debt, averaging 63 bps lower @ 5.29%, but the divide is even larger on loans maturing before the end of 2012, favoring GGP by an average of 125 bps. So, given everything else remains the same, Simon will be likely to assume GGP's mortgage loans. Add in factors such as the lack of available financing, higher coupons, stricter underwriting, etc. SPG's only roadblock to assuming the mortgage debt is getting rating-agency sign-off where its required.

GGP's mortgages on their malls actually perform slightly better than Simon's from a cash flow over debt service perspective. The majority of GGP's malls have a NCF DSCR greater than 2x. Simon's average DSCR is 1.83x.

GGP properties also have slightly lower leverage, with average original LTVs at 62.72% versus SPG's average orig. LTV of 66.53%.

Obviously GGP has a lot more overall debt (mortgage and corporate) due to the Rouse acquisition, and we all know about their huge refi hurdle - look below. This is the maturity schedule, in billions, for all GGP and SPG CMBS mortgages, extended out to their maximum ARD or Extension date.


The footprint overlap is probably of some concern that might lead Simon to cherry pick assets instead of taking the entire platform down. Some MSAs have multiple properties operated by each REIT.

Take Atlanta-proper, for instance. SPG has Phipps Plaza, Lenox Square, and Northlake, while GGP has Cumberland and Perimeter; if you expand to the Atlanta MSA, you end up with SPG malls Discover Mills, Gwinnett Place, Town Center at Cobb, Mall of Georgia, Mall of Georgia Crossing, North Georgia, and GGP has North Point and Southlake. Not only is there a high number of malls in the Atlanta MSA from both sponsors, but a quick look at the loans and the GGP Atlanta loans are higher leveraged then average (so are the SPG loans), and have lower DSCRs than average.

Tenant overlap is pretty consistent, just looking at the non-anchors, and focused on revenue, Simon has a slightly more diverse tenant base.

Top Retail Tenants by Rental Income	Simon	GGP
The Gap	2.20%	2.90%
Limited	2.00%	2.60%
Abercrombie & Fitch	1.80%	2.30%
Foot Locker	1.40%	2.30%
Zale	1.00%	<1%
Luxottica Group	1.00%	<1%
American Eagle	0.90%	1.50%
Express	0.90%	1.30%
Sterling Jewelry	0.90%	<1%
Genesco	0.80%	1.10%

Not sure who wins the battle of increased tenant concentration - probably the tenants since they have more negotiating power, but could go to the landlords because the tenants have fewer location options.

Will be interesting to see if Simon cherry picks the performing assets and let's the others (especially in high-overlap areas) flounder, or if they go in and take it a substantial percentage of the total to increase their footprint and dominate the space (as if they don't already) blocking out any competitors.

ESH Ruling Problematic?

Moody's pondered that the Judge's ruling in the ESH bankruptcy case that the actual investor list be released so he could hear their concerns directly (versus through the Trustee/Servicer)

Moody’s noted it cautioned in June this scenario might lead to “free-for-all financing” as certificate-holders plead their own cases, bypassing the natural filtering process of the trustee and servicers. Because of the implications, Moody’s said at the time any judge would be unlikely to pursue that option.

“Judge [James] Peck may return to his initial skepticism and rule on later substantive motions the way all market participants, even the certificateholders now attempting opportunistically to bypass the trust structure, thought the rules would work when the ESH transaction went out the door,” Rubock said. “Or me may not, and we may need to rethink how robust many structures are — from trusts to participants — under the extreme tests to come.”

Probably not a big deal at this stage, but maybe it sets a new precedent for other workouts down the road.

Chicken and Egg - Bailout and Crisis?

A friend of mine has been sending me depressing stories all morning from the Huffington Post. I don't know if he needs a hug and is reaching out for attention, or if things are just this bad - there's an article about a kid in Michigan who is being denied a prosthetic arm by his insurance company, another about no more raw oysters, another about Al de Molina stepping down (oh wait, this could be GREAT news for BOA in Charlotte). Anyways, they linked to a, mostly factual, slide show from business insider that blames the regulators for the crisis....

UPDATE: I finished the article and decided its stupid and you shouldn't read it.

How A Government Bailout Created Today's Commercial Real Estate Catastrophe


Wait, only the first 1 or 2 slides are mostly factual, then John Carney just starts making things up. The size of the market is wrong, RTC did not "Create" the CMBS market, then he blames Basel I risk-based capital reserves, 60% of CRE mortgages were securitized (try 28%, at the height of the market!), that because of the CMBS market the remaining bank mortgages were the riskiest loans (instead of pointing out that C&D loans were always the riskiest, and he pointed out earlier that these were the primary loans that banks made before CMBS), next he blames REITs, dot com bubbles, and it goes on. I clicked through a few more slides, and its all just misguided garbage. He continues down this path that small banks have risky loans on their balance sheets because they securitized their good loans - small banks didn't securitize any CRE loans, they just originated 100% of the C&D and land loans.

You know what, don't read it. It's so misguided.

FAS 166 & 167 Implications

A topic that I've referenced many times, but have yet to do a complete overview of is FASB's idiotic accounting rules. Barclay's (Hotel Tango ZH) looked at the impact to various banks by primarily looking at nonconforming resi, Credit Cards, and ABCP (It sounds to me like the rules encompass more products than that, but hopefully I'm wrong). Please read the whole article from ZH - I won't take it whole cloth.

This will have the impact of increasing asset levels and possibly reduce retained earnings--both which adversely impact capital ratios. Note consolidation results in an increase in loans and leases, securities, short-term borrowings and long-term debt on the banks’ balance sheets. In addition, there could be a cumulative effect of adopting these new accounting standards resulting in a charge to retained earnings relating to the establishment of loan loss reserves and the reversal of residual interests held. Additionally, limiting banks ability to recognize securitized assets as off-balance sheet exposures could have further consequences on credit creation.

DDR 2009-DDR1 Priced

Tranche	Size	Coupon	Rtg	Talk	Price
A	$ 323.50	4.28%	AAA	N+145-160	N+140
B	$ 41.50	7.45%	AA
C	$ 3.00	8.43%	A

Don't have any additional details. Seems uber-rich to me.

Coming and Going

DDR might get priced today. I think PIMCO summed it up best:

"It's a great execution for the borrower," says Scott Simon, managing director and head of mortgage- and asset-backed securities portfolio manager at Pimco, a leading bond house. "If other real-estate investors can borrow money at that rate, it would be a real game changer for the commercial real-estate market that has been so devoid of financing."

I wouldn't buy it at a 4% yield. However, the new issue machine has officially had most of the dust bunnies blown off and someone flipped on the switch. It's not just Goldman taking the leap, JP Morgan has started warehousing loans for an issue scheduled for early next year. I'm sure others have started to test the water as well.

Spreads responded positively. Spreads on the A4 class have tightened over 100 bps since their wide during the first week of the month.