Super Senior CDO Tranches

snovik · Post by **snovik** » Fri Nov 30, 2007 1:27 pm

Who said there is no liquidity? From todays FT:

[i]According to Friday’s[/i] [i]Daily Telegraph[/i][i], Alliance and Leicester has secured a £10bn funding facility from a “consortium of banks.”[/i] [i]Credit Suisse is understood to be leading the consortium. As FT Alphaville[/i] [i]noted on Thursday[/i][i], Credit Suisse itself is lending £4bn to A&L. The whole whack is backed by A&L mortgages.[/i]

So $20bn secured by mortgages. Cool.

Cheng · Post by **Cheng** » Fri Nov 30, 2007 1:30 pm

I think we are talking about two phenomena here that should be disentangled.

One is the current problem that banks do not trust each other and are hesitating to lend money, either to each other or also increasingly to corporate customers.

The other one is the credit cycle which might turn in '08 or '09. This will be the test what the ratings on certain structures are worth.

My 2 c.

[Edit: I stand corrected after Baghead's comment.]

AndyM · Post by **AndyM** » Fri Nov 30, 2007 1:37 pm

[i]I'm not sure about the liquidity question but my bank would be interested in one of those Pfennigs for 3 months - will pay Libor +45[/i]

CBOT, I'm sure you don't need my pfennigs; haven't you heard there's a global savings glut Wink

baghead · Post by **baghead** » Fri Nov 30, 2007 1:37 pm

hesitating to [u]lend[/u] money...

I know, to borrow and to lend are the same words in German. mine is yours and yours in mine. socialists......

AndyM · Post by **AndyM** » Fri Nov 30, 2007 1:42 pm

Snovik, I'm not sure what your point is in highlighting a couple of deals...absent a return to the Dark Ages, some financing will always be getting done at any point in time, regardless of the liquidity situation. Pointillism makes for pretty pictures, but isn't much good for bolstering economic arguments.

snovik · Post by **snovik** » Fri Nov 30, 2007 2:03 pm

AndyM: these are to support my economic arguments and fend off some other links that were thrown at me about "poor" ECB injecting cash into the system.

You are right about continuing financing but what is striking for me is the scale and number of these deals in times when financial system is facing "liquidity crunch" according to the street.

curmudgeon · Post by **curmudgeon** » Fri Nov 30, 2007 2:18 pm

I think there is a reason why the terms on the Alliance and Leicester funding are not exactly public....management were close to paranoid to reveal any terms as FT reports.

I suppose you could get funding in any sort of market ....the arm twisting variety which probably what A&L got probably defines what an illiquid market is.

Cheng · Post by **Cheng** » Fri Nov 30, 2007 2:49 pm

Talking about "continuing financing" and "scale and number", I also see some CLOs getting placed. Size is not too big, like 500 mn EUR, but still decent. The problem is that you don't know at what price the tranches print, you only see the spread. This corresponds to KR's point about Rio Tinto/Alcan in corp space.

snovik · Post by **snovik** » Fri Nov 30, 2007 3:45 pm

we are in the pre-christmas shopping season. everything comes with discount

rowdyroddypiper · Post by **rowdyroddypiper** » Fri Nov 30, 2007 10:13 pm

I can confirm that there is nooooooo liquidity in the CMBS space. The bid lists that are going around...well they're the same ones that have been circulating for 2 weeks. Dealers are sitting on north of 15bn of unsold fixed rate bonds from primary issuance and probably north of 40bn in floating. The fixed rate portion is not terrifying as it represents like maybe a month and a half of supply if things start to come back to 2004-2005 issuance levels. Unfortunately 40bn represents about all of the floating rate issuance from 2006 when things were good and SIVs had money. I don't think the banks are going to clear a lot of this paper over the next 8-12 months.