CEO Ron D'Vari:

Many refer to the current transformation of the global financial industry as “The Perfect Storm ...”

As was the case in the popular film of the same name, survival depends on the skills of the captain mastering the ship.

Analysis

In the last three years, we have gone from sub-prime to global financial system, to credit across the board, and now to sovereign crises. On the surface the problems are growing rather than subsiding. However, along the way, each one of the legs of the crisis has highlighted a major weakness in the way the systems were working and have been patched with at least some temporary solutions. Subprime proved that our originate-to-securitize approach and cheap leverage were not ultimately sustainable. Near collapse of global financial infrastructure proved an apparent lack of a fail-safe mechanism. Sovereign crisis so far has proven that even G-20 fiscal and monetary patch-work policies are short sighted and need to be strengthened.

Evolution

The transition to a “normal” regime is an evolutionary process requiring many more financial behavioral modifications across the board. The implication of this is that the look-back statistical framework needs to be replaced with agile organizations equipped with unbiased battle-tested experts and requisite data and systems. This leads directly to my second and third points, i.e. the heightened need for timely transparency and necessity for proactive and timely approach to facing and solving problems.

Once we find ourselves in a regime with sounder global banks, a better defined capital adequacy system followed by all major economies of the world, more prudent stimulus policies that lead to efficient economic growth, the securitization will come back albeit in a more judicious fashion that offers significant improvements in: a) underwriting standard of the collateral, b) transparency of initial and ongoing data with independent verification, c) more robust structures, and d) alignment of interest of originator, underwriter, rating agencies with investors.

Our Beliefs

I would like to share four key beliefs that are driving our current thinking and hence our emphasis:

• 1) The economic crisis is not over but issues are getting clearer
• 2) Transparency has a price, yet is a must for effective management
• 3) A timely and proactive approach to facing credit issues & recapitalization wins over alternatives
• 4) Securitization is a tool, not a magic wand

We at NewOak Capital feel we can help in all four areas by assisting our clients in establishing direction, achieving transparency without prohibitive costs, evaluating creative proactive solutions including recapitalization, and being active in the new securitization markets as they develop.