Corporate Credit Default Rates and Recovery Rates Outlook Over the past few weeks, we have seen several dozen companies default, seek deferral of interest payments or forbearance of covenant breaches. Moodys and S&P recently upped their 2009 default forecast to 15% and 14%, respectively which is up from 8% just a few months ago, and [...]

Filed under: NewOak Blog by Mark Pibl, Ross Heller

As defaults pick up in the leveraged loan markets, we ran a few of the most recent big default names through a large subset of the CLO universe to get a sense of the exposure across deals. Here are some preliminary results:
Sample size is approximately 450 USD CLOs
Analysis indicates:
0.50 % Lyondell Average Deal Exposure, with [...]

Filed under: NewOak Blog by Alex Razumny, Irina Shulmanovich, Ross Heller, Marc Pibl

Fannie Mae and Freddie Mac Will Need More Money from the Feds: Is that a Surprise? By Vincent Truglia January 24, 2009
Last year, the U.S. government had to rescue Fannie Mae and Freddie Mac. Fannie didn’t need to take money at the time, but several months ago, it indicated that by the time it would [...]

Filed under: Research Reports by Vincent Truglia

The main underlying assumption for those who even ask this, is that UK banks are not hedged against foreign currency risk, either through dollar- or euro-denominated assets or through FX swaps. I seriously doubt that large onshore UK banks borrowed dollars/euros and lent in pounds without a hedge. Also, we have to remember that the [...]

Filed under: Research Reports by Vincent Truglia

Is there money to be made in the CDOs? Here is a quick rundown of some of these sectors as we see it come 2009:
CLOs
Fundamentally, CLOs are exposed to the risk of lower-rated corporate borrowers (BB/B/CCC). Underlying are generally secured loans used, among other things, to finance private equity deals and generally leverage up businesses [...]

Filed under: NewOak Blog by Michael Khankin, CFA

The CMBS market is sick. The symptoms are obvious: US issuance was down 94% in 2008, no deals priced in the 2nd half of the year, and the remaining conduit shops are either quoting loans to lose, or not quoting them at all. This all begs questions around what made the market so ill and [...]

Filed under: NewOak Blog by Commercial Real Estate Loans & Securities

In 2008 we talked to many market participants about the handcuffs on CLO managers when loans were trading below $80. To recap, in most 2005 or later deals, loans purchased below $80 would only get credit in overcollateralization tests for market value, rather than par value. However, loan purchased at Par now trading below $80 [...]

Filed under: NewOak Blog by Corporate Credit and CLOs

NewOak Capital’s Whole Loan Team fielded an interesting question in a meeting this week and we wanted to share our thoughts. Why didn’t due diligence prevent the problems in the mortgage market? The factors contributing to the mortgage debacle are many: fraud, greed, easy monetary policy, improper incentives, a vast conspiracy against the [...]

Filed under: NewOak Blog by Jim Dougherty

As the housing crisis continues, there is an increasing likelihood that Congress, with President-elect Obama’s approval, may change Chapter 13 of the Bankruptcy Code to allow, for the first time, for judges to restructure mortgages on primary residences. The question markets are asking is whether this will help or hurt housing markets going forward, and [...]

Filed under: Research Reports by Vincent Truglia

Although the US fiscal year begins on October 1, this paper will concentrate on calendar year 2009, simply because it better captures the risks posed by the incoming Obama administration fiscal stimulus package. We also, need to keep in mind that not all “spending” by the government actually appears in the fiscal deficit or general [...]

Filed under: Research Reports by Vincent Truglia