If you would like to interview our experts, please contact Marisa D'Vari, Managing Director of Corporate Communications at mdvari@newoakcapital.com, or office 212 209-0847 or cell (24/7) 917 361-0843

Are you on deadline? Feel free to use these quotes in your stories with appropriate attribution. Thank you in advance for letting me know of this placement.

NewOak Capital Story Ideas for the Week of July 26, 2010

CRE Opportunities: What, No Fire Sale?!

"A lot of money was raised to invest in distressed commercial real estate and given the current marketplace, many hoped for good opportunities to buy cheap assets,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “After all, in the last real estate downturn of the early 1990s, investors made a lot of money buying cheap assets from RTC sales. Why no fire sales this go-round?”

"The reason is that investors were not the only ones who learned from that experience. Owners of the assets, and the regulators, also learned that if the assets are sold at cheap fire sale type of prices, investors make a killing, but the owners of assets lose out. Now the owners of the assets are trying to hold out as long as they can when it makes sense to do so, and regulators are prudently giving latitude to owners to avoid fire sales. This avoids quick indiscriminate fire sales for now, but eventually overleveraged owners without access to additional capital will need to refinance in the new low leverage environment.”

EU Regulators: Stress Tests Without Stress?

“Throughout this financial crisis the Euro was severely challenged, Greece and other European countries were pushed to the brink, and European debt markets remain under constant pressure. However, when the top 91 banks were recently tested, the surprisingly upbeat result was that only seven banks failed.” says James Frischling, President & Co-Founder at NewOak Capital.

"Europe’s ‘Stress Tests’ relied on a number of fairly mild assumptions: specifically, that unemployment and real-estate values don’t appear to have been ‘stressed all that hard.’ By contrast, the US ‘Stress Test’ done in early 2009, which found 10 of the 19 biggest banks needed to raise capital, is now seen as the turning point in the US financial crisis. The tests helped calm fears, partly because their outcome seemed credible. The markets will weigh in on whether the Europe ‘Stress Tests’ were stringent enough or whether the EU regulators felt these were the only results that could be handled at the moment.”

EU’s Stress Tests: Will They Lead to Further Transparency?

“The EU bank stress tests by itself just gave public just a glimpse of what may be behind the curtains,” says Ron D’Vari, CEO and Co-founder of NewOak Capital, a New York based solutions, advisory, capital markets, and asset management firm. “The efforts will lead to a better general appreciation of the credit and portfolio data and analytics needed to monitor on an ongoing basis the risk exposures across the different areas.”

"Even with today’s advances in information technology and credit analytics, one of the most resource intensive efforts in banking industry remains to be the infrastructure for integrating the exposures across the firm and allocate capital effectively on a timely basis. The missing element has been a comprehensive portfolio risk and capital allocation model that is understood and believed by the business lines and management.”

NewOak Capital Story Ideas for the Week of July 19, 2010

CMBS Performance: Devil in the Details?

“As was the case in earlier downturns, CMBS deal performance will vary from deal to deal and that has started to become apparent,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “Some deals are already seeing interest shortfalls reach to bonds that were rated AAA originally. In April, LBUBS 07-C1 AJ was the first AJ tranche to face an interest shortfall.

Since then other AJ classes from 05 and 08 vintages have faced interest shortfalls. This month 2006 vintage IQ12 deal had interest shortfall reach as high as the AM class. Even older vintage deals have faced problems. Examples include loans like Crossroads Mall in a 2003 deal that was liquidated and had a 82% loss, or Rolling Hill Apartment loan in a 2004 deal that had a 99% loss. Averages based on factors like vintage or shelf may not be sufficient to give a full picture.”

Data and Markets: Flashing Warning Signals

“There are increasing concerns about the US economic recovery,” warns Ron D’Vari, CEO and co-Founder of NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “The June manufacturing data from major economic regions of New York and Philadelphia showed unexpectedly sharp declines in activities. Further companies indicative of the US economy (i.e. GE, Citi and Bank of America) reported disappointing results.

This very recent data reverses the positive trends of the past several months and increases the risks of the recovery. While calling for a double-dip recession is too early, a slowing growth for the second half or at least the summer appears to be closer to reality. This is supported by weak consumer confidence, slow job growth and continued weak housing.”

Is the ‘Blame Game’ Now In the Hands of the Lawyers?

“The FHFA issued 64 subpoenas last Monday to financial institutions in connection with securities purchased by Fannie and Freddie," says James Frischling, President & Co-Founder at NewOak Capital. "Meanwhile, the SEC recently reached a settlement with Goldman Sachs ending heretofore the most public case involving a major securities firm and its clients. One case appears to have ended while many more appear to be just getting started. Now that ‘forest fire containment’ is complete, we will move onto the second phase of the’ blame game’ where parties dispute in arbitration or in court who committed fraud or broke the law, and who made poor decisions."

"Many would like you to believe that the financial crisis was the result of so many misunderstandings, misjudgments and mistakes. While all of that did occur, there were also misrepresentations, manipulation and malice. It will take years of work, investigation and discovery to understand the difference. One thing for sure, it’s going to take a whole lot of lawyers to untangle all of this.”

NewOak Capital Story Ideas for the Week of July 12, 2010

Psychology of Eurozone Government Bond

“Intriguing that some of the largest banks in Europe are discussing plans to accumulate a $20 billion risk capital with voluntary contributions from the biggest banks for the eurozone recovery fund over the next two years," notes Ron D’Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, capital markets, and asset management firm based in New York. "Given the banks are focused on the stress testing, such an idea may not actually go far with many banks. Yet it may help the general psychology of the Eurozone government bond. The prospect of $20 billion fund, Alcoa’s above consensus earnings coupled with China’s exports increasing by 44% in June have created a modest support to an otherwise directionless market. Of course this is just the start of the earning seasons and markets will be on their toes."

Conflicting Signals In CRE Data

"The data on commercial real estate is sending conflicting signals and is being read by different people in different ways,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “Cushman & Wakefield report last week showing US CBD office vacancy dropping to 14.8 % in Q2 from 15% at end of Q1 -first drop since 2007, CMBS statistics showing declining pace of deterioration in delinquencies, etc are seen by many as signs that the CRE market is stabilizing. Others point to declining rents and high unemployment as factors that point to further declines ahead. Both the viewpoints have some validity, which probably implies that the CRE sector might move sideways in near term with some volatility caused by which of the two views is stronger at any given point. However, for CMBS, as opposed to properties, a consensus that the property price decline has stopped will be enough for bond spreads to tighten. Real estate prices do not necessarily need to go up for CMBS spreads to tighten.”

US Stock Market : Why are Retail Investors Pulling Out So Much Cash?

“US equities markets had a strong week with many analysts bullish about the upcoming quarterly numbers,” says James Frischling, President & Co-Founder at NewOak Capital. “Yet equity investors pulled nearly $12 billion out of mutual funds for the week ending July 7. The data reflects the battle between the bulls and the bears, with the bulls able to push the market higher last week.”

“However, retail investors continue to show they don’t have confidence in these markets. High unemployment, continued uncertainty in Europe, and market domination by computer algorithms and technical trading are yet more reasons for the retail investor to lose confidence in the market and either pull money out or stay on the sidelines. Expect the market to go sideways unless there is an exceptionally strong earnings season combined with some clarity to the European debt story.”

NewOak Capital Story Ideas for the Week of June 28, 2010

Future Governance of Eurozone Is Center Stage

“ECB is being proactive this time to set the agenda and proposing tougher rules for preventing financial crisis in the Eurozone,” says Ron D’Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, capital markets, and asset management firm based in New York. “ ECB’s idea of co-responsibility, penalties (e.g. sanctions, cut in EU aid, suspension of voting rights) and establishing an independent agency to buy bonds of countries under pressure seem to be all in the right direction short of a true fiscal integration. It remains to be seen how if all of these may work and if they help calm the markets. On the margin the new ECB effort, further banking transparencies in Europe and Chinese new exchange-rate posture should help support the markets in coming weeks as the markets get thinner with the heat of the summer.”

Rating Agency Reform: Success or Failure?

"In rating agency reform efforts, the issue of conflict of interest arising from issuers paying for the ratings has received the most attention," says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan.

“Even as the ratings gained a quasi regulatory status and became embedded in virtually all parts of the financial system with Nationally Recognized Statistical Ratings Organizations (NRSRO) designation, the ratings have moved from being statistical ratings to incorporating more subjective opinions of future outcomes. This allows the agencies to take rating actions that actually impact the outcomes, and leaves them open to criticism if they don’t act. If NRSROs were required to stick to Statistical Ratings and base ratings only on known facts and past history, that may remove many issues, including perception of conflicts from issuer paid ratings.

Read Malay's article, "Rating Agency Reform: The Unrecognized & Unaddressed Basic Issue" for more details.

Debt Crisis: America Beware?

“Have you heard the joke about America quickly becoming a third world country? With our debt crisis, high unemployment and now a solid national soccer team, maybe the classification is warranted?" asks James Frischling, President & Co-Founder at NewOak Capital. “Overseas many governments face challenges as a result of overspending and many US states face the very same issues. State leaders must overhaul tax policies and reign in spending. The federal government’s extraordinary spending over the last two years masked the depths of many local problems and state budgets have been hit hard by the drop in tax revenues, which combined should force states to embrace their own austerity measures. With local elections looming, significant changes are doubtful. If our state governments don’t learn from the history being written across the Atlantic ocean, many states will be destined to repeat it.”

NewOak Capital Story Ideas for the Week of June 21, 2010

NAIC Action, Less Noticed, But Good for Commercial Mortgages

"The National Association of Insurance Commissioners backed off from its proposal to increase the capital that insurance companies must set aside for commercial mortgage loans. That is a good thing for the commercial real estate market,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “The NAIC had proposed to increase the MEAF for insurers with average loss experience from 2.6 to 4.0, which would have been an increase of 53% in capital that insurance companies would require for holding commercial mortgages. That increase would have resulted in insurance companies reducing their mortgage holdings and would have made it difficult for them to originate new loans. NAIC opted to leave the MEAF for insurers with average loss experience at 2.6%, while increasing it to as high as 4.6% for those with greater than average losses.”

Will China’s Exchange-Rate Policy Reduce Pressures on European Sovereign Bond Crisis?

“Latest China’s exchange-rate policy should help reduce pressures on European sovereign bond crisis on the margin,” says Ron D’Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, capital markets, and asset management firm based in New York. “Beijing knows well that in the long run maintaining a huge current account surplus is not sustainable but at the same time it desires to maintain its export competitiveness against a double dip in western economies. Announcing it just a week before G-20 meeting is clever and will reduce trade war tensions. A gradual appreciation of RMNB over the next 2-3 years should improve world trade and reduce the risk of US and Europe economies to fall back into a deep recession. This is masterfully timed and incredibly wise move on Chinese part despite studies showing RMB’s overvaluation having fallen from 40% to 25%.”

Community Banks in High Demand: Yet Can New Owners Satisfy Existing Customers?

"The failed bank count thus far in 2010 currently stands at slightly over 80 and demand from private equity firms for banks in general remains strong" says James Frischling, President & Co-Founder at NewOak Capital. "The general view is that what goes down, must eventually go up. With so many banks in need of capital and trading at discount to their historical levels, from chaos comes opportunity and the investors are ready to pounce."

However, the demand for deploying capital into the weakened banking space, while a much needed solution for preventing further damage to the financial system, doesn't necessarily meet all the demands of the FDIC or the customers that these community banks serve. 'Community continuity' has become an important part of the approval process and protecting the customer base that was once served by these institutions is something suitors and potential acquirers need to pay closer attention to. Like any investment, proper and thorough due diligence is required, but beyond the acquisition target's balance sheet or the capabilities of management, the target bank's place in the community and its ability to retain its customers under new ownership will go a long way in making the investment a profitable one. "

NewOak Capital Story Ideas for the Week of June 14, 2010

President Obama & the Oil Spill: A Rock & A Hard Place?

“President Obama didn’t cause the disastrous oil spill in the Gulf, but his Presidency will be significantly judged by how his administration responds to this manmade crisis,” says James Frischling, President & Co-Founder at NewOak Capital. After over 50 days, this situation remains uncontained and people are very angry.”

“ BP stated it will take financial responsibility, though it is not yet possible to ascertain the costs of the clean-up or the costs associated in the damage done to Louisiana, Mississippi, Alabama and western Florida. The costs will be astronomical and as a result, the US is going to need a financially strong BP to make good on its promises. So what is the administration to do? Come down hard on BP and satisfy deservedly angry people who have had their lives and businesses ruined, not to mention the environmental damage? Push BP to the brink of collapse? Such actions would only leave a weakened, possiblyinsolvent company to deal with this mess. On the other hand, going light on BP and allowing the company to prosper will help in the recovery efforts, but it will not go over well with the voters. Remember how so many Americans reacted to certain TARP recipients quick return to profitability with anger despite the Government’s ownership in these very companies? The country wants blood as a result of this oil spill, but it also needs cash from the company that caused the mess. The Administration is going to need to walk and talk a very fine line."

Pricing of $716 MM Deal by JP a Step Forward for the CMBS Market

"The $716 MM JPMCC 2010-C1 deal priced on Friday was a step forward for the CMBS market in several ways,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “It is positive that most bonds saw good demand. From an investors’ perspective, it is also good to see issuers moving toward lower LTV, higher DSCR, and in-place underwriting. The control shift based on appraisal reduction also moves the structure back towards what it used to be before the 2006 -2007 loosening of standards. However, pricing spreads were about 50 basis points wider than the RBS deal that priced in April, underscoring the fact that hedging loans while aggregating will be an important for any prudent lender trying to close loans before securitization.”

Manufacturing Will Lead and Housing Will Lag

“Builder’s sentiment as measured by NAHB index slumped from a three-year high of 22 just in May to 15 in June," says Ron D’Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, capital markets, and asset management based in New York.

"This is partially because of running out of the home buyer tax credit incentive in the context of continuing high employment, lack of financing for new construction, high inventory of existing homes, short sales, and pending foreclosures. The good news is that manufacturing is leading recovery and is balancing the home building slowdown."

NewOak Capital Story Ideas for the Week of June 7, 2010

What does the Purchase of Extended Stay Say About State of CRE Markets?

"What seems like the final chapter on Extended Stay for now is interesting to analyze. On Thursday, Centerbridge led consortium that includes Paulson & co and Blackstone Group won the auction for Extended Stay after 11 rounds of successively higher bids and a marathon bidding session lasting 19 hours, when the rival group including Starwood Capital and TPG decided against another higher bid,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “The final purchase price was $3.925 billion, which is good for holders of $4.1 billion CMBS bonds, who were looking at a much higher loss last year when Extended Stay’s advisors had pegged the value at somewhere between $2.8 to $3.6 billion. But, does the intensity of bidding indicate that market is reaching somewhat frothy levels? Probably not, especially if Blackstone is making a meaningful investment, as they know the assets and the company well, having owned it previously. They sold it at $8 billion to the Lightstone group in 2007, and are buying back in at $3.9 billion. Also, since Extended Stay owns budget hotels and not trophy properties, the heavy bidding challenges the convenient notion of bifurcated markets with lot of demand for trophy type properties and lack of demand for others.”

Will Continued Negative News Drive the Market Down?

“Retail investors remain on the sidelines," says James Frischling, President & Co-Founder at NewOak Capital. "Despite the challenges facing the US, current global issues highlight the flight to a safety strategy. How much more bad news can the US markets take? Positive economic indicators including home sales and job growth suggest we're on the road to recovery, but excessive government spending and unmanageable debt levels remain the biggest issues on minds of investors.”

Bank Regulations - We Need an End To Uncertainty

"G20 meeting in Busan, Korea will end with a delay in the determination and implementation of much needed tougher regulations for the world’s bank. Once again it is apparent that the world bank regulators as a collective body have added to the uncertainty so far. This has presented an obstacle for new capital to be raised to heal the problems of the banks, especially in Europe. Not having well defined new standards for banks is a big bottleneck and put the entire system in a standstill. Everyone agrees that it is critical to have a final resolution on what exactly the new standards are for banks in terms of capital, leverage and liquidity. While everyone recognizes that an end to uncertainty is urgent, it appears that it is not as easy to bridge the differences between UK, France, Canada, and US in terms of capital rules, bank levies, and transition period," says Ron D'Vari, CEO and Co-founder of NewOak Capital, a New York based advisory, capital markets, and asset management solutions firm.

"The transition period should not matter much because once the new standards have been agreed on, the larger banks would come under pressure to meet them and will be forced to provide appropriate plans to catch up. From a practitioner's point watching this whole saga has been interesting and makes one to wonder of the safety and soundness of the entire global banking system in the end," explains D'Vari.

NewOak Capital Story Ideas for the Week of May 24, 2010

Is European Sovereign Debt Crisis A Threat to the Global Recovery?

"A great deal of the global recovery hinges on the return to normalcy of the credit markets and continued healing of confidence on flow of capital throughout the whole supply-chain and to the small and medium enterprises," says Ron D'Vari, CEO and co-founder of NewOak Capital, an integrated asset management, advisory, and capital markets firm based in Manhattan. "A limping global banking system cannot take the shock of a sustained european sovereign debt and banking crisis without impairing flows of capital. Sustained volatility in the global markets will further restrict the flow of vital economic fluid, i.e. debt, to the middle market and affect the heart of the economy and no doubt will cut into the global recovery."

"Markets have been very fragile and investors have been rushing out of risky assets and going in to US Treasuries on eurozone sovereign and banking debt crises," D Vari continues. "German limited ban on short-selling and fear of governmental interference have not helped. While sovereign debt and currency crises are not new to the markets and haven't made lasting impacts on the global economy in the past, this time it may act very differently as a strong after-shock to an unprecedented global financial crisis."

As the Focus Shifts to Spain, How Many Dominos Are Still to Come?

“Speculation over the severity of a sovereign debt crisis continues to spread,” says James Frischling, President & Co-Founder at NewOak Capital. As a result, the Euro fell to its lowest level since 2001. ” Spain’s banking sector is a major concern and the overriding view is that the government has been too slow to respond and thus unable to strengthen its banking system. Contagion risk from the European debt crisis is the driver of the markets at the moment. This has become a global threat to the markets. Despite what had been viewed as an unprecedented commitment from the EU nations to prevent the crisis from spreading, the unconvinced markets are betting against containment. The EU and IMF aren’t able to calm the markets down, so expect more volatility and disruptions to come. Italy is now trying to take measures to get ahead of the tide that is clearly heading its way. Thus far these types of actions have been deemed too slow and too little.”

The Dichotomy in Commercial Real Estate Markets

"There is a dichotomy in commercial real estate at present. On one hand, there are worries about commercial real estate, with S&P downgrading three insurance companies – Principal Financial, National Life and Pacific Life - a week ago citing expected losses on commercial mortgages and CMBS. On the other hand, every property we have looked at, has had 30 to 50 offers from possible buyers already. Portfolios of loans, especially better quality ones, have attracted a lot of buyers too,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “How do you reconcile the two views? If you purchased a loan or property at the old inflated price, you may be facing losses. But if you are buying based on today’s lower valuations, it might turn out to be a good investment, especially given the returns on other asset classes.”

NewOak Capital Story Ideas for the Week of May 17, 2010

CLO New Issue – 2nd Time is A Charm

"Despite the nervous Eurozone amid banking reform uncertainty, the Citibank-arranged ALM Loan Funding deal was upsized from $300mm to $325mm," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an integrated asset management, advisory, and capital markets firm. "The top 66% of the capital structure received AAA rating and was issued at a relatively tight level of Libor+170 at par. Never mind the sharp drop in Euro and stocks such as the 3.4% drop in American Express stock price, the deal-starved leverage finance investors appear to be confident the market jitters are temporary. The ALM Loan Funding was the second CLO of the year and like most of the recent ones it appears to be motivated by financing for the manager to achieve 4-5 times leverage on their equity and charge very low senior fees (only 10bps). Time will tell but financial climate is giving signals."

PE Money: Seeking a New Mandate to Acquire Distressed Banks?

“Few groups have successfully acquired a failed bank with a shelf charter,� said Mark Ruh, Managing Director at NewOak Capital, a capital markets, private equity, and advisory firm based in Manhattan. "There appears to be a regulatory bias for failed banks to be acquired by existing banks rather than with private equity involvement. This certainly makes sense from a regulatory point of view; the execution risk of assuming a failed bank by a healthy operating bank is lower than by a shelf charter group. With the FDIC watch list growing and over 2,000 banks with some type of enforcement action, private equity money seeking to participate in the distressed bank sector will rotate away from seeking FDIC assisted deals to recapitalizing highly distressed institutions. And with PE firms moving away from an FDIC assisted focus, some of the ‘walking dead’ banks may have a new lease on life before the FDIC gets hold of them in receivership."

Taxpayers Go Long CDOs?

“The number of failed banks continues to climb, which contributes more CDOs and other hard to value assets to the FDIC,” says James Frischling, President & Co-Founder at NewOak Capital. “The many small and mid-sized financial institutions that issued trust preferred CDOS were a result of regulation that counted the securities as capital, making their balance sheet look healthier. Poor CDO performance are believed to have contributed to the quick collapse and failure of many of these banks. Were these CDOs built to fail or was the failure of these CDOs a result of the financial crisis? With specific questions being raised about the synthetic CDO market and the short-sellers that contributed to the origination of these deals, there’s no doubt investors in trust preferred CDOs will be looking for answers and potentially monetary damages in court. Now that the FDIC owns many of these securities, it looks like the arranger banks, rating agencies and other market participants will have a major plaintiff to confront."

NewOak Capital Story Ideas for the Week of May 10, 2010

Financial Markets vs. Eurozone - Round One

"Financial markets have now escalated the eurozone lack of quick reaction to Greece to a crisis spreading far into the global markets, and rightly so,” says Ron D'Vari, NewOak Capital CEO and co-founder. "It is about time to put to real test how a currency regime decoupled from monetary/fiscal integration is supposed to work.”

"No one seems to care about the clear violation of "no bail-out" language in EU treaties other than five professors in Germany who filed a formal complaint. ECB once again is in disparate search of coming up with an unusually massive program to support European sovereign bond markets and protect banking system. The details are yet to be worked out. In the meanwhile everyone is anxiously watching the Asian market opening for clues. Japan and Obama Administration are also supportive in principal, but they probably know by now this crisis is not one that would go away with just official jaw boning. While the Eurozone officials are struggling to figure out how the system should work under the crisis, the financial markets are demanding clarity. It should be relatively easy to figure out who may win this one if they don't act with determination.”

The European Union: Shock and Awe?

“The initial market reaction to the proposal bailing out Greece combined with the consensus view that it was simply not enough, motivated the EU to make a massive commitment to its most indebted countries and to protect the Euro,” says James Frischling, President & Co-Founder at NewOak Capital. “Clearly, the EU wants to demonstrate it can handle this sovereign debt crisis. The driver of this nearly trillion dollar bailout plan was to build confidence in the markets. The package is an unprecedented commitment for EU nations to take responsibility for each other’s fiscal difficulties. With the help of the IMF and ECB, the EU has taken a page out of the US playbook - throw a massive amount of money at the problem in order to stabilize the system. The challenge will now be the selling of this story to each nation’s respective constituencies, while the risk is establishing a precedent of bailing out the fiscally weaker and less responsible countries.”

Is Optimism or Pessimism the Correct Feeling Towards CMBS market?

"Just when spread tightening in last two months had started making market participants more optimistic, volatility came back to the CMBS market, and is causing some to wonder if optimism is the appropriate feeling towards commercial real estate at this point,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “A recent survey reported in press of 300+ top executives within the US commercial real estate market by a law firm had an interesting statistic regarding optimism vs pessimism. The pessimistic part was that 60% of respondents described themselves as bearish and did not expect the CMBS market to return in time to help refinance more than $150 billion in CMBS loans coming due in next two years. The optimistic part was that the number of bears has come down from 90% in Sep 08 to the current 60%! So, is optimism or pessimism the correct feeling towards CMBS? Clearly one can find reasons for both. Also clear is the need for careful and appropriately deep analysis of risks and rewards. For those contemplating conduit loan originations, the volatility highlights the need for proper hedging of loans while aggregating the pool. If market participants worked out an efficient hedging mechanism, that will help the conduit CMBS market come back sooner, and that will make a lot more people more optimistic.”

NewOak Capital Story Ideas for the Week of May 3, 2010

Talk of a New CMBS Deal and Tightening Spreads Generate Optimism

"Reports last week that JPM will be coming out with a $840 mm new issue CMBS deal with multiple borrowers and dramatic tightening in CMBS spreads in last two months have generated a lot of optimism in the CMBS market," says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "As an example of spread tightening, GG10 super-senior bonds have tightened by 90 basis points in last month, and 165 bps in last two months. Increasing optimism is encouraging others to consider restarting origination too, which is good for the market. However, with the fundamental problems that the CRE market still faces, it will not be prudent to originate loans for securitization with the assumption that spreads will keep tightening. Any negative surprises could hurt sentiment and discourage origination efforts. The prudent thing for the CMBS market participants to do is to work on a mechanism to hedge loans while they are being aggregated for securitization."

Default Rates for April Continue Downward Trend

"The default rate for April was 5.65%, down from a peak of 10.6% last year, which is in line with our expectations", said Mark Pibl Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "Many of last year's troubled loans have been worked out and the markets have re-opened allowing troubled issuers to refinance. We are forecasting that default rates will trend toward 3-4% during the remainder of this year."

Greece: A Bailout with Sacrifices?

“Finance Minister George Papaconstantinou and Greece are stuck between a rock and hard place,” says James Frischling, President & Co-Founder at NewOak Capital. “They either commit to making sacrifices to get the rescue package or face an economic collapse. The Finance Minister has the more difficult task of successfully selling this story and getting buy-in from the Greeks. The intense drama, stakes, and tensions are high yet the leadership, directness and candor of Finance Minister Papaconstantinou should be seen as a source of great hope that this too shall pass. After watching other bailouts that seem to have taken place with little or no conditions placed upon them, the story of the EU and the IMF coming to the aide of one of its members is a very different one. There will be unprecedented help, but it will come at an unprecedented price.”

NewOak Capital Story Ideas for the Week of April 26, 2010

Earnings - Beyond Greece, Financial Regulations, and Rate Hikes

"Many wonder why the equity markets and the corporate spreads are not so much focused on the risk of Greece restructuring its debt, new financial regulations, and potential rate hikes. The answer may be that the markets are mesmerized by the prospects of corporate earnings growth and stable multiples, leading to higher valuations," says Ron D'Vari, CEO and Co-founder of NewOak Capital.

"In aggregate markets are telling us the global economic locomotion driving corporate earnings are not going to be rattled by these other factors any time soon. The markets may be right and the analysts may be overly nervous."

Exit Loans Make Attractive CLO Collateral

“We are seeing more and more CLOs looking at investing in the bankruptcy exit facilities that are coming to market,” says Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. “This class of loans provide very attractive yields on companies who capital structure has been washed through the bankruptcy court process. In my view, these companies used to be good companies with bad capital (over-leveraged) structures. Now they are the same good companies, but with better suited capital structures. Usually, these Exit facilities have a higher rating that the previous collateral yet the yield remains high providing the CLO with an attractive rating arbitrage investment.”

Lipstick on a Pig: Where's the 2010 Version of the Charles Schwab Advertisement?

"In 2002, Charles Schwab created a TV commercial believed to specifically target and ridicule a significant Wall Street firm whose research and sales departments were pushing questionable investments. At least one major network refused to run it. So," says James Frischling, President & Co-Founder at NewOak Capital, "is history about to repeat itself? Win, lose or draw, Wall Street firms will be under the spotlight. Conflicts of interests and questions of whether positions were taken against clients will take center stage. Were laws broken? That will be left to the attorneys to argue and the courts to decide. However, the stakes couldn't be any higher. The integrity of Wall Street is now on trial and the world will be watching."

NewOak Capital Story Ideas for the Week of April 19, 2010

More Turbulence Ahead in CMBS Market?

"Last week, dramatic tightening in CMBS spreads coincided with the first time an AJ tranche, originally rated AAA, faced interest shortfall,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “Also, CMBS delinquencies became higher than they have ever been in the history of the CMBS industry. All this points to more volatility ahead, which will be good for traders. However, volatility may not be encouraging to those looking to originate and warehouse loans for securitization.”

Inflows into High Yield and Loan Funds Reach New Record

“Over the past week, inflows into high yield bond funds and bank loan funds continue to remain strong,” said Mark Pibl, Managing Director and Head of High Yield at NewOak Capital. “We have been surprised by the continued strength of this product, especially retail investors appetite. The good news is that with all that interest, the cost of capital for borrowers will remain reasonable for those that need the money. One of the drivers of this trend is the low returns that these investors are getting in safer investments. Clearly, investors are prepared to stretch into higher risk investments for that additional yield.”

The Airline Industry: Are we Also Going to Regulate the Beverage Cart?

“With its delayed flights, cramped seats and general low customer satisfaction, it’s simply too easy to throw stones at the airline industry. Yet when Senators want to regulate whether an airline can charge for carry-on luggage, it’s fair to say that nothing is beyond reproach,” says James Frischling, President & Co-Founder at NewOak Capital. “With everything going on in this country and around the world, the bar has got to be raised in terms of what the government can and should be focusing on. If the charging for carry-on luggage that doesn’t fit under the seat doesn’t meet the minimum standard of a customer’s sensibilities, let the customer choose another airline. If too many customers reach this same conclusion, you can be sure the policy of charging for these bags will be changed. These are serious times and we need to focus on the serious issues. Our ever growing government shouldn’t use this issue to increase its presence any further.”

NewOak Capital Story Ideas for the Week of April 12, 2010

Read My Lips: German taxpayers' money won't be put at risk to help Greece?

"The bailout and subsidy game is a tricky one and comes down to choosing the lesser of two evils," says James Frischling, President & Co-Founder at NewOak Capital. " No one wants to reward 'bad behavior' with taxpayer dollars, but if such a move is believed to be the best of the tough choices available, that's exactly what is going to happen. It appears German Chancellor Merkel has buckled under significant pressure and signed on to the European Union plan that will now offer Greece below market rate loans "While receiving the funds isn't guaranteed, the stage has been set for Greece to be given 30 billion Euros in 3-year loans at around 5%, which is less than current rates for Greece's obligations. Germany's contribution to this package will be about 28% of the total. If the US led taxpayer bailouts can be used as a benchmark, while the popular rhetoric against using taxpayer dollars remains high, the assistance averted what would have been a far greater crisis. The EU is betting history will repeat itself and despite the frustration of many, it's the smart move to make."

Will CMBS Spread Tightening lead to Revival of CMBS Origination?

"With the first multi-borrower CMBS deal getting priced at tight levels with heavy demand, and spreads for legacy bonds tightening rapidly, there seems to be a lot of optimism in the CMBS market," says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "CMBS deals getting done is a good thing and shows demand for the paper. However, the fact remains that the deals done so far have been ones in which the issuing banks did not take warehousing risk on the loans that were securitized. CMBS will have truly reemerged when loan originators start taking warehousing risk. Otherwise, the bigger borrowers will be able to get financing but smaller borrowers will have a harder time getting financing."

Mirant + Reliant Annouce Merger: A twist on the same theme?

"Both of these companies have been faced with a volatile commodity price environment and dwindling demand for power caused by the economic slowdown," observes Mark Pibl, Managing Director and Head of High Yield and Leverage Loans at NewOak Capital. "By combining operations the companies hope to generate significant cost savings to help restore the combined company to sustainable profitability. Mirant and Reliant are well suited for each other given their geographical footprint and complementary power generating assets. Unfortunately, for the remaining industry participants, they may be forced to merger with less than ideal partners."

NewOak Capital Story Ideas for the Weeks of March 29 & April 5, 2010

Markets Ignore US Private Sector Job Cuts and Latch on US Non-farm Payrolls

"As global markets cheered 162,000 nonfarm payrolls rise, they ignored the 23,000 job cuts by the US private sector in March. Wall Street analysts themselves had expected a turn around on companies hiring with an addition of 40,000 this month," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an asset management and advisory firm in New York.

"If it wasn't because of temporary census employees the job number would have been viewed as very disappointing. While manufacturing is shedding jobs, service sector has had two consecutive rises. 9 months after the recession has been declared over, this has been one of the longest jobless recoveries. One would have expected the lower dollar and interest rate would have helped our competitive advantage, lifted US exports, and turn around the private sector job market," says D'Vari.

Bank Loan Market Continues it's Upward March in March

"The bank loan market returned over 2% in March and 4% for 1q2010. However, the real story is the continued rally in lower rated triple-C sector which returned 4% this month and 11% for 1q2010," said Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "What is surprising is the continued strength in this lower rated sector after a very strong return performance last year. Earlier in the year, these results were driven by money flowing into the asset class in the search for yield. Now these returns are being driven by the improving operating fundamentals as companies are reporting stronger results and investors anticipating these trends to continue."

US to China: How About if We Ask you Nicely?

"Treasury Secretary Geithner is delaying a report on global currency policies scheduled to be released. April 15th . to give China more time to move toward a more flexible currency, but will not admit that such is the reason for the delay," says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform. "Director of the White House's National Economic Council, Lawrence Summers, wouldn't use the words 'currency manipulation' on the weekend TV circuit, yet everyone knew that's what he meant."

"Senator Schumer along with four other senators put forward a bill that would require the US to impose tariffs and other penalties on countries that failed to address misaligned currencies. When all this is going on in the face of the single largest foreign holder of US Treasuries, you try to get ahead of the curve and ask them nicely, which is exactly what the administration is trying to do .Despite the tough talk from some, the currency problems between China and the US will be best solved through negotiations, not legislation. Given the reliance on one another, any attempts to impose one's will on the other would be a classic example of biting one's nose to spite one's face. We may not like the pace at which changes are going to take place, but asking nicely may still be the only sensible option."

NewOak Capital Story Ideas for the Week of March 22, 2010

Uncertainty in CMBS Workouts? Curious New Twist with Extended Stay

"Extended Stay's action last week to terminate its earlier agreement with Centerbridge Partners and Paulson & Co, and sign a new one with a group led by Starwood Capital, which agreed to invest up to $905 million, shows the uncertainty of outcomes in large CMBS loan workouts,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Good news in this case was that the group led by Starwood Capital has agreed to invest up to $905 million under a plan which values Extended Stay at $3.9 bn, compared to the $3.3 bn that the company had put for itself when it filed for bankruptcy last year, and the $4.1 bn senior loan securitized in CMBS. Centerbridge and Paulson, and Cerebrus earlier, were the ones who made it possible for Lightstone group to put ESA into bankruptcy by indemnifying David Lichtenstein for violating his recourse guarantee on the loan to not file for bankruptcy. This story is not yet complete - the starwood deal still needs approval from the bankruptcy judge, and another higher bid is still possible."

Mezzanine; Cost of Capital

“The cost of capital for mezzanine capital seems to remain in the mid teens range despite yield compression further up the capital stack," says Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans. “Over the past 6-9 months the typical mezzanine investor has still been able to achieve the higher yields since they hold the key bridging the transaction. One can expect greater demand from borrowers in the mezzanine space as banks and conduits pull back by lowering their advance rates. The mezzanine investor is willing to step into that funding gap and assume the subordinated risk to the senior lender for the extra yield.”

Student Loans: Taxpayer Owned & Operated?

“The Democratic-led House vote on Sunday will result in the biggest overhaul of the student loan program since it was created in 1965,” says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform. “Private lenders and critics of an expanding federal government are opposed to the Federal Government dominating the provision of student loans and feel the government has already stepped in to run banks, insurance companies and the car companies alike. Yet with the government already owning the default risk of these loans, isn’t allowing it to also control the process of originating them a good idea? How the government will develop the necessary infrastructure to process all of these originations remains unclear. The credit crisis has shown the risks and significant failings that can take place when you separate the responsibilities of origination of many types of loans from their actual performance. The overhaul of the federal student loan program is a clear recognition that if the government is going to own the risk, it’s also going to own the process.”

NewOak Capital Story Ideas for the Week of March 15, 2010

US Credit Rating - This time may be different

"Investors are unconcerned about US credit rating while the three rating agencies have issued warnings of potential negative credit watch. If the current budget deficit trends continue, the interest servicing burden will approach those of the 80s. However this time could be very different. This time around the government may not be able to solve the issue as easily by just lowering the interest rates as they are already near the lows. Since the government is already in a box of not being to either lower spending or increasing already high taxes, the public finance will continue to deteriorate and the rating agencies may have to take action," says Ron D'Vari, CEO and Co-founder of NewOak Capital, a Manhattan advisory, asset management and capital markets firm.

"However, most investors seem to rely on the reserve currency status of the US and ignore such a risk. However, Chinese officials as one of the largest holders of the US Treasury bonds have indicated their concerns at the possibility of not getting their money back," adds D'Vari.

Will the FDIC's Failed Bank Auctions Lead to Additional Failures?

"The FDIC's program to manage the disposition of portfolios from failed banks is intended to maximize the return on these portfolio sales by creating an orderly and transparent process and one that also has a profit-sharing relationship with the winning bidder," says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. "However, the program poses a potential threat to other weakened but still healthy banks that may own the same loan as the ones being liquidated at auction. The FDIC's auctions are resulting in prices on average of 43% on performing loans and 26% on the non-performing. A bank that participated in a loan alongside a failed institution could potentially be impacted by having to write-down the loan to the FDIC's auction price. The very program intended to help clean-up the banking mess and move the assets into healthier hands, as an unintended consequence, may drag other banks down along with the failed institutions."

Riverton Foreclosure Sale an Indication of what might happen to StuyTown & Others?

"On March 11, Riverton Apartments loan, one of the first large CMBS loans to default in mid 2008, was sold in a foreclosure auction for $125 mm. Some see it as a positive that the price was 16% higher than the $108 mm value from the appraisal done in June 2009 since that suggests that maybe value estimates have become too pessimistic,"� says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "However, the fact remains that the $125 mm sale price is 44% below the CMBS loan amount of $225 mm."

"Many may look at Riverton's result as an indication of what might happen in the case of Stuy Town loan, as there are many similarities between the two as both were NY apartment buildings purchased at the peak of the market with business plans based on converting rent-stabilized apartments to market rent. However, it will be important to keep in mind that there are significant differences between the two as well."

NewOak Capital Story Ideas for the Week of March 8, 2010

High Yield Bonds Tapped to Finance Bankruptcy Exits

"We are seeing an increasing trend of bankrupt companies utilizing the public high yield bond market to help them exit bankruptcy proceedings," said Mark Pibl , Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "In the past, most companies looking to exit Bankruptcy Court, sought out the bank loan market to refinance the existing DIP facility. Issuers are more inclined to tap the high yield market due to increased covenant flexibility despite the slight higher cost of capital. Readers Digest and Six Flags are just several companies that have tapped the market in this manner."

Separate Rating Designation for Structured Finance Securities: A Good Idea?

"Fitch, Moody's, and S&P have now all announced that they will have a separate rating designation for structured bonds, which they will start using this year. It doesn't change anything else in the rating process, and will probably just do nothing more than cause confusion and create logistical issues for investors who will need to modify their charters to clarify if bonds with new ratings are included," says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Rating agencies will start adding 'SF' suffix to the ratings for structured finance securities by September. This is to satisfy requirements of European regulators. Reform in securitization markets is very desirable and needed, but if not done thoughtfully, it can be a negative rather than an improvement."

Volatility in the Agency MBS Space?

"Delinquent loan buyouts resulted in 28 CPR increase in prepayments on Freddie collateral last month," says Michael Khankin, Director at NewOak Capital in Manhattan, an asset management, advisory, and capital markets platform. We are likely to see similar increase in the Fannie collateral once that program gets fully ramped up. Given the premiums on these pools combined with the expected Fed pull-out we are likely to see some volatility in the Agency MBS space."

Toyota: Can it Weather the Storm?

"Toyota's franchise has obviously been severely damaged by its recent unprecedented recalls," says Vincent Truglia, Managing Director of Global Economic Research for NewOak Capital in Manhattan. "However, Toyota should be able to weather the storm because it has deep pockets. We should also remember that other car manufacturers have been able to turn around their declining franchises in the past. Lee Iaccoca turned Chrysler from the brink of bankruptcy in the 1980's to profitability. However, it is not a foregone conclusion that such a turnaround can be achieved. Because of engineering problems, both the Yugo and Fiats disappeared from US roads in a relatively short period of time. Will Toyota be the Chrysler of Iaccoca's time, or the Yugo: That is the question."

NewOak Capital Story Ideas for the Week of March 1, 2010

Default Rates Falls to 10-Month Low in February

"As we have been anticipating, S+P recently announced that the LTM default rate for February fell to 8.5% from 9.6% at end of the year and over 10% last yearn," said Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "The real story, however, is what the market is anticipating for the forward default rate this year. The current consensus is low 5% while the imputed default rate of the LSTA index is 5.5%"said Pibl. "While companies are still seeking bankruptcy everyday,as witnessed by Regent Communication just today, the largest wave of defaults is mostly behind us."

CMBS TALF: Is the Judgement in?

"CMBS TALF has worked as it has brought spreads significantly in. However, it has not achieved its original purpose of restarting CMBS lending and securitizations,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “Legacy CMBS TALF program, scheduled to end in March, could end as scheduled, but the commercial real estate market still needs help to get the conduit market going. A modified TALF program geared towards restarting conduit program can be very helpful in making sure that the gains in spread tightening from the Legacy program are not reversed after that program ends.”

Looking at AIG & The Deal with Prudential: Is Patience is a Virtue?

“The sale by AIG of its Asian life-insurance business to Prudential Plc marks the company’s biggest move yet to repay the $182.3bn bailout by the US Government, "says James Frischling, President and co-Founder at NewOak Capital, a Capital Markets, Advisory, and Asset Management Platform in Manhattan. "It should also be received as a little vindication for the government officials and AIG management that decided to wait for better market conditions before selling off businesses.”

“This deal would have been worth at best 50% of the agreed $35.5bn had it been executed earlier and that would have come at the expense of the company and therefore the US taxpayer. The Asian life-insurance business is one of the crown jewels of the AIG portfolio. Monetizing its value via a sale as opposed to a public offering will result in a faster repayment to the US taxpayer and no one should be upset about that. There are other core businesses that will remain and drive AIG going forward, so no one should feel the store is being given away. This well executed asset sale shows that the poster child for the financial crisis and the most hated corporate entity in America is still also among the most skilled.”

Diversification Benefits of Structured Products

"Before the financial crisis, an important virtue of structured products was their perceived diversification value," says Michael Khankin, Director at NewOak Capital in Manhattan, an asset management, advisory, and capital markets platform. "However, since structured products were the leading cause of the crisis, observed prices naturally ended-up being very correlated with the market. Today, however, diversification may again be of some value to investors."

"As the world emerges from the recession markets are becoming increasingly less concerned with systemic failures and doomsday scenarios and are more focused on things like corporate earnings, sovereign deficits, and unemployment - quantities that are not directly related to the fate of structured debt. Also, in a post-TARP world, Government is considerably more alert to the problems of large banks. As such, on a forward looking basis, structured products are unlikely to continue to influence the macro picture to the extent that they have over the last couple of years. There is some evidence emerging to support this: while we saw a broad sell-off due to the Greek fiscal crisis, structured products generally fared quite well. So while mortgage woes are likely to continue for some time, it seems that they are unlikely to drive the broader market. Therefore, with relatively attractive yields and diversification benefits that they will likely bring, there is something to be said for having some exposure to the structured space in a credit portfolio. Properly selecting the exposure should prove worthwhile and result in a superior risk/reward."

NewOak Capital Story Ideas for the Week of February 22, 2010

High Yield Reversals

"Over the course of the past several months, high yield bonds have outperformed leveraged loans as investors stretched for yield and were prepared to trade down from secured bank loans and into unsecured bonds," said Mark Pibl, Managing Director at NewOak Capital and Head of High Yield and Leveraged Loans. "What we are seeing now is the reversal of that trend. This is driven in part by the extraordinary returns in high yield bonds versus bank loans, but also in part to the expectations of a rising interest rate environment. What will surprise many investors in the coming year, is that in a rising interest rate environment , high yield bonds will underperform bank loans due to the fact that bank loans are a floating rate security while bonds are fixed coupons. All else being equal, the high yield bonds will drop in value while bank loans will hold their value."

Toyota: Current Industry Focus, yet more trouble ahead?

"With more than 8 million vehicles recalled over the past few months and concerns over its reaction to safety concerns, officials from Toyota and US regulators will soon appear before several Congressional Committees to face the music. The public is about to learn just how self-regulated the auto industry actually is and the reaction may not be pretty." says James Frischling, President & Co-Founder at NewOak Capital.

"Concerned about the changing political landscape and a potentially more regulatory environment, Toyota may be considering an image rehabilitation campaign. Yet ensuring that Toyota and other auto makers are forthright in disclosing problems, that the Department of Transportation is quick to investigate such complaints and that consumer protection is the top priority will be the focus of the hearings."

Slower CMBS activity ahead?

"With Legacy TALF coming to an end after March, DDR dropping its planned CMBS deal, and few new deals on the horizon, CMBS market may be headed for slower days," says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "If lower activity results in more volatile spreads, that may not be good for the sector."

"DDR was the first to do a new issue CMBS deal last year using TALF. The planned second $300 million deal was cancelled after it was able to raise $300 million by selling equity. Yet the fact that DDR preferred to raise funds elsewhere instead of a CMBS deal, does not mean that CMBS is not needed or that others will not want to take CMBS loans. If DDR had not been able to refinance maturing loans by doing its first CMBS deal in November, it would not have found the equity markets that hospitable."

NewOak Capital Story Ideas for the Week of February 15, 2010

Bank TruPS Defaults: Are They Roiling the CDO Market?

“Just in the past month there have been seven new bank defaults and 20 banks began deferring interest payments on their TruPS,” said Mark Pibl, Managing Director at NewOak Capital and Head of High Yield. “What a lot of people don’t realize is how pervasive these bank trust preferred securities were packaged into CDOs. The cumulative default and deferral rate now exceeds 27%. These CDO structures were not set up to withstand that level of deferrals. To give you an idea how concentrated these deals are, the 24 largest bank TruPS (out of 1,800 issuers) issued $6 billion which amounted to nearly 20% of all bank collateral. More importantly, these 24 accounted for over 66% of the collateral that is either in default or deferring. At NewOak Capital Advisors, we have been helping Bank TruPS CDO investors peel away the layers of the CDO onion.”

Greece - Which Evil Will the EU Choose?

"The US Administration was forced to choose between bailing out the very firms that contributed to the financial crisis or risk a far bigger crisis. The EU now has a similar choice with respect to Greece by either bailing out one of its members or facing the fallout of allowing one of its members to fail," says James Frischling, President & Co-Founder at NewOak Capital.

"The moral hazard and populist backlash likely to ensue from providing a financial package to Greece will be immense, but a failure to act will prove to be far worse Thus Europe now faces a similar dilemma to the U.S. when the government was confronted with the possible collapse of the banking system in connection with Greece's needs. Expect tough talk and major conditions placed on the funds provided to Greece, but the funds will be given with insufficient conditions and the result will be numerous unintended consequences. When people start making money off the bailout, especially some of the very firms that now appear to have contributed to Greece's troubles, expect the anger to intensify."

Greece: The Final Frontier

"Greece's struggle with major fiscal crisis is a recurring theme," says Vincent Truglia, Managing Director of Global Economic Research at NewOak Capital,an asset management, advisory, and capital markets firm in Manhattan. "Curiously, Greece got the assistance it needed in the past even though its Prime Minister was openly insulting (then) British Prime Minister Margaret Thatcher. At the time, political realism was more important than personal slights."

Note: this is a paraphrased excerpt from Mr. Truglia's blog post of the subject. To read the post in its entirety, please click here.

NewOak Capital Story Ideas for the Week of February 8, 2010

Corporate Bonds Begin to Retreat

“Clearly, the market is starting to run into a bit of indigestion issues, “ says Mark Pibl, Managing Director at NewOak Capital and Head of High Yield and Leveraged Loans. “Investors are starting to re-assess their allocations in the face of some of these global macro issues. We have seen this before, as government credit concerns spill over into the corporate market. In these situations, the first thing investors do is sell-down their higher risk positions and assets in order to create liquidity.”

John Thain is back! Can Mr. Fix It Strike Again?

“Shareholders of CIT and small/medium sized companies had a reason to smile today when the company announced John Thain has taken on the role of both chairman and CEO at the commercial lender,” says James Frischling, President & Co-Founder at NewOak Capital.

“While some were less than pleased to see the former Chief of Merrill Lynch return to the limelight, Mr. Thain’s reputation as an executive skilled in restructurings and turnarounds makes this announcement the best thing to happen to CIT since it first participated in the federal bailout in 2008. Despite the short marriage with Ken Lewis and Bank of America and less than positive press bestowed upon him, printing the deal between Merrill and Bank of America saved his former institution from a fate similar to Lehman’s and the thousands of jobs and wealth connected with it. History will look very favorably upon Mr. Thain’s actions during this financial crisis and he now has an opportunity to demonstrate yet again, that in New York City, other than Yankee superstar Mariano Rivera, Mr. John Thain is the best closer in town.”

Restarting CMBS Lending

"Inability to hedge loans while aggregating a pool large enough for securitization is one of the biggest obstacles preventing restarting of conduit lending for commercial real estate properties,” says Malay Bansal, head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan.

“The problem is that Lehman & BOA CMBS indices that worked in the past are no longer appropriate for hedging, especially for new origination loans. Spreads on new bonds with newly underwritten loans cannot be expected to move in tandem with spreads on old bonds which makes the old bonds or indices unusable as a hedge for newly originated better quality loans. Originators want deals with new collateral so they can hedge, and new deals require originators to originate new loans. A new TRX index based on the three new CMBS deals can provide a mechanism for loan originators to hedge loans, and should also be attractive to the investors. It may not be as diverse as desired and may not be perfect, but the new index may be just the thing that lets at least some people move forward with loan origination.”

NewOak Capital Story Ideas for the Week of February 1, 2010

Budget Deficit - Does Size Matter?

"Obama's plan for controlling down the deficit from 10.5% of GDP to 4% by 2014 which will leave us at 73% Debt/GDP will get a lot of focus," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, asset management, and capital markets firm based in Manhattan. "However, the focus should not be the size and timing of the deficit but the quality of spending. The right measure of quality should be how the spending will re-stimulate the economy in the right direction."

"2009's $1.4 trillion deficit wasn't effective in changing the job market but directed mostly to make sure the banking system doesn't colapse. 2010 and beyond should focus on areas where there is a multiple created by private sector."

Fixing the Banking System: Should President Obama Simply Go Back to the Future?

“President Obama's recent announcement of potential banking regulation has good intentions, but could spell disaster for an already ailing economy,” says Amy Levenson, Managing Director and Chairman of Commercial Real Estate Trading & Execution at NewOak Capital. “These past few years have demonstrated that the repeal of the Glass-Steagall Act contributed to an environment where far too much risk was injected into the banking system and it should therefore be re-established.”

However, the Administration is proposing a Glass-Steagall “light” which will likely drive away more jobs and the associated tax revenues than the current disaster has already cost America. The proposal to introduce limitations on all risk-taking and the permanent limits on banker compensation will not eliminate these businesses (or the compensation); it will simply drive the business offshore. This will cost the United States far more than the 400k financial jobs already lost (and far more in tax revenue).

Glass-Steagall effectively segregated inappropriate risks from lending institutions. It allowed good financial ingenuity to flourish, while protecting commercial banks from foolish risks. There’s a quick fix solution here that has already been proven - reinstate Glass-Steagall in its entirety.”

Bailed-Out Institutions: What Were the Use of Proceeds?

“According to recipients of the economic-stimulus funds own report, there were fewer jobs saved/created than originally reported and that continues to fuel the fire surrounding the impact of the $787 billion package,” says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. “Though difficult to gage the program’s success based on jobs saved/created as a result of counting the direct and indirect effects, it’s now clear we're back from the abyss. Voters are weighing in on the debate. As taxpayers and politicians evaluate decisions made throughout the crisis, hindsight risks opening up old wounds. Yet it aids the recovery proess as we can more fully understand where we were in order to ensure decisions will be made going forward with as much information as possible."

NewOak Capital Story Ideas for the Week of January 25, 2010

Exit Financing: The Door Swings Open

“Financing for companies seeking to exit from Bankruptcy proceedings (aka “exit financing) has emerged as the new hot trend in the early days of 2010,”, says Mark Pibl Managing Director at NewOak Capital . “One of the biggest stumbling blocks for companies trying to exit bankruptcy has been their inability to raise this form of financing. Just this month we have seen over $ 3 billion in exit financing for bankrupt companies.”

Should Congress have more control over Federal Reserve?

"The uncertainty on Ben Bernanke’s confirmation as Federal Reserve chairman for second term, and the resulting market turmoil, demonstrate the importance of independence of Federal Reserve from political influence," says Malay Bansal, Managing Director and head of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Till the democrat’s loss of senate seat in Massachusetts election, Bernanke’s confirmation was not in doubt. The election loss made clear the public anger at the current state of the economy, and led to some politicians withdrawing support for the chairman throwing his reconfirmation in doubt. Even many of his detractors credit him for helping bring the US economy back from the brink last year, but fault him for being part of Fed that promoted easy monetary policy for several years. US monetary policy, especially going forward, is likely to require some tough choices from whoever is at the helm at Federal reserve. Some decisions may need to be made that will not be very popular. Allowing the congress to have more of a say or control over the Federal Reserve, as some have proposed, will bring more uncertainty, and will eventually be more harmful to the economy and the main street."

Wall Street Bailouts Have Cost CEOs Their Jobs: What About the Fed Chairman?

"Populist anger and voter concern may cause Federal Chairman Bernanke to have a far tougher confirmation than one would expect of a Chairman hailed a hero by White House officials. Expect the bark to be bigger than the bite." says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. "There be sufficient bipartisan support to award Chairman Bernanke another term?"

"The wild card will be the House hearing Wednesday and continued disclosure of information in connection with the AIG bailout which will bring more negative attention to the Fed and the Treasury. This is the story that won't go away, but with transparency may come closure. The Fed Chairman's strong and steady leadership averted what would have been a far greater crisis. Holding Bernanke accountable for an inability to predict what so many other experts failed to do raises the bar too high. Attacks and negative attention will result in additional volatility in the markets, but we already know the end of this story - Chairman Bernanke gets another term."

NewOak Capital Story Ideas for the Week of January 18, 2010

Proposed Wall Street Tax: A Fight in Supreme Court?

“As the Obama administration attempts to correct the unintended consequences of allowing the Big Banks to be saved by the taxpayer but then keeping the majority of the profits generated as the markets recovered for themselves by proposing a tax on these very institutions, Wall Street’s main lobbying arm is gearing up for a potential legal battle to push back on such a tax,” says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. “While legal experts have differing opinions on the success of Wall Street to win this battle in court, if Wall Street cuts some of the pre-crises extravaganzas and re-structures compensation to be more aligned with its shareholders, this might be a better action than the Supreme Court."

“The fight between Wall Street and Main Street will continue with the Administration trying to levy the playing field until the taxpayer believes the risk and losses incurred from these government bailouts have been recovered or shared far more equally. While many institutions have already returned their TARP funds, the number of programs that supported the banks during the crises far exceeded just the those funds, so the frustration felt by the taxpayer and the administration of taking risk and not sharing in the recovery will continue. This story is far from over."

Stuy Town loan has garnered more attention, but Extended Stay bankruptcy is more interesting

"The Stuyvesant Town story has attracted more attention, but the Extended Stay bankruptcy story has more unusual elements," says Malay Bansal, Managing Director of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Last week, Extended Stay reached a preliminary agreement with Centerbridge Partners and Paulson & Co to provide a $400 million cash infusion to enable the company to emerge from bankruptcy, and judge James Peck gave them a two-month extension of the exclusivity period for filing the restructuring plan. This story includes the original reorganization plan, which was put together by the borrower and some of the investors throwing out the cash waterfall and procedures specified in deal documents and without consulting the trustee or the servicer, who are normally and legally the sole voices for securitization. It involves the investors agreeing to pay the borrower for losses from violating the pledge to lenders in loan documents to not file for bankruptcy. It involves a rival group with several current debtors fighting back with an alternate plan. It involves the Federal Reserve as a debtor holding $900 mm of debt, which could possibly take a loss."

"If the plan is eventually approved, it will be a culmination of a long sequence of events starting with the top-of-the-market $8 billion buy-out of Extended Stay Hotels in 2007 by David Lichtenstein of Lightstone group, who contributed just $200 million of equity and financed the purchase by a $4.1 billion first mortgage and $3.3 billion mezz loan. In June 09, Extended Stay filed for bankruptcy and proposed a plan which may have resulted in Centerbridge and Cerebrus ending up controlling the firm. In September 09, a group including Starwood, Fortress, DE Shaw and Five Mile Partners proposed an alternate plan which has not gained much traction. The Federal reserve ended up holding $900 million of the debt resulting from Bear Stearn’s failure. In the bankruptcy filing, the company estimated its value at $3.3 billion, down from the $8 billion purchase in 2007.”

Unspectacular Eurozone Recovery

"Despite deceleration in growth in Europe in the fourth quarter of 2009, German and French governments lifted their forecast to a steady 1.5% and 1.4% growth for 2010, respectively," says Ron D'Vari, CEO and Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. "This is not spectacular growth but much better than zero growth, as some high profile US fixed income manager have forecast. The primary drivers are export pulled by improving international environment and improved confidence, countering reduction of government subsidies. As most governments start to reduce subsidies and other stimulus spending, it is critical to have domestic consumption-driven growth in Asia to pull the economies of both East and West. It is becoming a reality that Western economies are more and more driven by Eastern demand and lack of dependence on export, and Eurozone is not an exception."

NewOak Capital Story Ideas for the Week of January 11, 2010

Coming HY Refinancing Wave; Where are the Buyers?

“There has been significant discussions about the pending wave of bank loans that require refinancing over the next 2-3 years. Left unsaid is who is going to buy all this new debt?” says Mark Pibl, Managing Director at NewOak Capital and Head of High Yield and Leveraged Loans. “What many people forget is that the last wave of capital raising in 2006-2007 was financed by the CLO investor base. Today those investors and investment vehicles have shrunk significantly. This combination of large refinancing need combined with reduced investor base will create an unique investment opportunity for those still able to invest.”

Banks may be Facing a New Problem

"Recently banks have been big buyer of Treasuries -- that has been good for them, yet it can become a big problem very quickly," says Malay Bansal, Managing Director of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Depository institutions held $145 Bn of Treasuries as of June 2009, and that number is likely higher by now. With cost of financing near zero, a $1 Bn position in 10-year treasuries generates about $38 mm in coupon income annually. "

"A $1 Bn position in 30-year treasuries generates about $47 mm of seemingly risk-free income annually. However, if all rates rise by just 100 basis points, the $38 mm income turns into $85 mm loss, whereas the $47 mm income on long bonds turns to $145 mm loss pretty quickly. Group of six bank regulators jointly warned banks last week to be aware of the interest rate risks they face, demonstrating again that they have learnt from past crises. Fear of rising rates could lead banks to consider doing something other than buying treasuries with the money: perhaps like increasing their lending?”

Public Hearings to Investigate the Financial Crisis: Will This Help -- or Open Up Old Wounds?

“Top bankers and regulators will be down in Washington to testify under oath for hearings intended to create a detailed investigative report on the causes of the financial crisis,” says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. “But if the report suggests that many bailed-out firms were also key contributors to the crisis, it will likely feed anger felt across much of America and further the divide between Wall Street and Main Street.”

“Why? Taxpayers feel they are on the hook for some of these companies and rewards aren’t being shared evenly. Keeping the information secretive may be the preferred course of action from many of the masters of the universe, but the investigative report will now bring it to the surface. Britain may currently be out on its own having already passed legislation to tax bank bonuses, but if the US firms don’t get their houses in order, don’t be surprised if the US takes a page out of the UK’s post financial crisis playbook.”

Detroit Auto Show: Was the Mood Overly Optomistic?

"The Detroit Auto show very much reflects the mood in the US Economy, subdued but optimistic, and some may say overly optimistic," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an integrated advisory, asset management and capital markets firm in Manhattan.

"The big threat has expanded from being Japanese car makers to also Chinese. Ford's plan of selling largely the same vehicles in all major global markets rather than the previous method of designing and building entirely different cars for different markets is just the recognition that world economy has become more homogeneous. While US auto makers have recovered somewhat from the verge of collapse and are promising profitability soon, no one has the delusion that it will be easy street. China's threat and 2009 car sales slump are good catalysts for the US auto industry to become more global and efficient."

NewOak Capital Story Ideas for the Week of January 4, 2010

Will Investors Need to Modify Return Expectations for 2010?

"After seeing 60+% type returns on high yield bonds and leverage loans in 2009, will investors will need to modify their return expectations for this asset class for 2010?" asks Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "If history is any indicator, we believe yes, but the high yield sector will still return a healthy double digit (mid-teens) return, but with a lot less risk."

“In the first year after the 1990 and 2002 credit crisis, the high yield markers returned 30-40+%. However, during the second year after the credit crisis, the HY market returns moderated towards 10-14%. With a current yields of approximately 9% and an expected price gain of 4-5%, NewOak Capital is forecasting a 2010 total return of low teens (12-14%) for the high yield bond market. More importantly, we are expecting defaults to moderate substantially from the 2009 peak of 14% towards 6-8% for 2010 as liquidity and equity refinancing options return for troubled companies, thus creating a safer environment for which to invest. Our only caveat to our return forecasts would be either a i) "double-dip" recession or ii) a significant spike in Treasury rates. The latter having a higher probability of occurring than the former."

Is Fed Chairman Bernanke kicking off the 2010 blame game?

“Recently Fed Chairman Bernanke kicked off the 2010 blame game arguing stronger regulation and supervision of financial institutions would have been more effective than higher interest rates in averting the financial crisis of the past two years,” says James Frischling, President & Co-Founder at NewOak Capital , an asset management, advisory and capital markets platform in Manhattan.

“Despite the truth and accuracy of his comments, Bernanke’s aggressive stance seems like a political strategy now that his nomination for a second term awaits Senate confirmation. “True, in the end, everyone generally acts in their own best interests. Self-regulatory can be synonymous with self-serving. So as regulatory changes become the hot topic for the year ahead and the Wall Street Lobbyists prepare to challenge and combat meaningful changes to an exposed, flawed and essentially broken system, remember what Fed Chairman Bernanke put forward as his choice for the top-ranking contributor to the crisis: poor underwriting practices and risk management. Therefore, this was a crisis caused by human capital.”

Regulatory Actions: Criticized but Eventually Positive for CMBS

"The final version of the recently passed Wall Street Reform & Consumer Protection Act of 2009 (H.R. 4173) removed the requirement for banks to retain 5% of CMBS securitizations when there is a third-party B-Piece buyer doing due-diligence,” says Malay Bansal, Managing Director of Portfolio Management and Advisory for Commercial Real Estate & CMBS at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “This is a positive, but did not get much reaction from the market. Without this concession, combination of HR 4173 and FAS 167 would have been a self-inflicted fatal wound for new issue CMBS origination by banks. On another note, the guidance from agencies to make it easier for servicers to modify loans has been heavily criticized as extend-and-pretend or delay-and-pray. Yet, so far servicers seem to be handling extension requests in a prudent manner. Despite fear of misuse, giving servicers flexibility to avoid forced fire-sales is a positive step for the market.”

“Avoiding forced fire-sales seem to be a common unstated theme behind many of the regulatory actions in this crisis. Lack of these fire-sales has prevented asset prices from going down even more, and has frustrated many who have raised funds for investing in distressed assets. Many expect a repeat of the crisis of the early 90s when a lot of money was made by buying cheap assets sold by FDIC, but FDIC seems to have learnt from that experience too, as can be seen from steps like FDIC asking bidders to offer the agency a chance to profit if they benefit. Do fire-sales lie ahead or can they be avoided? Those waiting to buy cheap assets certainly expect that they will, but the authorities and the owners of these assets will try to avoid that as much as they can. What will happen? Only time will tell.”

Will The U.S. Outperform Most Developed Economies This Year?

"This year, the US will outperform most developed economies,” says Vincent Truglia, Managing Director of Global Economic Research for NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. " Most people forget that even in capitalist countries, one of government's main historical tasks has been to allocate capital. The Federal takeover of colonial debt, the Erie Canal, the building of the transcontinental railway, the national highway system, etc. were all aided by government backing. In the 1980's and 1990's, we went through a short but inevitably failed belief that government can never do it right. Government saved capitalism in 2008-2009. Because of on-going government action, 2010 will be a banner year for US growth, with GDP growth moving to trend, if not even above trend. The Fed can sit back and wait since slack will remain until the end of 2011 at the earliest."

NewOak Capital Story Ideas for the Weeks of December 21 and December 28, 2009

TARP: Was It Easier Getting In … or Getting Out?

"While several TARP recipients have been able to exit the program by re-paying the Treasury Department with ease and speed, others are struggling to raise the necessary funds and negotiations between the banks and Treasury has been anything but easy," says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. "With so many variables and nuances to the situation there's no simple way to pay back the money without there being a debate. The health and strength of the entity, the amount of capital that needs to be raised, the price for the shares and the timing of the exit are all important and highly debated issues."

"The Government wants the TARP funds back to highlight the success of the program, but allowing the money to be returned too quickly and risk a bank's relapse to a less than healthy institution would be problematic. President Obama has compared this dilemma to a parent allowing a child to stop taking mediation before the prescribed dosage is completed. However, with so many TARP recipients having now returned the money, the last remaining institutions want their chance to go out and play, so returning the funds has become their number one priority in the re-building process. Let's welcome the money back and then hope these children can stay healthy and out of trouble."

New Issue CLOs: Wishful Thinking?

“There is a considerable amount of talk in the market regarding potential for new CLO issuance,” says Michael Khankin, CFA, Director of Structured Credit Portfolio Management at NewOak Capital, an Asset Management, Advisory, and Capital Markets Platform in Manhattan. “Clearly CLO managers, bankers, traders, current CLO investors, and, less directly, the loan issuers themselves want to see this market recover. Grabbing headlines this week was a first new issue in two years priced by Wells Fargo - a $275mm middle market CLO. Though Market players hoped the floodgates for new issue CLO were going to burst open, the Wells Fargo deal was unique in that it was made up of "middle market" loans, or loans to small companies. Some of these loans are yielding higher than 10% hence financing about half the cost at just over 300bps over LIBOR makes sense for the issuer. The deal is static and short - a balance sheet financing for a player with limited direct access to the capital markets.”

So are new issue CLOs wishful thinking? Given the massive rally in loan prices this year, with many loans trading in the $80s and $90s, yields are not significantly wider than the secondary AAA CLO spreads - making such financing uneconomical. And unless you have some really cheap loans the CLO liabilities are generally trading at a discount to the portfolio after taking fees and expenses into account. So until AAA spreads come in another 100 - 200 bps relative to loans, we shouldn't expect to see a deluge of issuance. However I'd think that with the traditional AAA CLO buyer base having gained a new appreciation for liquidity risks and leverage embedded in structured products over the last couple of years this may take longer than many would like to anticipate.”

Bank Failures Resolution - Can Suspicion Get in The Way?

"Private pools of capital targeting to buy failed banks are certainly in vogue," says Ron D'Vari, CEO and Co-Founder of NewOak Capital, an integrated asset manager, advisory firm, and capital markets firm based in Manhattan.

"Yet the list of weak banks is growing. Getting regulatory approval is harder than raising capital for investing in failed banks. Does this sound like a dicotomy? Perhaps. Yet appearances may suggest that if private equity firms are making money then tax payers must be losing money. We would collectively be better off if the bank recapitalization happened sooner than later and we didn't let the suspicion get in the way."

NewOak Capital Story Ideas for the Week of December 14, 2009

New Issue CMBS TALF – Not getting used much, But is still needed

"Given that, of the $1.26 Bn in new issue CMBS this year, only about $80 MM was done using TALF, it might seem like an easy conclusion to reach that the CMBS market does not need TALF anymore, but that may not be the right conclusion," said Malay Bansal, Managing Director of Commercial Real Estate Asset Management & Advisory Services at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "These deals have benefited from being the first ones after no deals for 18 months and the pent up demand from dearth of new deals. More importantly, these deals are single borrower deals where the loan originator did not take risk of bond spreads, which was borne by the borrower. Real test of CMBS market functioning well will be multi-borrower deals where the loan originator will have to take the execution risk on bond spreads. Those deals will take time and will need all the help they can get. At the end of the day, TALF acts as insurance, and is useful even if it is not used heavily."

What Happens When You Feed a Fat Cat?

"The Obama administration is aggressively trying to 'persuade' Wall Street to curb lavish bonuses and increase their lending operations," says James Frischling, President & Co-Founder at NewOak Capital, an asset management, advisory and capital markets platform in Manhattan. "However the 'Fat Cat's' (as Obama recently called Wall Street bankers) have been fed and brought back from the abyss by bailouts deemed necessary to stave off a potentially greater crisis."

"What will motivate Wall Street not to pay out large bonuses, or increase lending operations, when improving their balance sheets is still a top priority? Is the expectation that this should happen because it would be nice or the right thing to do? The very firms and banks that contributed mightily to the financial crisis are largely the same firms that received government aide and support. You want change you can believe in, then help change the players, don't reward the ones that caused the problems and then expect things to be different."

Markets: 2010 Starting Gate's Critical Tests

"The global economy is setting up its maiden flight under the new market realities and will go through critical testing in the next 12 months," says Ron D'Vari, CEO and Co-Founder of NewOak Capital, an Asset Management, Advisory and Capital Markets platform in Manhattan."

"The finishing lap for 2009 brings positive news for the New Year. Many large US/UK banks have announced raising equity to pay backTARP obligations or reduce participation in Asset Protection Scheme (including Citi, Wells Fargo, Lloyds, and RBS). Abu Dhabi has also moved to rebuild trust in the middle eastern markets by extending $10 billion bail-out to Dubai; Increasing signs suggest SWFs are now back in evaluating new investments after being gun shy while they were grappling with their earlier investments; Greece finally recognized a serious corruption problems throughout the administration and public procurements; Bank regulatory reform efforts in the US are shaping up to be milder than experts worst expectations; and Asia-ex-Japan is worried about asset bubble rather than deflation.

However challenges in 2010 will involve achieving self-sustained growth in the west, shoring up US housing problems, reversing job losses in US and Europe, motivating banks to lend to consumers and small-to-medium size enterprises, normalizing mortgage lending, and addressing commercial real estate refinancing issues.

A significant enabler will be to gradually revive the securitizations market. New Issue TALF ABS and CMBS and CLOs are badly needed to facilitate transition to a more normalized environment for unsecured consumer loans, CRE mortgages, and senior-secured leverage loans. The critical test will be to watch progress in all these areas across the board."

NewOak Capital Story Ideas for the Week of December 7, 2009

GGP loan modifications – good news for CMBS, but a bad precedent?

"GGP loan modifications agreed to as part of the reorganization plan seem to have more favorable terms for lenders than many had expected," says Malay Bansal, Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Borrowers agreed to pay catch-up and additional amortization on all loans, agreed to pay special servicing fee, expenses, and a 100 bp modification fee, among other terms. That is positive as it removes uncertainty on 90 loans with $9.7 Bn balance, which move back to performing status, even though extensions will have differing impact on different bonds. However, the fact that borrowers were able to get loan modifications with extension of 5.2 years on average, may be setting a precedent which will make it easier for others to ask and try for similar extensions. ”

Did The UAE Central Bank Act Quickly Enough?

"The decision by the UAE Central Bank to provide a liquidity facility for the Dubai banks will reassure investors that the banking system is not on the brink of a collapse," says James Frischling, President & Co-Founder at NewOak Capital , an asset management, advisory and capital markets platform in Manhattan. Yet what do Dubai's issues say about other countries that may have taken on too much debt -- specifically for real estate projects?

"The cost of capital just got higher, even for some developed Western countries," says Frischling. "The UAE Central Bank acted quickly, yet the full effects of the crisis continue to be masked by government spending. Emerging Markets and other sovereign debt issues are clearly a cause of concern for investors."

Credit Conditions: Signs of Improvement?

"Faint and tentative signs suggest the credit conditions at the bank-to-business level are starting to improve," says Ron D'Vari, CEO and co-founder of NewOak Capital, an integrated asset management, advisory, and capital markets in Manhattan. "Of course the public markets of bonds have been improving for some time as evidenced by tightening spread trends and new issuance before the Dubai surprise. Some even consider the secondary bond and leverage loan markets way ahead of itself because of demand and supply imbalance - i.e. over eager investors and not enough supply. However down in the trenches small and middle market enterprises were not getting much attention due to much reduced origination activity and some say the banks' focus on secondary trading and profit making."

"Now that trading opportunities have become more symmetric, anecdotal evidence suggests some banks are moving toward setting up lending programs for the companies that want to take advantage of the expected economic recovery on the way and need to shore up their working capital to size their operations to the forecast increased sales. History shows a chicken and egg paradox in such transitional times yet there are signs of improvement in the environment overall," says D'Vari.

NewOak Capital Story Ideas for the Week of November 30, 2009

Tracking the Money Flow: Into High Yield and Out of Leveraged Loans

“Diverging trends of money flowing into high yield and out of leveraged loans have recently been reported,” says Mark Pibl Managing Director at NewOak Capital and Head of High Yield and Leveraged Loans. “ This is a very interesting dynamic and may foretell how these sectors may perform going forward. For all of 2009, the money flows into both assets were very strong which drove impressive results during the year. The fact that investors are taking money out of leveraged loans (the perceived safer asset class) and continuing to deploy into high yield highlights the investor desire to stretch for yield. “ The only question still to be answered is this: does leveraged loans actually sell-off as money flows out of the asset class? My bet that it does.”

The Federal Reserve or another Risk Regulator: Which Devil do You Want?

"The standard operating procedure for officials heading into confirmation hearings is to maintain a low profile, but Fed Chairman Bernanke clearly decided to go in a very different direction," says James Frischling, President & Co-Founder at NewOak Capital , an asset management, advisory and capital markets platform in Manhattan. "The Fed Chairman's writing a column for the Washington Post ahead of the December 3rd hearing should highlight how much he feels is at stake with respect to the financial reforms being proposed by the House Financial Services committee and the Senate Banking committee. "

"The Chairman clearly wants the issues out in the open as opposed to trying to get his points across under what will prove to be some uneasy questioning. Chairman Bernanke's number one objective is to have the Fed maintain its independence and remain immune from political pressure. With the Great Depression Part II scenario largely off the table, people are now understandably moving onto the 'blame game'. Chairman Bernanke admits that the Federal Reserve could have done better, but this was a crisis that belongs to so many different groups and people (meaning: there's plenty of blame to go around)."

"Putting the blame on the Fed notwithstanding the arguments that the actions and specifically the number of unintended consequences that resulted from the bailouts are unfair and truly bothersome, wouldn't be right. Until a proposal is put forward that would provide for a better overall system, the administration's proposal to make the Fed the lead regulator of risk across the financial system is the devil to stay with," says Frischling.

Marathon - Seeing Through the Credit Crisis

"Think about it: Up to 8 million home foreclosures. Double digit national unemployment. Idle cranes and deserted buildings in North Miami. And now Dubai's attempt at restructuring its debt. Clearly one can doubt the economic recovery and be bearish on the market rebound since the March lows," says Ron D'Vari, CEO and co-founder of NewOak Capital, an integrated Asset Management, Advisory and Capital Markets firm in Manhattan.

"Yet there are other forces – a cheap dollar, unprecedented low global interest rates, coordinated international stimulus spending, and powerful growth in China and Asia driven partially by aggressive policies and partially by demographics."

"China has just introduced its version of "clunker" trade-in offers featuring tax rebates for domestic appliances and fuel-efficient autos. Such policies have helped Chinese retail sales grow 16.2 percent this year so far. On the demographics element, Reuters reports that analysts estimate just newlyweds in China can scoop up 450 million square meters of housing a year, more than 16% of currently under construction housing supply."

"While the pain and shock of credit crisis is deep and immediate in the US and the West, the healing power of the global stimulus, low interest rates, and consumption growth will take time. Absent major surprises destabilizing the global financial system, the credit crisis should be a catalyst for a more balanced, stable global economy and financial system in the long term. When we look back five years from today we will view the changes from a different perspective, and that is challenge of being a long term investor," says D'Vari.

NewOak Capital Story Ideas for the Week of November 23, 2009

Misplaced Optimism from the DDR deal?

"Pricing of the DDR deal at better than expected spreads is undoubtedly a positive for the CMBS market, but it may have resulted in some misplaced optimism in the market," says Malay Bansal, Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "DDR and the follow-up deals will be single-borrower deals. Hopefully that will encourage conduit lenders to start originating new loans at some point, and with lower LTV on new loans, these deals will attract investors, as clearly demonstrated by the pricing on the DDR deal. However, commercial real estate prices, as measured by Moody's/REAL index, are down 42.9% from the peak and have now retraced all the price gains since Sep 2002. New loans will be based on these new lower values, and that would not be helpful to the legacy BBB and BBB- bonds. CMBX BBB and BBB- bond prices were up 1 to 4 points last week while AAAs were down slightly, but any optimism for those bonds from the DDR deal will be misplaced. Bottom of the stack needs to adjust, and senior bonds are still the best place to be in legacy CMBS."

Financial Reform - Can We All Have A Dialogue?

"There is a general trend in the opinion of experts in the last two years that there are fundamental flaws in the global financial system responsible for the current credit crisis. Of course a few years back very few believed or voiced such flaws existed. Some have attributed the failure to the short term profit maximizing behavior ingrained in banks, financial institutions and risk arbitrageurs, others have blamed the regulators and regulatory framework. The knee-jerk response has been to revamp the supervisory systems by redefining the scope, boundaries, and structure of regulation," says Ron D'Vari, CEO and Co-founder NewOak Capital, an integrated advisory, capital markets, and asset management firm.

"Instead of jumping into legislating financial reforms, shouldn't we have a more collaborative dialogue to see if any of the enterprise transformation research that have been produced in the last several decades can be directed to the needed financial industry transformation to avoid future unacceptable systematic risks? Key is how one (society or financial industry in conjunction with government) goes about promoting and institutionalizing principles, processes, behaviors, and tools for the soundness of the entire financial system while maximizing the long term expected GDP growth and acknowledging the unavoidable short term profit maximizing behavior by individuals and institutions. The answer may be that in aggregate we may have to sacrifice (i.e. lower long term GDP) in order to reduce the risk of financial destabilization once every 50 years. However, it has not been clear who and how the choice is made."

Why won’t this AIG Back-Door Bailout Story Go Away?

“If it looks like a duck, walks like a duck and sounds like a duck, sometimes, it is a duck,” says James Frischling, President & Co-Founder at NewOak Capital, an asset management, capital markets and advisory platform in Manhattan. “This AIG story and especially the idea that Wall Street firms were given some kind of back-door bailout won’t go away because too many people believe there are still too many questions left unanswered. And no one involved is coming forward with the detailed information necessary to put this issue to bed. “

“TARP watchdog Neil Barofsky ‘s report continues to challenge some of the statements and assertions made by people and firms that were part of the AIG bailout. The single largest use of taxpayer dollars were allocated to AIG, so everyone should expect an audit and forensic due diligence of the situation to occur before this story is dropped.”

“We are facing a situation in which ‘correct decisions’ were made under duress. Secretary Geithner (and others involved in the process) should share what they know. If mistakes were made along the way, so be it. If we learned anything from Major League Baseball with regard to the steroids issue it is that admissions and apologies gained one favor. Denial the opposite. “

“While this jobless recovery suggests we’re far from out of the woods, the economy is in a far better position today as a result of the aggressive actions taken by the Fed & Treasury. Let’s pull back the curtain on the AIG story once and for all. Let us collectively understand the good, the bad and the ugly associated with that bailout and move forward.”

NewOak Capital Story Ideas for the Week of November 16, 2009

Winning by Losing

"What is the role of the market system in relation to the credit crisis?" says Ron D'Vari, CEO and Co-founder of NewOak Capital, an integrated asset management, advisory, and capital markets. "It is a natural question."

"Short term incentives in the banking system and unwise government protection (GSEs and deposit insurance) over the last decade has led to unprecedented over allocation of debt capital and leverage to the real estate sector. Instead of a productive economy fueling real estate through saving and equity stake, cheap loans fueled real estate prices and ill-conceived new developments. Now that it all has abruptly stopped, real estate prices have come back to their mean trend line and are bound to under shoot on the down trend. It all looks ugly at this moment and it appears we are losing badly. However, in the long run the credit crisis could be viewed as facilitating a long over due transition of Western economy to higher saving rates and export-orientation in support of growth and consumption in the East. In the end the current credit crisis in the West and lower dollar is helping us to change our behavior and reallocate our resources to transitioning from real estate and consumption based economy to saving and production based economy. That is winning by losing."

Can you Fight the Problem of Leverage with Leverage?

"Leverage is like alcohol, it makes good times better and bad times worse," says James Frischling, President of NewOak Capital, an asset management, advisory and capital markets firm based in Manhattan. "Leverage itself isn't a bad thing, but applying leverage to less than solvent assets is a recipe for disaster. To a certain extent, it was a key driver of this financial crisis. The demand for the $400 million of bonds backed by the Developers Diversified Realty Corp is a strong indication that when you have quality assets and apply the right amount of leverage, you're going to deliver a product that attracts a great deal of attention. That's what the Federal Reserve's TALF program is trying to achieve by offering to play the role of the temporarily sidelined private sector in terms of providing the financing to quality commercial real estate securitizations. If orchestrated and managed correctly, expect to see the spreads on these commercial assets driven tighter. In time the government's role in terms of providing the financing will be phased out. In short, yes, you can fight a problem caused by leverage with leverage. The long term success, however, will depend on the markets learning from history as opposed to repeating it and remembering that quality assets and proper levels of leverage must always be part of the equation."

Can Creative Retraunching Conserve a Bank's Capital?

"When it comes to "partitioning" technology (or tranching) in the credit marks, earlier cash flows are less risky than later, or back-end, cash flows," says Andrew M. Akers, a Managing Director at NewOak Capital, an asset management, advisory, and capitol markets platform in Manhattan. "In a recent policy statement targeting non-performing commercial real estate loans the Federal Reserve gave its blessing to banks to apply the concept of 'good-bank/bad-bank' to individual loans, i.e. 'good asset/bad asset.'"

Consider a loan made to a mall developer. As mall tenants close up and vacancy rate rises, the loan's performance becomes increasingly questionable. At some point, the bank might need to put the loan on non-payment status. Under the adopted guidelines, rather than putting the entire loan on delinquent status, the bank could partition the loan into a performing part and a non-performing part. Such a retranching could conserve a bank's capital by properly reflecting an institution's risk."

NewOak Capital Story Ideas for the Week of November 9, 2009

LBO – without the Leverage

“We are seeing a reemergence of the LBO, just without the leverage” says Mark Pibl, Managing Director at NewOak Capital and head of high yield and leveraged loans. “The current TASC deal will have only 5.75x leverage (debt/ebitda) through the capital structure which is significantly less than in the hey days when 9x debt/ebitda was the norm. However, I have seen this trend before. After every credit crisis (1990-1991, 2002-2003) over the past 20 years, leverage financing multiples crash to very modest levels in order to get the deals done, but over time creep back-up.”

How Low is Low

"The US dollar continues to fall against most currencies and has reached its lowest level for more than 15 months (before Lehman's bankruptcy). Despite this, Europe has been able to surprise us on the upside on industrial productions and exports. Recent US dollar moves have been driven by G-20's continued commitment to keep stimulus posture on and Federal Reserve's stance on maintaining the interest rates low," says Ron D'Vari, CEO and Co-Founder of NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan.

"The persistent rising unemployment, residential delinquencies, and foreclosures in the US provide some level of confidence that the "punch bowl" is not going to be yanked away anytime soon, and this fuels the equities, oil and gold to their new highs. Investors' confidence and continued risk appetite are also driven by the same forces. For now, the US dollar needs to slide even further in order to bootstrap the US economy out of the subprime shock it has not yet been able to shake off almost in four long years."

What happens when trillions fight with billions?

“The unemployment rate continues to climb higher and consumer confidence remains low, but the stock market continues to rally. Can we really hope for a jobless recovery?” asks James Frischling, President at NewOak Capital, an asset management, capital markets and advisory platform in Manhattan. “After watching professional American athletes strike against their league owners, I’ve learned that when millionaires fight billionaires, it’s the billionaires that come out on top. “

“ Just like our economy, now facing billion dollar problems, but the government is confronting them with trillion dollar commitments and has made the decision to win this fight. The bulls are betting on the government and their commitment to throwing enough money at the problems to fix it. The expansion of the US deficit and the tremendous borrowing must come with a cost attached to it, but how far out in the future will the bill for all this come is an open debate.

“Stock market bulls believe that following the collapse of Lehman and the plunging stock market, the US government made the decision that the financial system was too big and important to fail. Aggressive actions were taken to give confidence that our banking system could wobble, but not fall down. For those that argue that the government is merely throwing kerosene on the fire in order to keep it going and that without the stimulus we’d be in far worse shape, recognize that the government has a lot of gas in the tank. So yes, you can in fact fight billion dollar problems with trillion dollar solutions.”

NewOak Capital Story Ideas for the Week of November 2, 2009

Foreign Investment…….Manhattan Real Estate’s Ace in the Hole

“Various sectors of Manhattan real estate have fallen approximately 40-60% from the 2007-2008 peak,” says Jon Fischer, Managing Director of NewOak Capital, LLC, an asset management, advisory, and capital markets firm in Manhattan. Citing figures from Massey Knakal Realty Services. Real estate sales activity has likewise plummeted. “Unless you’ve been living in a cave, you’re now quite familiar with all of the ‘For Lease”’ signs that traverse the City’s landscape, and in particular Madison Avenue. As we start to look around the corner towards a ‘slow and prolonged recovery’, or as some say ‘a jobless recovery’, it is important to revisit some of the economic realities that are peculiar to the Manhattan marketplace. Wall Street firms will eventually rebound, and with that increasing residential prices are likely to ensue. Slowly, stalled condo projects will transform themselves into rental apartment complexes, and vacant stores will gradually become occupied…..albeit at significantly reduced rental rates. Furthermore, due to the weak dollar, international capital is now beginning to flock to the U.S. in ways reminiscent of the early 1990s when Japanese and European investors flooded the Manhattan office markets. Earlier this month a Central Park West penthouse unit sold for $37 million to a Russian investment fund, and an Israeli fund purchased the HSBC bank’s headquarters building in Manhattan for $330 million. Russian investors have been particularly active with Mikhail Prokhorov purchasing an 80 percent share in the New Jersey Nets basketball team and a 45 percent stake in Atlantic Yards, a real estate development in Brooklyn where the team will play if the project is approved and constructed. With real estate transactions crossing international borders, foreign investment may just well be Manhattan’s ace in the hole towards recovery.”

Will Big Banks Strangle The Economy?

“Big banks without real conditions to lend and distribute funds into the system are going to strangle the economy. Real job creation is done not at the big banks, but at the small company level,” says James Frischling, President and Co-Founder at NewOak Capital, a capital markets, advisory and asset management platform. “Banks under pressure from the Treasury Department to hoard cash to protect themselves from another crisis doesn’t bode well for the smaller market players. True, banks got far too aggressive in the years leading up to the credit crisis, yet now the pendulum has shifted so far the other way the largest and most assisted institutions may be the only ones standing in the end.”

“Aside from Lehman,” Frischling continues, “the largest financial firms were saved because of the systemic risks they posed to the economy. Yet now it’s smaller banks and companies gasping for capital. The big firms coming out of this crisis ahead of their competition are putting up trading revenues and grabbing market share faster that kids reach for candy at Dylan’s Candy Bar. So what about the little guy? This should have been their moment: they’re smaller, more agile and were ready to fill the void left by the fallen dinosaurs. It’s clear that at least one thing happened to change the course of history, the dinosaurs weren’t allowed to die and as a result, they’re still the ruling the earth.”

Post-Recaps: Oust Bank Management?

Vincent Truglia, Managing Director of Economic Research said, “If a financial institution fails or requires an injection of cash from the government to survive, then senior management and the board should be completely replaced. Such management should be precluded from working in the future in banks or other financial institutions. All performance based future pay should be forfeited by them. These people have a fiduciary responsibility, which if they don’t or can’t live up to, then they should pay a heavy price. I always say that if you tell me how someone is paid, I can tell you how they will behave.”

NewOak Capital Story Ideas for the Week of October 26, 2009

Has the Rally in the REIT Sector Jumped Ahead of Fundamentals?

“Over the coming week, several benchmark REITS (Boston Properties, Avalon Bay Communities, and Simon Properties) will report third quarter earnings,” says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital, an Asset Management, Capital Markets, and Advisory firm based in Manhattan. “Many astute investors will look to the quality of earnings reported by these companies in order to ascertain the deterioration occurring within the various sub-segments of the real estate market. Of special interest will be Boston Properties which will provide a window on the Northeast office property market. Avalon Bay Communities will provide a window on the luxury rental market. Simon Property, which manages regional retail malls, will give us a sense as how the all important Christmas selling season is shaping up. The stocks of these REITs have rebounded along with the rest of the stock market, but concerns remain if the rally in this sector has gotten ahead of the fundamentals.”

For Mr. Pibl's bio, click here

Is Growth Back on Track?

"Most economists agree the downturn has stabilized," says Ron D'Vari, CEO and co-founder of NewOak Capital, an integrated advisory and capital markets group based in Manhattan. "Yet it may be a while before we know we are on a steady growth path. Should we be trying to figure out the impact of the eventual rising global interest rates? Pundits my agree it is no time for across the board rate hikes, It yet smart investors are already developing views as to how rate hikes would potentially impact global equities, bonds, commodities, and currencies going forward. After the Lehman bankruptcy last fall who would have been even thinking that just a year later we would see robust growth across Asia and actual rate hikes in Australia? Authorities in many countries including Korea and India have already indicated considerations of rate adjustments and others will follow when more confident that the global stimulation effects have a longer term effect," adds D'Vari.

"While it seems too early, the rate and currency volatilities going forward have already worried the leaders of East Asian countries who have called for “serious” talks on currency co-operation to avoid recurrence of violent fluctuations affecting regional trade tentions. As different countries adopt their own rate timing and policies, the relative currency movements will play a key role in determining regional growths and financial market movements. Longer term dollar, euro, and yen relative trends will be paramount and are key to watch even if you are not investing internationally," says D'Vari.

For Mr. D'Vari's bio, click here

Too Big to Fail?

“The chatter to start the week is the Obama Administration and House Democrats pushing ahead with legislation giving the federal government the power to wind down the financial firms that are deemed too big to fail,” says James Frischling, President and Co-Founder at NewOak Capital, the asset management, advisory and capital markets firm in Manhattan. “While the quick response from the Wall Street contingent is decidedly negative to such an announcement, I think it’s fair to say that the pendulum needed to shift and the industry should brace itself for a far more regulatory intensive environment. It’s simply not possible to go through the most significant financial crisis since the Great Depression with unprecedented bailouts and use of tax payer dollars and not expect there to be costs and changes associated with such help. The help didn’t come for free and the largest firms should expect far greater scrutiny and an even an increase in costs in connection with running such large and integrated businesses. If you’re too big to fail, going forward, you too big to be regulated lightly.”

For Mr. Frischling's bio, click here

Will Media Coverage of Peter Cooper Village/Stuy Town Make CMBS Losses more Likely?

"Wide media coverage of the Peter Cooper Village & Stuy Town loan might make a CMBS loss on that loan more likely," says Malay Bansal, Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Media has widely reported that the value of Peter Cooper Village/Stuy Town properties, which were purchased for $5.4 Bn in Nov 2006, is now estimated to be less than $2 Bn. Normally the low estimates do not matter. What really matters is the highest bid or the price one – just one - buyer is willing to pay. Valuation of properties like this is not totally a science, and it is entirely possible for one buyer to put a higher valuation on it than others based on their view of possible upside. However, in this case, such a wide dissemination and knowledge of the $1.8 to $1.9 current valuation numbers, might make it difficult for someone to put a higher valuation on it, even if they otherwise might have done so. With reserves running out, special servicer may not be too keen on taking over the properties. That will make it more likely that they will end up accepting losses on the $3 Bn senior loan, included in five different CMBS deals, and modifying it for whoever emerges as the new owner.”

For Mr. Bansal's bio, click here

NewOak Capital Story Ideas for the Week of October 19, 2009

Solving the Chicken-and-Egg Problem is the key to restarting New Issue CMBS market

"Originators want to originate new loans, investors want to buy bonds with new conservatively underwritten loans, Treasury & Federal Reserve want the new issue CMBS market to start, borrowers certainly want to take out new loans to refinance maturing loans, and yet, four months after the Treasury launched the program, not one new issue CMBS deal will have come to the market – highlighting the chicken-and-egg type problem that the CMBS market faces ," says Malay Bansal, Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "Everyone knows that the new origination will be of higher quality and so should have tighter spreads than the legacy bonds. Yet, lacking an efficient hedge, all that the originators have for indication of spreads are the legacy bonds, which are still too wide for new issue deals. In other words, originators are looking for tighter and stable bond spreads to originate, and market is looking for new collateral for tighter spreads – sort of a chicken-and-egg type problem. One solution is to wait till legacy bond spreads tighten and stabilize, giving loan originators more confidence, but that might mean new issue TALF program may not get much traction before it ends. Another approach is to accelerate the legacy TALF program by removing some of the uncertainty that borrowers in that program face today. There are two easy to implement steps that will be helpful and allow investors to buy bonds throughout the month, rather than waiting till just before the TALF subscription date. First, the price used for calculating loan amount can be adjusted for interest rate movement from purchase date to the subscription date, and second, Treasury can allow potential borrowers to submit a list of potential bonds for purchase before actually buying the bonds, with approvals announced two or three weeks before the subscription date.”

For Mr. Bansal's bio, click here

High Yield Market: Have Default Rates Peaked?

“While loan defaults have jumped to nearly 10% with the “shadow default rate” trending above 12%, the market is actually anticipating that default rates have peaked,” said Mark Pibl, Managing Director at NewOak Capital, High Yield and Leveraged Loans. “Part of the rally we have seen in high yield bond spreads is driven by this expectation. Simply said, there is a lower default probability being attributed to high yield spreads. Liquidity has returned allowing troubled credits to raise capital and restructure their debt, resulting in lower default rates.”

For Mr. Pibl's bio, click here

US Deficit: Pay for it Today or Tomorrow?.

“The Treasury reported the 2009 fiscal year deficit at $1.4 trillion or about 10% of the US’s gross domestic product, its biggest deficit since World War II,” says James Frischling, President and Co-Founder of NewOak Capital, an asset management, advisory and capital markets firm based in Manhattan. ”The politicians are going to use this number as a lightening rod to cast blame on one side or the other. The Democrats will blame the Bush administration, which inherited budget surpluses, but left with deficits. The Republics will blame the Democrats for their supporting the stimulus package and the continued spending and bailouts that are being used to thwart and turnaround the financial crisis. In the end, it’s both parties collective decision to combat an economy that is struggling as a result of excessive spending, borrowing and leverage with additional spending, borrowing and leverage. And since our government’s officials reflect the views of the citizens that elect them, then it’s safe to surmise that the majority of this generation would like to put off the pain that comes from running deficits of this size onto another generation. Someone will have to pay for this, but why pay for something today, when you can put it off until tomorrow.”

For Mr. Frischilng's bio, click here

Empathy for Citigroup? Not!

“Today’s top news story are replete with articles expressing empathy for Citigroup. The sympathy stems from the ironic fact, depending upon which prism you look through,” says Amy Levenson, MD and Chairman of Real Estate Loans and Properties at NewOak Capital, a Asset Management, Capital Markets, and Advisory firm in Manhattan. “The US government ownership over Citigroup now makes it a government entity. This sad fact further ‘hurts’ Citigroup, the media states, because it now violates Mexican law prohibiting foreign governments from owning a stake in Mexican domestic banks. The Mexican Supreme Court is set to review this case this week. The source of pity stems from the reality that Banamex, Citigroup’s Mexican bank, and “the brightest jewels in the groups’ damaged crown” accounts for roughly 15% of global profits. In fact, it could be worth $20 billion.”

“The sympathy is misplaced.The reality is that a forced sale of Banamex could be the best thing to happen to Citigroup. If Citigroup can NPV the 15% of global profits, or alternatively, sell it for anywhere near the $20 billion it is estimated to be worth, that could be great news. If Citigroup gets even $15 billion for this entity and directs 100% of that $15 billion to shore up its struggling capital adequacy ratios, it would give the bank the flexibility to sell another $170 billion or more of troubled assets. Ironically, this would serve not to weaken, but to STRENGTHEN Citigroup, and get it closer to a healthier balance sheet and towards a bank making new loans as usual. Of course this scenario is predicated upon the natural presumption that Vikram Pandit would take the proceeds of a forced Banamex sale and use the proceeds in the most optimal way for the bank and the US economy----hopefully, the second half of this equation is a natural presumption for Citigroup’s management.”

For Ms. Levenson's bio, click here

NewOak Capital Story Ideas for the Week of October 12, 2009

U.S. Mortgage Backers; Do They Need Bailouts?

Vincent Truglia, Managing Director of Economic Research at NewOak Capital says, "FHA and Social Security are products of the Great Depression. In the 1930s, in order to gain public support for what were then seen as radical programs, they were set up in ways to make them look like independent entities, with profits, reserves, etc. However, the reality is that the FHA, Social Security and even Medicare (a similarly set up program, but dating from the 1960's), can't technically go bankrupt. They are all part of a pay-as-you go system of government finance in disguise. If there isn't enough money in their existing reserves, they need to call upon the Federal government to make up the difference. If not, the programs simply end. A missed insurance payment by the FHA is the equivalent of a default by the Treasury. In this environment, except among ideologues, such a possibility is absurd."

For Mr. Truglia's bio, click here

“Dow 10,000, So Party in the Streets? Not!”

“The stock market may be climbing higher, but don’t expect to see people partying in the streets any time soon,” says James Frischling, President of NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. “With a stated unemployment rate of nearly 10% and a unstated rate which is materially higher (by including those with fewer working hours and reduced wages), the ‘total weekly pay’ for the majority of the US work force is down sharply. This index is down an unprecedented nine consecutive months, according to the Bureau of Labor Statistics, shattering the previous record of a two-month decline during the recession of 1981-1982. If statistics associated with jobs doesn’t get you excited, the estimated savings rate for the 3rd quarter was 3.7%, well above the 1.30% rate a year ago and 0.20% in Q1 2008. All combined, the workers and the consumers are strained and playing defense. A meaningful and sustained recovery would seem lost without them.”

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of October 5, 2009

Has the Recession Bottomed Out?

"Say it ain't so! The Fed, Bernake and Geithner are all alluding to the probability that the recession has bottomed," says Amy Levenson, Managing Director of NewOak Capital and Chairman of its Commercial Real Estate Loans and Properties Capital Markets, based in Manhattan. "Whether or not this materializes is not the point. The absolute sure-fire way to derail any potential recovery is for our leaders to tell the adolescent American consumer and investor that the recession is over. We've finally gone from -4% saving to +6% and have finally been scared into a healthy and sustainable lifestyle. Let it gel a little while before we start teasing investors with double digit returns. This naïve optimism will do nothing but entice the 'smart money' to put on the same foolish leverage that got us into the mess to begin with. So Ben, Tim and all you other folks: even if you think the recession, unemployment, the economy or housing has bottom----doesn't mean you need to say so."

For Ms. Levenson's bio, click here

Re-Remics: Are they getting a bad rap?

"ReRemic (also known as resecuritization) is instantly rejected in a knee-jerk type reaction by many people, but single-bond reremics are a useful tool," says Malay Bansal, Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "With single bond reremics, all you are doing is taking a bond, and splitting it into a senior and a junior bond. The senior bond is better than the original bond because it has additional support from the junior bond which will absorb any losses before the senior. For buyers, the senior bond would be less likely to be downgraded or face losses in future. It’s a simple process to do create this and a simple structure should not cost a lot. Reremics are just a tool, and can be useful if used properly.”

For Mr. Bansal's bio, click here

High Yield Inflows Propel New Issue Market

"According to AMG data, this last third quarter we saw nearly $5 billion flow into high yield mutual funds," says Mark Pibl Managing Director at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan where he is Head of High Yield and Leveraged Loans. "This help propel issuers to take advantage of this new found liquidity by raising over $40 billion this past quarter. Our outlook is given the strong performance in high yield over the past 3 months, additional new money will flow into this sector. It's one of the only asset classes that is offering a an attractive yield with ample liquidity."

For Mr. Pibl's bio, click here

The Reality: The Outlook for Jobs is Still Poor

"If you listen to many experts and are watching the significant rally in the stock market, you might believe all that what was bad is now good again," says James Frischling, Co-Founder and President at NewOak Capital, an asset management, advisory, and capital markets firm in Manhattan. "But without a shift in the direction or even a leveling off of the increasing unemployment rate, this rally is going to run out of steam. While there are many signs that the economy is in fact recovering, the combination of increasing unemployment and a lack of consumer confidence suggests the rally in the stock market is overdone. Even the relatively stronger companies that are now turning the corner are reluctant to hire for fear that it's still too soon to make such a bold move. They're getting by with reduced staffing and stretching those employees in order to manage costs. Everyone knows that no successful business is built or can run on cost cutting strategy alone and without seeing an increase in revenues, these companies will continue to tread water and keep staffing levels unchanged."

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of September 28, 2009

Xerox ACS deal: Can it be the First Wave of a Coming M&A Tusnami?

“This transaction is exactly what we discussed last week with regard to the better capitalized companies starting to acquire the weaker capitalized companies,” says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital in Manhattan. “Management teams are feeling better about the prospects of an economic recovery and are positioning their firms by consolidating their industry. The highly leveraged companies still have liquidity challenges and feel that it is better to sell-out than to go into bankruptcy.”

For Mr. Pibl's bio, click here

Government Credit Protectors and Providers: Do They Need Credit Themselves?

"FDIC that protects the depositors and many supernational agencies such as The European Bank for Reconstruction and Development (EBRD) that provide credit for development are all campaigning for more capital themselves,” says Ron D’Vari CEO and Co-Founder at NewOak Capital in Manhattan. “The credit crisis has drained their source of capital so they need to replenish it.”

The FDIC is looking at all their options including asking banks for three years of advance fees, one-off emergency charge, and tapping to its $500bn credit line with the US Treasury. EBRD, a multilateral bank, has also gone to its shareholders asking for $14.5bn, a 50% capital increase, to provide a broader support for integration of Europe as foreign private investments have fallen of because of credit crisis.”

For Mr. D'Vari's bio, click here

FDIC: “Choose your poison!”

“With the FDIC’s fund dwindling to around $10bn, down from about $45bn a year earlier, and thousands of banks under great pressure, it’s clear that Chairman Bair needs to take action,” says James Frischling, President and Co-Founder at NewOak Capital in Manhattan. “The FDIC needs to replenish its fund and has few real choices. I expect the FDIC will follow through with the rumored prepay assessment strategy where banks will pay upfront the next 3 years of payments. This option appears better suited than a special assessment, borrowing from the industry or borrowing from the Treasury. While the industry will scream bloody-murder and certainly the healthier banks have every right to, it’s important that the industry itself takes the first step in fixing the situation. Chains are as strong as their weakest link and the banking sector is in jeopardy with the FDIC being forced to step in as a result of the actions by industry participants. They should fix this situation from within before turning to the Treasury for help. In the end, however, the FDIC is backed by the full faith and credit of the U.S government, so as taxpayers, we’re far from off the hook from any of this.”

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of September 21, 2009

M&A High Yield; Game On

"Given where we are in the recovery cycle, this sort of merger activity is exactly what we expected", said Mark Pibl, Managing Director High Yield and Leveraged Loans at NewOak Capital. " Equity markets have recovered for the better capitalized firms allowing them to go after the over-leveraged, good companies with bad balance sheets. This is the perfect time for these better capitalized companies to acquire these still struggling high yield companies. In our opinion, it is a win-win for all investors."

For Mr. Pibl's bio, click here

Does Speed Kill?

“While everyone is expecting a truly historic shift in the regulatory environment of the financial industry, don’t expect it to be at the level of changes witnessed as a result of the Great Depression or the far more recent internet and corporate calamities of the early 2000s” says James Frischling, President & CO-Founder of NewOak Capital. “The government needs to meet its obligation to create reform, but it’s also being asked, or almost forced, to do this as soon as possible (as in, by yearend). It’s just not possible to respond with such urgency and get a truly landmark set of regulatory reforms passed. As a result, what you should expect to see is a strong set guidelines and urgings on the part of the government with respect to the financial sector, but it will look a great deal like business as usual. One shouldn’t, however, be disappointed in the government’s inability to provide such landmark regulatory changes as the Glass-Steagall Act of 1933 or the Sarbanes-Oxley Act of 2002. As one of Aesop’s Fables taught us as children about patience being a virtue, if we want the rules re-written immediately, then we shouldn’t be surprised if they become watered-down and therefore don’t exactly get the changes we really need.”

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of September 14, 2009

Hey Mack, what have you done for us lately?

“There is no question that in finance, just like in sports, you’re only as good our last year (or season in the case of sports)”, says James Frischling, President and Co-Founder at NewOak Capital.” “We live in a ‘what have you done for us lately’ culture and in the case of John Mack, the last year hasn’t been a good one. While Morgan Stanley has performed far less than perfectly, it’s hard for me not to think that under Mr. Mack’s leadership, Morgan put up record numbers in 2006 & 2007 and then avoided the devastating fate that met most of its main competitors. For those accomplishments alone, you’d think there wouldn’t be such negativity being thrown in his direction now that a changing of the guard has been announced. In the end, Mr. Mack put Morgan in a position above all its direct competition, except for one firm, Goldman. However, in fiance, like in sports, 2nd place doesn’t win the awards or get sufficiently praised (just ask members of the 4-time Super Bowl losers (but also AFC Champions) Buffalo Bills). I’d like to think that the fact Morgan has lived to fight another day, while Merrill, Bear & Lehman essentially no longer exist, would be something worthy of praise, even if his stepping down as CEO is believed to be in the best interest of the company.”

For Mr. Frischling's bio, click here

Is the new TRX Contract Under-reported by Press?

"The launch of the new TRX Total Return swap contracts on Thursday has gone under-reported by press, but has the potential to have a significant impact on CMBS trading over time," says Malay Bansal, Managing Director at NewOak Capital, a asset management, advisory, and capital markets firm in Manhattan. "TRX will likely make it easier for dealers to hedge CMBS positions, and will provide some interesting possibilities to those who want to take a leveraged position, and others who have been active in the CMBX market.”

For Mr. Bansal's bio, click here

Bulls Drunk at the Punch Bowl!

"Bulls dominated the short week with the excess liquidity floating in the global financial system. Bulls came out roaring right after Labor-day. Global equity indices reached their 2009 highs, credit spreads tightened across the board including emerging markets, and gold shot over $1000 us dollar an ounce. Vix index of US equity volatility dropped and so did iTraxx Crossover Index spread, indicating lower fear levels. Coincidently, the combination of Fashion Week, Ramedan, and US Open made the traffic in Manhattan just like its peaks, as if the economy has healed. One could attribute the bullishness with improved economic prospects, but a much better cause unfortunately is excess liquidity," comments Ron D'Vari, CEO of NewOak Capital, an advisory, capital markets, and asset management firm."

"G20 finance ministers assured the markets that they will continue current policies, i.e. governments and central banks will keep filling up the punch bowl. This drove the global interbank rates to its record low and US dollar depreciated. Paradoxically the unemployment rates in the US and Europe have reached a level that has caused some union officials evoke fear of riots. German and Spanish economies are still weak and the Eurozone industrial production was probably down in July by about 17%," adds D'Vari.

"Also inconsistent with equity rally is the global bond markets rally in recognition that central banks will not jacking up rates anytime soon. This then raises the question if the bulls would last until Thanksgiving or fall in the punch bull face down?" says D'Vari

For Mr. D'Vari's bio, click here

Why Aren’t the Banks Selling?

“You hear about new dollars being allocated to purchase the toxic assets of the banking crisis,” says Amy Levenson, Chairman, Commercial Real Estate Loans & Property at NewOak Capital in Manhattan. “ Yet the rumor mill clearly states that the banks aren't selling or assets are not trading. Why? Catch-22. The government allowed banks to delay marking to market certain categories of assets. (Read; they do not have to take the loss on their balance sheet.) However, if they do sell the asset, they have to take the loss. In some cases, there are contingent marks downs associated with the one sale.

Why is this a problem? For a bank to stay in business, they are required to have 4% tier one equity capital on their balance sheet. So, if an asset is marked at 100 and it is worth 10 cents. Even if they received a 30 bid--virtually three times the true value of the asset, then they would have to take a 70 cent hit..and that booked loss---directly depletes their capital on a dollar for dollar basis. Therefore, if their tier 1 ratio were only 4.5% and they had to take a 70 cent write down on enough assets. that would force them to write down their equity to 3.5% and they would be shut down as insolvent.

Not all CFOs have their head in the sand. Many are merely handcuffed. The good news is that while the marks are allowed to be delayed, the banks are making money nonw, and underwriting standards have rarely been more lender friendly. So today's new assets should generate a lot of true profits to eventually allow the banks to absorb the true losses without eating through the ratio that would force them to close down.Remember, what is the best day to fly on a commercial airplane? the day AFTER a plane crash. That is the equivalent of today's underwriting standards.”

NewOak Capital Story Ideas for the Week of September 7, 2009

Securitization is not a 'Four Letter Word'

“People need to get past the notion that securitization is a ‘four letter word,’” says Andrew M. Akers, Managing Director and head of Capital Markets Solutions at NewOak Capital, an advisory, asset management, and capital markets frim in Manhattan. “As securitized residential and commercial mortgages, corporate loans and other financial assets have suffered downward ratings migration, securitization is increasingly being used to repair rather than manufacture. ReREMIC and other repacking is simply the acknowledgement of the simple fact that under any cash flowing security, the earlier cashflows are less risky than the later ones. Combined with the fundamental aspect of securitization that implements rule-based, structural claims priorities on such cashflows and differing risk-return preferences in the market, most assuredly further completes the financial markets and adds to liquidity. When the cynical broad paintbrush is whipped out in discussions about securitization, one should remember that a knife can be seen as a tool for healing or harm depending on how it is used and by whom.”

For Mr. Aker's bio, click here

First the Banks, Now Banker's Bank Worrying Fed

"The Fed has restricted two correspondent banks in Nebraska and Missouri owned by Midwest Independent Bancshares because of exposures to the commercial real estate ("CRE") loans. In addition to CRE loan exposures, the key concerns appear to be the business model of these two banks that are referred to as banker's bank. The banker's banks finance loans in conjunction with hundreds of financial institutions in the Midwest when the loan sizes exceed their lending limits," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an advisory and capital markets firm.

"Bankers' banks typically have less diversified and larger balance loan portfolios than a typical bank, so they naturally have a bigger downside risk in times like this. With both community banks and banker's bank under pressure, the credit availability for refinancing existing CRE loans coming due gets more scarce. Federal reserve and FDIC first job is to worry about the soundness of the banks but unfortunately their restrictive actions during credit contagion pose more problems by further restricting availability of credit to a large segment of the market. In CRE space, we are going through a similar dynamics we went through in the residential market but much slower. However, we expect that non-bank capital will come to the CRE sector quicker and hence the consequences may not be as dramatic as the residential credit destabilization we faced in 2007 and 2008," adds D'Vari.

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of August 31, 2009

FINANCE: Once Again, Bond Market Vigilantes are at Odds with Equity Jocks

"With two-year government bonds at 1.02 percent, 0.85 percent, and 1.25 percent in the U.S., U.K. and Germany, and still rallying, the bond markets are voting the economy will still face very bumpy roads ahead,” says Ron D’Vari, CEO and co-founder of New York-based NewOak Capital, an advisory and capital markets solutions firm:”The global government bond market rally is at odds with global equity indices trading at all-time highs since last October. This means equity markets are pricing in a greater degree of optimism than the rate side of the bond market. In some sense, the government sector is also in contrast with the credit sector of the bond market. The credit spread indices are already tighter than pre-Lehman levels, indicating lesser credit risks going forward. However, recently the credit markets have come under pressure after a very strong rally in the second quarter. Typically the credit spreads have foreshadowed the equity market's next move. Putting it all together, it simply means there will be more volatility for the short term in the equity, credit and rate markets until further evidence of the economic health. So savvy investors will play it more cautiously, given the dramatic rally in all three segments this year.”

For Mr. D'Vari's bio, click here

FINANCE: AIG's Stock Continues to Soar; Is This Good News for Taxpayers?

"There are so many questions being asked of AIG, and it appears the company will appropriately dominate the financial headlines for some time to come,” says James Frischling, president and co-founder at New York-based NewOak Capital, an advisory and capital markets solutions firm. “The skeptics are looking for answers, and they have every right to, but the run-up in the stock combined or derived in part by a confident and outspoken new CEO in Robert Benmosche, talks of having former CEO Maurice Greenberg become an official advisor to the company, and the idea of slowing fire sales to get better prices for AIG's assets all amount to good news for the government's investment in AIG. No other company received more financial aid during the crisis than AIG, and I assume most people would like to see some kind of return on that investment or at least get as much of the money back as possible. So whether the shorts are getting squeezed or the trading is being dominated by a relatively small number of market players, seeing AIG's stock have such a strong performance makes me hope there are even better days ahead for this recovering insurance giant and, therefore, an improving probability of a return of funds to the U.S. taxpayers."

For Mr. Frischling's bio, click here

U.S. Government Deficit/Debt Forecasts Are Meaningless.

“Anyone who thinks they can predict the size of the U.S. government deficit and/or debt over a 10-year period is seriously mistaken,” says Vincent Truglia, managing director of economic research at NewOak Capital LLC, a New York-based advisory and asset management firm. “The parameters that can change, including spending, tax revenues and nominal GDP growth, are simply so wide that such forecasts are meaningless. Also, comments made that say the U.S. could have trouble financing itself and must depend on China, are also simply mistaken, and show a lack of understanding of how fiscal and monetary policy work."

For Mr. Truglia's bio, click here

NewOak Capital Story Ideas for the Week of August 24, 2009

Has High Yield Bond Opened to Finance Large Transactions?

"The $4 billion Warner Chilcott high yield bond deal shows that the high yield market has opened up to finance very large transactions that are well structured and have a strategic rationale", said Mark Pibl, Managing Director and Head of High Yield and Leveraged Loans at NewOak Capital. "Despite the higher leverage to finance the acquisition, the strong projected free cash flows will allow for rapid debt pay down," say Pibl, "additionally, the acquisition of the P&G business is a good strategic fit with the company's existing business."

For Mr. Pibl's bio, click here

Finance: Did you (P/E Firms) get the impression we (FDIC) didn't want you?

"With nearly 80 bank failures and counting (including two very significant ones in Colonial and Guaranty taking place in August), you should expect to see the FDIC put out a welcome sign to Private Equity firms as it votes this week on the guidelines for these firms to invest in failed banks", says James Frischling, President & Co-Founder at NewOak Capital. "The P/E firms have the funds and the banks need capital, it shouldn't take much to bring these institutions together. As long as the rules of engagement are made clear and confidence is given that successful investing will not be punished later, the recapitalization of our banking system will be driven by P/E firms. Ideally, deals will get done without requiring the FDIC to share significant losses, but thus far it seems the larger deals can't get done without FDIC support. It's clear that many more banks find themselves under pressure and the banking industry remains strained. It took years to build the leverage into the system that has contributed to the credit crisis, the deleveraging process, unfortunately, won't be a quick one."

For Mr. Frischling's bio, click here

Looking Under the Hood - Money Market Funds

"Auction rate securities, Asset-Backed CPs, and CPs issued by asset-backed conduits are just among the securities that have caused some of the well publicized money market fund problems since the summer of 2007," says Ron D'Vari, CEO of NewOak Capital, an integrated advisory, capital markets, and asset management firm.

"Institutional participants in the commercial paper of Canadian conduits and non-bank sponsored SIVs that loaded up in leveraged super-senior corporate synthetic obligations know far too well that these so called short term securities can drop to as low as 25 cents once certain market triggers occur that prevents them from rolling to the next day. So far Money Market Funds have been saved by the fund sponsors by taking these out of the vehicles at par. However Money Markets ultimately pose a systematic risk to the system that has been scrutinized the least. For the funds to be competitive, they have to reach out and take risks. Money Market Funds don't enjoy FDIC insurance nor the explicit guarantees from the sponsoring institutions and yet that is where most people park their liquid cash. Go figure," adds Ron D'Vari.

"Further scruntiny is on the way for money market fund, it is just a matter of time. Most importantly the retail investors have to be educated about where they are putting their money," adds Ron D'Vari.

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of August 17, 2009

Does Non-conforming Residenatial Mortgage Sector Need TALF?

"New issue non-conforming MBS will not have the benefit of TALF assistance, at least not yet according to Fed's latest announcement," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an advisory and capital markets firm.

"The residential sector is already getting a shot in the arm by many other government programs such as GSE's guarantee and purchases, and favorable fed financing for banks. So some argue the nonconforming residential sector doesn't need another stimulus as the existing loans are not coming up for refianancing and the lendors are modifying them when in trouble," adds Ron D'Vari.

"The legacy non-agency RMBS has already rallied as much as 20% from the bottom without TALF mainly driven with the rising optimism, justified or not. So it is an easy decision not to include them in the eligible sectors for TALF for now and keeping the door open to add them later if needed," says D'Vari.

For Mr. D'Vari's bio, click here

CMBS: Is The Positive Trend Reversed?

"After weeks of positive technicals driving the CMBS market, last week's negative news reversed this trend," says Craig Lieberman, Managing Director and Co-Head of Commercial Real Estate at NewOak Capital an advisory, asset management, and capital markets firm in Manhattan. "First there was the announced delay of the PPIP program, followed by a large CDO liquidation, and then news of big CMBS borrowers like Maguire and Moinian handing over the keys on several properties. While I think that the extension of TALF for CMBS into 2010 is a positive, we'll need some more clarity around PPIP in order for the market to get back on track."

For Mr. Lieberman's bio, click here

The 6th Largest Bank Failure in US History occurred this past Friday: Does anybody really care?

“Regulators seized Colonial Bank on Friday and the FDIC brokered another bank-marriage by assuming losses in order to create a deal for BB&T Corp. This brings the total number of bank failures to 74 this year, but it seems that most market participants see this as business as usual and don’t appear to be all that bothered. Have we grown numb to bank failures and billion dollar bailouts?” asks James Frischling, President and Co-Founder at NewOak Capital. “While many of these bank failures have been relative small (for example, Dwelling House had $13.4mm in assets and will be absorbed by PNC Bank), it’s the trend that is disconcerting and one can only assume that there are more failures to come. The FDIC’s fund now stands at $13bn, its lowest level since 1993. Anyone want to wager whether that number moves higher or lower over the next month? I’m open to hearing arguments about the residential mortgage market bottoming out, but I know very few people that aren’t concerned about the commercial market and that should prove to be a dagger to many regional banks and will only challenge further the FDIC’s ability to continue to protect the banking system. There’s now talk about creating some relief for these institutions by removing some of these troubled assets and loans from the banks into a separate entity. The working name of this program within the government is “Spinco”. I find the name shockingly appropriate, if they can spin this story and keep market participants from believing there are more challenging days ahead, the program would have proved to be amazingly successful, even if it never buys a single real-estate loan. The reality of the situation is clear, these banks need to raise more capital. The good news is that there’s substantial capital looking to invest in these institutions. The bad news, the prices the buyers are willing to pay and the sellers are willing to accept are still far too wide. In the interest of protecting our tax dollars at work, we’ve got to narrow the gap and get the private capital into the system.”

For Mr. Frischling's bio, click here

New CMBS TALF - It all takes time, give it a few months

"Without TALF commercial real estate sector would have no other direct government help to pull itself out of the bottom. For new issue CMBS to start up again, it needs TALF, full stop. But even that takes more than a few months," says Ron D'Vari, CEO and Co-founder of NewOak Capital, an advisory and capital markets firm.

"There is a lag in property income declines and defaults in commercial real estate because of the long term leases and generally wider institutional support of the sector. But don't doubt they are coming. Given the bad timing of the involuntary refinancing need, weaker credit metrics for loans (LTV, DSCR), and current state of banks' lending on commercial real estate, Federal Reserve has to come to the rescue of the sector. New CMBS TALF is a help but it takes longer than other securitizations to issue and requires REITs or others to hold the risky subordinate portions. However, the REITs themselves have been under serious capital pressure and are raising new capital in order to originate or refinance older loans. To get things started, first the new optimism had to take hold for REITs to be able to come to the market," adds D'Vari.

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of August 10, 2009

A Big Fish Goes Under - Business as Usual?

"Last week’s announcement that major independent mortgage lender Taylor, Bean & Whitaker Mortgage Corp. would cease operations was met by a yawn from the market. When coupled with the news that Colonial Bank, one of the larger mortgage warehouse providers, failed to complete a badly-needed capital raise, I would have expected to see a more negative market reaction" said Jim Dougherty, a Managing Director at NewOak Capital, LLC. "Two things strike me – firstly, the mortgage market is expressing confidence in its ability to re-route production to other sources, and secondly, the broader markets are now tuned to handle sizeable speed-bumps without derailing. I’m not calling the bottom in home prices just yet, but perhaps the market is now better able to distinguish a difficult market environment from Armageddon."

For Mr. Dougherty's bio, click here

TALF Eligible New Issue CMBS: Will It Be Extended?

"With no news of conduit origination and only single borrower deals in the pipeline, it appears to me that the deadline for TALF-eligible new issue CMBS is going to have to be extended in order for it to have any positive impact," says Craig Lieberman, Managing Director and Co-Head of Commercial Real Estate at NewOak Capital. "Given that most banks have yet to staff back up and the time that it takes to originate, underwrite and securitize a commercial mortgage loan, I think that it's unlikely that we'll see any traditional new issue fusion transaction come to market before next year. In order for the program to achieve its desired outcome, it should be extended into next year, and should probably be done sooner rather than later."

For Mr. Lieberman's bio, click here

Pay Legislation? "I suggest you allocate that time and expense elsewhere"

"Relying on regulators to oversee the compensation packages and incentive plans at financial companies will prove to be a waste of time and energy" says James Frischling, President and Co-Founder at NewOak Capital. "With all due respect, as this forest fire of a credit crisis appears to be coming under some level of control, making sure these entities don’t pose the systemic risk and therefore aren’t ‘too big to fail’ would prove a far better use of the regulators time and efforts. In my opinion, the best compensation committee in the world already exists, it’s called the ‘shareholder’. If you don’t like the way a company rewards its employees or even the way they disseminate the information regarding employee compensation, don’t buy (or sell) the stock. Companies that prove more diligent in these regards, combined with good performance, will be rewarded in their share price. The ones that fail to meet the ‘best-in-class’ standard when it comes to compensation, will be punished, again, in their share price. If you want to ask why the shareholder failed to execute their power leading up to the crisis, the honest answer is they were greedy too and were enjoying the ride similar to those inside these organizations. Any other attempts to regulate this part of the financial industry I expect will leave all the participants feeling like they had only a handful of Doritos, they’ll be less than satisfied."

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of August 3, 2009

China in Decoupling Path? Let's Hope so.

"China's domestic demand growth and gradually lessening reliance on exports should bring a sigh of relief and dampen the fear of spiralling global slow down," says Ron D'Vari, CEO of NewOak Capital, a financial advisory and capital markets firm based in New York. "China's export growth is decelarating and trade surplus is actually falling while nominal GDP is still growing. Domestic demand growth supercharged by stimulus spending has been sufficient to fight slowing exports sector's impact."

D'Vari adds that according to CLSA survey, China’s manufacturing expanded for a fourth month in July and the CLSA China Purchasing Managers’ Index rose to a one- year high of 52.8 from 51.8 in June as reported. "Economists hope that China will not focus too much on boosting the negatively impacted export sectors and continues stimulating China's domestic demand. This will be a win-win situation for the global economy as well as China."

For Mr. D'Vari's bio, click here

Bank Loan Amendments Yields Hefty Yields

"As a result of the need to amend bank loans that are experiencing difficulty over the past 6 months, bank loan investors have been able to add significant yield to their loan portfolio through additional fees and higher coupon" said Mark Pibl, Managing Director High Yield and Leveraged Loans at NewOak Capital. " "The average increase in the yield for a single-B rated bank loan has been an additional 300 to 400 basis points per year over the initial spread when additional loan modification fees, higher spreads, and Libor floors are included. This clearly shows the ability of loan investors to adjust the loan product's yields to reflect the difficult credit environment, which is something that wouldn't happen for high yield bond investors. This development should bode well for future prospects for loan investors as they compare risk/return opportunities across asset classes and over the next credit cycle."

For Mr. Pibl's bio, click here

Restrictions on Compensation is Still a Hot Topic, ... or is all Just Noise?

“Following Attorney General Cuomo’s report last week about the bonuses paid out by the “TARP recipients” (please note: I intentionally avoided using the word ‘bailed-out’ because we know a number of these firms didn’t actually need the funds and were forced to accept them and participate in the program,) the compensation debate heated-up again and I expect it will rage further”, says James Frischling, President of NewOak Capital, an advisory and capital markets firm based in New York. “I believe Joe Nocera’s NY Times article this weekend (“Nice Wasn’t Part of the Deal”) actually nailed it and I’ll try to go one step further with respect to clarity on this topic: the job of bank executives is to maximize shareholder value…that’s it, full stop. Anything else is ‘noise’. You want a friend, get a dog. While the economy will still face many challenges, I believe most people have taken the ‘Great Depression Part II’ scenario off the table. With that in mind, the actions by the government have, for the most, been successful and that was the main driver and reason behind the support of the banking section - that these institutions and this sector in general, were too big and important to fail. The rest of the stuff going on, like the bonuses and whatever extravagances will come out of a sector that certainly knows how to be extravagant, is noise, and the bonuses being paid are unintended consequences of a system that isn’t always fair, but then again, life isn’t always fair. So if you work at a company or in an industry that wasn’t too big or important to fail, then regardless of your stellar performance and individual achievements in 2008, if your company went down, you went down with it. If you think that’s not fair, then make sure your next job is with a company that the government believes is too big to fail. In that case: win, lose or draw, you’ll whether the next storm better than the others.”

For Mr. Frischling's bio, click here

Who Wins By the Economic War Among States?

"In the face of widening deficits and econmic slump, states are accelerating their incentive programs to lure industries and companies as the competition is heating up among them. This may mean less spending on other essential public programs and lead to higher taxes," states Ron D'Vari, CEO of NewOak Capital, a New York based financial advisory and capital markets firm. "Some economists view this as unhealthy public policy distorting the overall economy leading to suboptimal national results."

"In the long term, misguided local public policies lose out. The industries will gravitate to states with the best workforce and most desirable living conditions including education, culture, infrastucutre, healthcare, and lower taxes," says D'Vari, adding that in the short term, state governments are fighting rapidly rising unemployment and have no choice but to compete furiously to create jobs. "Perhaps this may be rationalized by reasoning that to live another year, one must live another day" states D'Vari.

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of July 27, 2009

Nearing Housing Bottom and End of Economic Slump?
"How do you define the housing bottom? Measuring by annualized new or existing home sales or housing starts, perhaps? Measuring by home prices and unemployment? The ride is not over," says Ron D'Vari, CEO of NewOak Capital, a distressed-oriented advisory firm located in Manhattan.

"Inventory levels will be a good indicator," says D'Vari. Once we get inside 10 months level of inventory based on a realistic sustainable sales rate, we should see home prices to stabilize. Unemployment rate will bottom out ahead of that as companies cut to the bare bone."

For Mr. D'Vari's bio, click here

The money culture! Have things really ‘changed’?
“Last week it was announced that the world’s most famous and legendary investor, Warren Buffet, is now starring in a cartoon called ‘The Secret Millionaires Club’. While I have no doubt that the show will be informative, entertaining and educational, it’s the focus on money as the core of the program directed at young children that made me take notice” says James Frischling, President of NewOak Capital LLC. “Will Warren be interesting, engaging and humorous? I’d have to say ‘yes’. Do I feel this is a continuation and even an extension of the same infatuation and preoccupation with the money culture? I guess I’d have to say ‘yes’ again. If we’re actually going to continue with ‘more of the same’, then we should soon expect to see CNBC partner with the Disney Channel to develop teenage versions of “Squawk Box” and “The Closing Bell” by leveraging the Jonas Brothers and Hanna Montana in order to attract a more youthful audience to the world of finance”.

For Mr. Frischling's bio, click here

NewOak Capital Story Ideas for the Week of July 20, 2009

ECONOMY: What to Believe --- Housing or Unemployment Data?
Ron D'Vari, CEO of a NewOak Capital, LLC, a New York-based advisory and capital markets firm focused on parties affected by credit crisis: "The economy is not yet out of the woods, but yet many have taken U.S. housing starts' uptick for three months in a row as the sign that the housing market has stabilized and that would soon lead to the end of recession. Some believe it was the housing downturn that got us here and it is housing that has to get us out of here. Yes, housing starts may be ticking up but from a very low base of about one-fourth of the peak. The optimism should be tempered by the fact that unemployment will continue to be a drag, and also the multifamily component of housing starts is still shrinking. The markets still need to price in many credit distress situations such as CIT in coming quarters, not to mention potential commercial real estate issues. Net-Net, we are looking better than three months ago and credit goes to some of the government-induced liquidity that are finally starting to work. Let's hope it is not a false start."

For Mr. D'Vari's bio, click here

FINANCE: Who Will Play Hank Paulson in the Movie Version of "The Financial Crisis '08"?
James Frischling, president at NewOak Capital, LLC, a New York-based advisory and capital markets firm focused on parties affected by credit crisis: "For all the qualities that Hank Paulson possesses, I think his ability to maintain restraint was among the very best during his five-hour testimony in front of Congress last week. The former Treasury secretary met all the questions head-on and didn't appear to blink when he explained the situation we found ourselves in last December, his conviction that BofA stay the course and his commitment to use everything in his power to make it happen. I'm sure some people in Hank's camp (including probably Paulson himself) would have preferred him to borrow a line or two from Jack Nicholson's character Col Jessep in the movie 'A Few Good Men.' I couldn't help but think of one of my favorite quotes from the film and feel it summarizes rather well what was really going on in the former Treasury secretary's head during his time with Congress: 'I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way.' Since no one at the hearing took a moment to say it, I'll simply say: 'Thanks, Hank, for the big effort last fall and for getting the job done.'"

For Mr. Frischling's bio, click here

FINANCE: Will Investors Continue to Request TALF Loans for CMBS Assets?
Craig Lieberman, managing director and co-head of commercial real estate at NewOak Capital, LLC, a New York-based advisory and capital markets firm focused on parties affected by credit crisis: "Most investors seem to be waiting on the sideline so far instead of applying for a TALF loan to finance their legacy CMBS investments. While investors' trepidation is understandable, given the magnitude of S&P's proposed downgrades and uncertainty around the logistics of the program, especially the role of the collateral manager, I suspect more investors will begin requesting TALF loans for CMBS assets in the coming months. As these questions start to get answered, investors should grow more comfortable with TALF, which will increase its appeal."

For Mr. Lieberman's bio, click here

NewOak Capital Story Ideas for the Week of July 13, 2009

A Second Stimulus Packate ... Already?
"The calls for a second stimulus package appear to be getting louder and we’re only four months into the first one"� says James Frischling, President at NewOak Capital LLC. "Recent economic surveys suggests the US economy will expand faster in the second half of the year and signs of stability in the housing market and an improving consumer confidence should suggest more time is needed to allow the package to work its way through the system before another package is even considered. It seems the issue of the first and now talk of a second stimulus package is a political lightening rod, but the most meaningless statistic in sports is the score at halftime and the first package approved in February still leaves us only in the first quarter of what predicted to be a two year game. I’d like to see the administration do what it can to tone down the debate and give the $787 billion a chance to work before going back to the well for another package. Rising unemployment is clearly something everyone is watching carefully and remains a key driver for concern, but we’re in a much better place today than we were just a few months ago. This won’t be a straight-line recovery and my hope is that the administration gives their own program the time it needs to take effect before judgment is passed."

For Mr. Frischling's bio, click here

CLO Market: Still a bargain?
"After a relatively quiet holiday week CLO market is back on track. Paper continues to be offered through auctions and dealer inventories as people take profits and use the rally as an opportunity to sell," says Michael Khankin, Director - Structured Credit Portfolio Management at NewOak Capital, an Advisory, Capital Markets, and Asset Management company based in New York City. "Overall, the market has been flush with good news as corporate defaults appear to be slowing their pace, matched by rising asset valuations. CLO tranches are starting to look like bonds again to the potential bidders and offer substantial relative value as people pare down their default expectations. Given where we are, CLOs are likely to exhibit performance that is very sensitive and geared to the corporate market. Should the corporate loan market stabilize CLOs will likely outperform as investors chase for yield. On the contrary, should we hit a down leg of the "W" scenario liquidity is likely to disappear again as recent buyers sustain a loss to their economic and political capital. Today it looks like the former scenario is more likely but compensation for the risk is nowhere near the levels of a month or two ago."

For Mr. Khankin's bio, click here

Jobless Recovery?
"There is always a lag between economic response and economic stimulus," says Ron D’Vari, CEO/co-founder of NewOak Capital in Manhattan. "Even if GDP starts stabilizing and possibly reversing soon according to some surveys of economists, the unemployment will continue to be a drag for quite a while and it would feel like a jobless recovery. Businesses and investors have to just adjust their expectations and not focus so much on the lagging indicators but for real signs of change in direction of economy. Sometimes less bad news, is good news."

For Mr. D'Vari's bio, click here

California: No Pain, No Gain:
Vincent Truglia, Managing Director of Global Economic Research at NewOak Capital: "Although I usually support government bailouts in financial situations which are dangerous to the financial system as a whole, a possible default by California might be healthy for the financial system and also California. Over forty years ago New York City was forced into a default that ultimately caused reform in Albany and in the city government which brought spending and taxing powers into line for the first time in decades. Prior to the crisis, not only was New York City profligate, but the state and local governments each boasted income tax rates of 15% and 7+% respectively. Those tax rates are down significantly from those days. New York City is today among the better prepared major cities for this economic downturn. Without pain, unfortunately, there is sometimes no gain."

For Mr. Truglia's bio, click here

NewOak Capital Story Ideas for the Week of July 6, 2009

Is Legacy CMBS TALF Financing Limited?

"The updated terms for legacy TALF have been released and no changes have been made to the language regarding ratings" says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC. "Of the 120+ conduit deals issued in 2006-2008, only 21 were not rated by S&P. S&P covers more than 80% of this universe and they are putting a huge proportion on watch for downgrade. As it sits now, a very small portion of outstanding issuance will be eligible, which will limit the effectiveness of this program. In order for Legacy CMBS TALF to have its intended consequence of causing a rally in secondary CMBS spreads, S&P's actions have now put the onus on the Fed to amend its eligibility requirements to include AAA bonds on negative credit watch or to only require one rating agency. It is really unfortunate that the future of the PPIP/TALF program for legacy CMBS is being potentially derailed by S&P's actions."

For Mr. Lieberman's bio, click here

Recovery: A Straight Road?

"The latest unemployment data has woken up the market again that this is going to be a windy road to steady growth." says Ron D'Vari, CEO/Co-founder of NewOak Capital. "Commodity markets volatility are gradually reflecting that concern and soon the debt and equity markets should appropriately price the risk. With 9.5% unemployment rate and rising, the consumer will be more of a drag rather than help to revive the economy. That may mean a second stimulus package in the US and continued coordinated effort globally by the central banks may be needed to get through the tough curbs ahead," adds D'Vari.

For Mr. D'Vari's bio, click here

Feel Good Economy?

"'From many accounts, people are starting to feel good again about the economy. They're seeing the light at the end of the tunnel," says Peter Heintz, Director of Residential Mortgages at NewOak Capital, an Asset Management, Advisory, and Capitol Markets firm located in Manhattan. "But from our extensive research and interactions with realtors from a macro point of view, it looks like we are a long way off. Unemployment continues to tick up and so do the mortgage defaults. The supply of foreclosure sales vs. wiling sales is almost 2 to 1 in most of the states in the southeast region. With a supply of homes between 18 months and 4 years, one wonders if the tunnel's flickering light is really a freight train?"

For Mr. Heintz's bio, click here

NewOak Capital Story Ideas for the Week of June 29, 2009

CLO Rally: Will It Continue?

"The CLO market rally continued this week" says Ross Heller, "even on the back of significant profit taking from buyers who bought at the bottom. The rally has been met with selling but demand has kept pace, which makes the price action more impressive. At this point, the CLO market will look to the underlying leveraged loan market for its next move."

For Mr. Heller's bio, click here

High Yield Market Starts to Pull Back

"Over the past several days, the high yield market has started to pull back" says Mark Pibl, Managing Director at NewOak Capital. "The market has had a powerful rally and investors are starting to take profits. They have been able to generate record setting returns in the space of a few months. In effect they made their whole year and now are trying to reduce risk."

For Mr. Pibl's bio, click here

Is the U.S Economy Out of the Woods?

"US equities closing down for the week, only for the third time since the lows in March, indicates that market is not convinced that relatively better recent economic and earnings data will continue and the economy is out of the woods," says Ron D'Vari, CEO and co-founder of NewOak Capital. "The volatility in financials highlight this nervousness as many banks dropped with S&P's downgrades of 22 banks and overall concerns about Obama's plan to overhaul the regulatory framework," adds Ron D'Vari.

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of June 15, 2009

Risk Profiles of Subordinated CLO Tranches Alarmingly High

"Although the prices of senior tranches of CLO have improved over the past several weeks, the risk profiles of a vast majority of subordinated CLO tranches remain high," says Ross Heller, managing director at NewOak Capital, LLC, a New York based advisory and asset management firm. "Moody's continued to downgrade 35 tranches from five CLOs. These deals aren't only reliant on loan prices; rather collateral characteristics and credit are still issues in the market. Most originally BB-rated and equity tranches are likely to be wiped out in this credit cycle. Right now, single-A paper appears to be the fulcrum for most deals."

For Mr. Heller's bio, click here

"The proposed relaxation of REMIC rules to allow for proactive restructuring of loans would be a net positive for CMBS," says Precilla Torres, managing director at NewOak Capital, a NewYork based advisory and asset management firm. "One of the biggest complaints among borrowers is that they cannot even initiate a conversation with a servicer until a payment is skipped,. However making this decision adds additional costs and burdens to both the trust and the borrower. Therefore, allowing servicers to modify loans prior to default while maintaining the trust's REMIC status, would be a positive policy response to what might otherwise become an increasingly problematic situation."

For Ms. Torres' bio, click here

Flowering Fruit for the U.S.?

"Green shoots are flowering in the US," says Ron D’Vari, CEO of NewOak Capital, LLC, a New York based advisory and asset management firm. "Soon they will bear fruit – or so the markets believe. Despite unprecedented consumer and housing credit issues and banking in the US, the world once again has come to reaffirm its confidence in the US currency and Treasuries, and rightly so. While Asian markets led in the rally, the US economy, once on the road to recovery, will be much more impactful to the world economy's recovery overall."

For Mr. D'Vari's bio, click here

NewOak Capital Story Ideas for the Week of June 8, 2009

TALF: From Abysmal Failure to Tremendous Success in Two Short Months

"The massive demand for TALF loans and the underlying ABS deals they support has resulted in a huge, and still ongoing, rally in the consumer ABS market," says Ross Heller, Managing Director of ABS, CDOs, and Corporate Credit at NewOak Capital LLC. "It was only back in March that the market was ready to write off the program as another misguided attempt by the Fed to jump start the market. Now, however, the biggest issue in the ABS market is availability of paper," says Heller.

"TALF should get some credit for helping to kick start the market, but in reality the market is now running ahead of TALF, and proof of that is the fact that TALF and non-TALF bonds of similar profile trade at the same spread. The biggest issue with regards to the TALF program for consumer assets is if it will become irrelevant if spreads tighten further still, which seems a fair bet at this point."

For Mr. Heller's bio, click here

"Potential Methodology Change for Rating Interest-only Certificates: A Serious Risk?

"S&P's potential methodology change for rating interest-only certificates poses a serious threat to investors who are constrained by regulatory capital requirements," says Precilla Torres, Managing Director and co-head of Commercial Real Estate at NewOak Capital LLC. In its request for comment letter titled Methodology For Rating Interest-Only Certificates, Standard & Poor's stated that by adopting the subject proposal, more than 1,500 interest-only securities would be subject to potential downgrades which might reach 10-17 levels. "Due to capital requirement cliffs between ratings levels, the required capital for an insurance company holding a downgraded IO might increase by over 60-fold," Torres explained.

For Ms. Torres' bio, click here

IS GM Waiving the "All Clear Flag to Bank Loan Investors?"

"In the GM situation, I would not be waving the flag to bank loan investors, signifying that all is clear, and they should come out of their bunkers" says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital. "Some of the cram down issues that faced Chrysler bank debt holders were still present in the GM bankruptcy filing", said Pibl, adding that "it still fails the litmus test of priority of claims."

For Mr. Pibl's bio, click here

NewOak Capital Story Ideas for the Week of June 1, 2009

Fasten Your Safety Belt: It May Be A Bumpy Ride

"So life is good again. Stock markets around the world have bounced back, treasury yields sold off, some toxic assets have caught a bid, and corporate spreads have rallied. Does all this mean mortgage delinquencies are about to come down? That corporate and commercial real estate defaults are averted and banks are in the clear?" asks Ron D'Vari, CEO of NewOak Capital an advisory, asset management, and capital market firm based in Manhattan. Peering inside his crystal ball, D'Vari replies: "At this point, it doesn't mean they are averted . yet it may not get as bad as some investors thought."

Has S&P Announcement Spooked the Market?

"S&P certainly chose an interesting time to announce their request for comment on a revised conduit rating methodology," says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC. "We were barely a week into a strong rally in CMBS prompted by the announcement of the TALF for secondary CMBS terms when this bombshell came out. They've spooked the market by potentially rendering a majority of the collateral out there ineligible under the current terms. It's not certain what anyone will do, but I doubt the government will allow the program to be stymied by this issue. They may revise their stance on current ratings and move to include senior cash flows that were originally AAA, irrespective of the current rating."

Hope for RMBS Revivial?

"Resecuritization is an important option for a RMBS revival," says Sam Warren, Director in charge of RMBS Structured Solutions at NewOak Capital, a asset management, advisory, and capital markets firm in Manhattan. "Senior Prime & Alt-A bonds were often 80-95% of the entire capital structure because the market believed that 5-20% of subordination was more than adequate to cover losses, and that convexity (prepayment) risk was a greater concern. Now that credit is the primary focus, bonds need to be restructured to better optimize the allocation of credit risk and the yields buyers are willing to accept for that risk."

NewOak Capital Story Ideas for the Week of May 25, 2009

HOW LOW CAN THE HOUSING MARKET GO?

"We are now experiencing the second tier of defaults and foreclosures," says Ron D'Vari, CEO of NewOak Capital. "The first wave was due to weak underwriting in subprime, Alt-A, and option-ARMS loans, but the second wave is driven by unemployment continuing to rise and low savings. Bank writedowns are expected to continue to pile up throughout the rest of the year but should stabilize in the first half of the year."

For Mr. D'Vari's bio, click here

CLO MARKET: GREEN SHOOTS IN STRUCTURED CREDIT?

"The massive rally in corporate credit, and particularly in leveraged loans, is finally bringing some interest back to the CLO market," says Ross Heller, Managing director of CDOs and Corporate Credit at NewOak Capital LLC. "The top of the CLO capital structure, and particularly original AA- and A-rated paper, has seen renewed interest, with bonds finally trading stronger even as bid-list activity picks up.

In addition to a compelling relative value story with CLOs trading cheap to their underlying collateral, these bonds offer significant potential for high returns without the use of external leverage. That makes these bonds appealing to certain investors that have difficulty obtaining financing in today's market," Heller says.

"That said, we are still in a challenging part of the corporate credit cycle, and supply of CLO paper may increase to meet demand, but the broadening of the investor base is a positive step. There is a relative value story to tell in CLOs that has not existed until recently, and the investor base is responding."

For Mr. Heller's bio, click here

SPECIAL SERVICING ALERT: WHAT CMBS INVESTORS NEED TO KNOW

"The CMSA and other industry representatives were highly successful in making their case to Washington as evidenced by the inclusion of CMBS in the TALF program," says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC. "The next hill to climb is REMIC relief, which is a rather less glamorous issue but equally as important to the health of the industry going forward." Mr. Lieberman believes that this could be a valuable tool in mitigating the steep losses potentially facing CMBS investors. "No one will deny that property values are down, and some losses are to be expected but when you combine the deterioration in fundamentals with the rather strict rules the Special Servicer has to follow when working out distressed assets it makes a bad situation worse. The issue has the potential to be divisive within the CMBS investment community. If the Special Servicer has the ability to provide seller financing through the trust it may slow down dispositions, which will be viewed unfavorably by the first and second pay bond holders."

For Mr. Lieberman's bio, click here

NewOak Capital Story Ideas for the Week of May 18, 2009

Corporate Bonds: How to Ride The Bull

"One of the most proven strategies for investing in fixed income is to extend out of treasuries and into higher yielding assets such as corporate investment grade bonds or high yield bonds as signs of a recovery abound", says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital. "Historically, investors seek out that higher yield after they sense that the worst of the storm is behind them and they are no longer satisfied with the safety of treasuries. We have gone from ‘flight to quality’ to ‘stretching for yield’ in a fairly short time frame."

For Mr. Pibl's bio, click here

Foreclosures – Why Aren't Short Sales the Prime Solution

"The market should not have been surprised by the recent increase in foreclosures, especially in the wake of the expiration of government-mandated foreclosure moratoria," says Jim Dougherty, a Managing Director with responsibility for residential whole loans at NewOak Capital, LLC, a New York based advisory and asset management firm. "What surprises me is that no one has figured out a way to harness the groundswell of short sale appetite as a way to reduce foreclosures. We are hearing of a massive backlog of short sale requests. Servicers are struggling to push product through modification programs or down the foreclosure pipeline, both time-consuming and expensive propositions, while thousands of short sale opportunities go unanswered."

For Mr. Dougherty's bio, click here

GGP SPEs - What does it all mean?

"The judge's decision regarding the SPE's that were filed into bankruptcy took the headlines this week" says Precilla Torres, Managing Director of Commercial Real Estate at NewOak Capital LLC. "Investors are concerned, and rightly so about this development but it will take some to sort through the fall-out. We've seen similar situations in the past but never with such a high profile borrower or on so much debt. GGP was a major player and they negotiated very well with their lenders. Past experience may not be a reliable guide, if they were able to eliminate certain provisions. This is not the best development right after announcing a program to originate new CMBS. While this may ultimately be much ado about nothing, in this environment investors need fewer reasons to worry, not more. "

For Ms. Torres bio, click here

When Is a Trust Fund Not a Trust Fund?

"Yesterday’s Government’s report regarding the health of the Social Security and Medicare Trust Funds leaves a basic misimpression with US voters," says Vincent Truglia, Managing Director of Global Economic Research at NewOak Capital LLC. "The trust funds are not, nor have they ever been, true trust funds. These two entitlement programs are pay-as-you programs, which do not differ from most other major G-7 countries. Reports about the solvency of these programs are irrelevant. The only thing that really matters is how much we wish to spend annually on them."

NewOak Capital Story Ideas for the Week of May 11, 2009

What Would the US Economy Be Like Without Securitization?

"Our financial system had gradually grown used to "pack’em-and-ship’em" securitization culture starting in the mid 80’s,"says Ron D’Vari, CEO of NewOak Capital. "Banks and finance companies used securitized markets to cavalierly originate and pretend to service consumer, residential, and commercial real estate credit. Investor trust has been broken and with that those days have come to a screeching halt. In absence of securitization markets, availability of credit will be several trillions less despite much bigger bank balance sheets. The world needs to prepare for much less growth. And just where is the economy headed? To answer that question, we need to forget we ever heard of the productivity miracle and look at long term growth of 1 to 2%. The evils of our past credit binge is an expensive lesson."

For Mr. D'Vari's bio, click here

CMBS Rally Continues Despite Legacy Asset Snub in TALF Expansion

"After the Fed's omission of details around legacy CMBS in TALF, there was a minor blip in the market's grind tighter," says Craig Lieberman, Managing Director at NewOak Capital. "But this was relatively short-lived, as spreads have since resumed their course tighter. The market is now pricing in the eventual formality of TALF's inclusion of legacy CMBS, but also with relatively favorable terms for this segment."

For Mr. Lieberman's bio, click here

Rally in High Yield Market Spreads Fuel Expectations of a Flood of New Issuance

"Driven by the rally over the past month in high yield spreads, expectations are that issuers who have been sitting on the side lines will jump in this week to raise money," says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital. Pibl recommends treading with care adding that he expects the rally to stall. "Everyone has jumped on board, but nothing has really changed except that the fear factor has gone. It's not going to go straight up from here."

For Mr. Pibl's bio, click here

Stress Tests: What is the Impact on Our Economy?

"We must remember the bank stress tests were never meant to test the solvency of the banks," says Vincent Truglia, Managing Director of Global Economic Research at NewOak Capital. "Instead, they were created to calm market fears about possible future banking sector problems. A major problem would have occurred if most banks had been found to be so capital deficient that they would have required a major shift of government money into common equity. If that had happened, we would have lost faith in the competence of the existing regulators. That would have caused further stress in credit markets. In the end, the stress tests succeeded because they calmed the concern

For Mr. Truglia’s bio, click here

NewOak Capital Story Ideas for the Week of May 4, 2009

Another Hurdle for Loan Investors in New York City?

"Newly enacted legislation will require investors purchasing delinquent loans located in New York City to be licensed debt collectors" said Jim Dougherty, a Managing Director with responsibility for residential whole loans at NewOak Capital, LLC, a New York based advisory and asset management firm. "Strong debt collection rules are critically important to ensuring that delinquent borrowers are treated fairly and not disadvantaged by unscrupulous lenders, but I am at a loss as to how this legislation will provide additional protections to borrowers. The servicers who are interacting with the borrowers and collecting the debt are licensed. Requiring passive investors in the debt to be licensed as well will only prevent capital from coming into the market, and this will exacerbate the continuing decline in property values."

For Mr. Dougherty's bio, click here

Rally in High Yield Spreads: Greenshoots or ... Crabgrass?

"Concern about missing the recovery forced high yield buyers to chase after the diciest credits this month," says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capita, noting that Triple-C loans had the highest monthly return in over a decade of 21% compared to 11.7% for Single-B's and 6.4% for double-B's. "While everyone knows that defaults are still going to increase in the coming months, better-than-expected earnings reports from some of the largest leveraged issuers, improving equity markets, and firming technicals fueled this rally. Now the question is this: was April's rally just another bear market head fake or the start of something more real?"

For Mr. Pibl's bio, click here

TALF New Issuance Announced - What the Doctor Ordered?

"The terms of new issuance TALF are now out and they are fair but not overly generous" says Precilla Torres, Managing Director of Commercial Real Estate at NewOak Capital LLC. "The securities will be a credit based investment rather than an arbitrage based trade." Torres believes that given the terms of the loans and current market conditions that the 5 year maximum tenor of the loans is appropriate. "Borrowers are looking for some form of liquidity, but they are not going to be interested in locking into loans at the rates and leverage points that are available in the market, TALF or no TALF. Loans will go from being essentially unavailable to available, but not extremely favorable. There is a little bit of trepidation surrounding the announcement of these terms without terms on the legacy TALF terms. It makes sense to release these terms first as new issuance will have a longer lead time, though a little color around the legacy program would probably go a long way."

For Ms. Torres' bio, click here

Will the Swine Flu Mimic the Spanic Influenza?

"Although this year's swine flu (H1N1) outbreak is a cause for concern, it is not likely to lead to anything like the Spanish influenza of 1918-1919," says Vincent Truglia, Managing Director of global economic research at NewOak Capital LLC, a New York-based advisory and asset management firm That flu outbreak spread to 28 percent of the American population, causing 10 times more American deaths than World War I itself. The number of dead worldwide exceeded the total number of deaths witnessed during the bubonic plague. It took special conditions and virulence and a lack of knowledge about viruses to cause such a high mortality rate. Since then, we have had numerous worldwide flu pandemics, including the Asian flu (1957) and the Hong Kong flu (1968), both of which caused a minimal effect on the world's economy. To date, outside Mexico, the mortality rate of this flu appears low. Also, as the northern hemisphere approaches summer, influenza usually declines significantly."

For Mr. Truglia's bio, click here

NewOak Capital News for the Week of April 27, 2009

ECONOMY: APRIL SHOWERS, MAY FLOWERS?

"The US economy continues on a de-levering mode," says Ron D'Vari, CEO of NewOak Capital, noting that de-levering is the trend across the board for consumers, corporate, and funds. "We are only seeing government levering up and that could backfire from both rates and currency point of view. Additionally," says D'Vari, "securitization markets remain anemic at best. TALF has been very slow getting off the ground and it is still uncertain if the market will embrace it. Consumers and corporations are still finding it difficult to find financing. Anecdotally there seems to be a bit of thrift-exhausting by consumers yet that won't last long if the global and credit markets down turn soon."

For Mr. D'Vari's bio, click here

IS THE FEDERAL HOME LOAN BANKING (FHLB) SYSTEM REMOVAL OF FINANCING TO REGIONAL BANKS PROBLEMATIC?

"In the past few months, the rating agencies have downgraded a high percentage of Subprime, Alt-A and even Prime Jumbo backed securities from AAA to non-investment grade," says Samuel Warren, Director at NewOak Capital on the recent trends in RMBS downgrades.

"The new non-investment grade ratings make these bonds ineligible for financing through the FHLB system. According to the FHLB's own white paper: 'FHLBanks have been the largest source of funding for community lending for eight decades'. The removal of banks' largest source of financing at a time of extreme stress is creating a liquidity problem for many of the regional banks. The liquidity squeeze initially forced banks to sell at discount prices, further eroding capital. An alternative solution has emerged, providing a cheaper means of easing the serious liquidity problems every institution is facing; banks can hire a restructuring agent to reREMIC the bond, by returning a portion of the bond to investment-grade rating, and thus allowing FHLB financing on at least some of the bond."

For Mr. Warren's bio, click here

WILL CONGRESSIONAL BUDGET BILLS REDUCE IMPACT OF OBAMA'S BUDGET ON UPPER INCOME TAXPAYERS?

Vincent Truglia, managing director of global economic research at NewOak Capital LLC, says: "Differences between the Administration's budget proposal and what has initially passed the House and Senate would remove much of the Administration's pledge to shift the tax burden from the lower and middle classes to wealthier individuals. Congressional changes to President Obama's proposed business tax reforms, and the removal of cap-and-trade revenue represent significant changes, and would likely cause the budget deficit to swell further."

For Mr. Truglia's bio, click here

NewOak Capital News for the Week of April 20, 2009

CMBS: WILL SPRING BRING SIGNS OF HOPE?

"Recent market turnaround indicates springing of green shoots of hope," says Ron D'Vari, CEO of NewOak Capital based in Manhattan. "Hope may prove better than the harsh truth as Wen Jiabao of China has reminded us that hope is worth more than gold. Credit markets have priced in a severe downturn. If the downturn ends up not as deep, the earliest beneficiary will be super-senior tranches of Commercial Mortgage-Backed Securities (CMBS). Once again CMBS may avert a pending disaster since the 2000/2001 scare."

For Mr. D'Vari's bio, click here

ARE HIGH YIELD INVESTORS COMING BACK TO THE MARKET?

"It's a sign that high yield investors are starting to come back into the market," says Mark Pibl, Managing Director of High Yield and Leveraged Loans at NewOak Capital, noting that several high yield deals last week were significantly oversubscribed. Hospital Corporation of America (HCA) issued $1.5 billion in high yield bonds which was 3x upsized from the original $500 million amount that the company initially sought. "We have been saying that there is a lot of money waiting on the sidelines waiting for the 'all clear' signal" says Pibl, adding "this level of demand for a stable performing high yield credit like HCA demonstrates the pent up demand by investors prepared to deploy capital into the high yield sector".

For Mr. Pibl's bio, click here

SHOULD INSURANCE INCOMPANIES TAKE TARP TO BOLSTER BALANCE SHEETS?

"Questions over capital adequacy and solvency are emerging over investment portfolio valuation and variable annuity exposures of US life insurance companies," says Andrew Akers, Managing Director at NewOak Capital in reflecting on the considerations of insurance companies about taking TARP money to bolster their balance sheets.

"If TARP money is available and cheaper than alternatives and also buys a company time to stabilize the ship," says Akers "waive it in!" Yet Mr. Akers notes that accepting government funds under TARP or maybe PPIP are not the only approach - and many banks have already figured out that there are two ways to solve the capital adequacy puzzle: raise capital or shed risk. The later can be accomplished in two ways. One, by selling assets in a cash transaction, such as Citi's $12Bil sale to TPG/Apollo/Blackstone and ML's sale to Lonestone last year, each with roughly 75% non-recourse seller financing. Second, through unfunded risk transfer. In these transactions, the risk holder buys protection from a counterparty in a negotiated transaction."

For Mr. Aker's bio, click here

WILL THE FED WILL KEEEP LONG-TERM INTEREST RATES ON TREASURIES LOW?

"The Federal Reserve's policy of purchasing long-term US Treasury securities is a strong indication that it intends to keep long-term interest rates low over the medium-term," says Vincent Truglia, Managing Director of Global Economic Research at NewOak Capital. "Although this policy stance hasn't been used in decades, it should prove effective at keeping fixed rate mortgage rates low over the next several years. The Fed wants to make sure that credit markets, particularly those related to housing and corporate finance remain open. Although most commentary has centered on mortgage rates, the Fed is keeping a close eye on the corporate bond market, which is still in its early stages of recovery from the financial crisis."

For Mr. Truglia's bio, click here

NewOak Capital News for the Week of April 13, 2009

CHINA - BORROWING ITS WAY OUT OF A GLOBAL CRISIS

"China's lending boom contrasts with the struggle in the U.S. to rid banks of illiquid assets and unfreeze credit clog has raised concerns of lending quality and speculative lending in China," says Ron D'Vari, CEO of NewOak Capital. "The Shanghai Composite has gained 38 percent this year, and that has been a surprise to many in light of the global recession and collapse in exports," added D'Vari. "China needs to continue to grow internal consumption and reduce its dependence on export. However, it needs to avoid US-style sub-prime lending as it could lead to significant weakening of mostly state-run banking system." D'Vari comments. "China 4-trillion yuan stimulus has come faster than similar efforts by other G-20 govenrments. But China has to still be vigilant about maintaining a responsible credit culture. The global crisis has taught us that we cannot borrow our way out of trouble by more borrowing." cautions Ron D'Vari.

For Mr. D'Vari's bio, click here

SOCIAL SECURITY: IS IT REALLY IN DANGER?

Vincent Truglia, managing director of global economic research at NewOak Capital LLC, says: "The debate about the viability of Social Security is usually based on basic misinformation. Most people think that the Social Security Trust Fund is the real source of strength for the program. As I have testified before Congress, the Trust Fund makes the program no different from 'pay-as-you- go' government pensions used in most advanced industrial democracies. It is not, and has never been a true trust fund because its only assets are non-marketable treasury securities. Social security taxes are simply that, taxes. As long as the government maintains Social Security as one of its main priorities, the system will always be funded."

For Mr. Truglia's bio, click here

LOAN SALES - POISED FOR A PICKUP?

"While the legacy securities program has been getting most of the attention, the legacy loan program may end up being the most helpful," says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC. "Unfortunately at this juncture, there's a wide gap between where investors are willing to purchase loan assets and where banks are willing to sell them. A lot of the activity to date has been from failed banks which can hardly be called willing sellers," Lieberman adds, estimating that using current CMBS pricing as a guide, investors imply a price of 50-55 cents on the dollar for whole loans. "It's hard to argue that it makes sense to purchase a whole loan at 75-80 cents on the dollar when the whole CMBS capital stack is implying a price of just north of 50. If the legacy loan program can restore some liquidity to the space, it should allow buyers and sellers to come closer to agreement on price, facilitating sales."

For Mr. Lieberman's bio, click here

NewOak Capital News for the Week of April 6, 2009

Marisa D'Vari, Managing Director
Corporate Communications
mdvari@newoakcapital.com
Office: (212) 209-0847 | Mobile: (917) 361-8843

WILL RENEWED RMBS SECURITIES LEAD TO A RENEWED RESTRUCTURING WAVE?

"Expected RMBS downgrades are a big concern to the banking and insurance companies" says Ron D'Vari, CEO of NewOak Capital LLC. a New York based advisory and asset management firm. "Because of recent changes to its criteria for rating Alt-A RMBS, Moody's is expected to downgrade 80-85% of '06 and '07 Alt-A AAAs to single-B or below. Because of similar changes to its criteria for rating Prime Jumbo RMBS, Moody's is expected to downgrade 30% of '05 senior securities to a single-B rating, the vast majority of '06 to Baa1 or below with 35% lower than B3 and in the '07 vintage they expect nearly all securities to be downgraded to Ba1 or below. S&P and Fitch have also continued to increase loss expectations and downgrade large numbers of AAA bonds. Banks' required Regulatory Capital holdings increase from 1.6% on a AAA to 100% on a CCC rated security, a 63X increase. Insurance Companies' Required Statutory Capital increases from 0.40% on a AAA security to 23.0% on a CCC security, a 57x increase. Similarly many institutional fixed income funds have investment guidelines limiting the % of bonds rated below investment grade and have to sell them. NewOak Capital can structure and implement cost-effective reREMIC solutions engineered to optimize rating efficiency and add portfolio flexibility. For example a simplified form of a reREMIC solution is achieved by tranching a single bond sequentially for principal allocation and reverse sequentially for losses to achieve the additional subordination necessary to return a senior portion of the cashflow to a AAA/AA rating. Depending on the situation, such a restructuring may reduce the overall Required Capital against the overall position."

For Mr. D'Vari's bio, click here

SIGNS OF LIFE IN THE CONDO FINANCING MARKET?

"The residential mortgage market has witnessed a virtual airlift of government assistance in recent months - Hope for Homeowners, Making Home Affordable, foreclosure and eviction moratoriums, Federal Reserve buying of MBS, innumerable hotlines and helplines, and now TALF and PPIP - yet a massive, nationwide meltdown in the condo market due to the lack of end-loan financing is occurring without much alarm" says Jim Dougherty, a Managing Director with responsibility for residential whole loans at NewOak Capital, LLC, a New York based advisory and asset management firm. "The pain is especially acute in the new construction and conversion products which straddle two very challenged markets - a residential market that has already imploded, and a commercial market that is rapidly headed down the same path. The government has its hands full saving existing homeowners and is unlikely to provide any aid to developers and lenders holding condo risk, so this large segment of the market will need to write a new playbook to solve its own problems and stop waiting for things to get better on their own. Time is not on their side."

For Mr. Dougherty's bio, click here

ORIGINATION MARKET: GOOD NEWS . OR BAD NEWS?

"The good news is that lenders are putting money to work, even if it is on a selective basis" says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC, noting that a partnership between The Macerich Company and Alaska Permanent Fund recently refinanced a $205MM mortgage on the Shops at Northbridge, a 682,000 SF retail development in Chicago's Magnificent Mile. "The bad news is that the loan amount was equal to the existing mortgage which was originated in 2004. Additionally the interest rate of 7.5% is almost 3% higher than the in place mortgage. This bodes ill for assets that will need to be refinanced in the near to medium term. The bar for getting a loan done has been set and from the borrower's perspective it is dauntingly high. This speaks to the need for government focus on spurring new origination in addition to the recently announced efforts on legacy assets. "

For Mr. Lieberman's bio, click here

BANKS: ACCOUNTING FORBEARANCE REQUIRED?

Vincent Truglia, managing director of global economic research at NewOak Capital LLC, says: "Whenever countries have faced banking and/or other financial crises, traditionally the first line of defense is accounting forbearance. As a general rule, mark-to-market accounting for large portions of bank balance sheets is a relatively recent phenomenon. Banks are not required to mark-to-market loans today, yet if that had been the case during the emerging market crisis of the 1980's, most large banks in the US would have been technically insolvent. Mark-to-market accounting usually reduces fiscal outlays in propping up banking systems, benefiting tax payers."

For Mr. Truglia's bio, click here

NewOak Capital News for the Week of March 30, 2009

VINTAGE CMBS in TALF & PPIP OVERWHELMS HEADLINE RISK AND CONTINUED CREDIT DETERIORATION

"The announced inclusion of vintage CMBS in TALF and PPIP has temporarily overwhelmed both headline risk around commercial real estate and continued credit deterioration," says Precilla Torres, Managing Director of Commercial Real Estate at NewOak Capital LLC, explaining that prices for last cash flow super senior CMBS rallied 10-15 points in the past week, adding, "Buyers who are fundamentally comfortable with the credit of these bonds are getting a cheap call option that will be in the money should TALF terms be more favorable than what the market is pricing in."

INSTITUTIONAL INVESTORS POISED TO SEIZE TALF OPPORTUNITY

"TALF represents an excellent opportunity for institutional investors to generate Alpha," says Candice Nonas, Managing Director of NewOak Capital. "Obviously some segments of consumer ABS are more distressed than others, but credit quality distinctions within TALF eligible assets can be made to generate very attractive yields. For TALF eligible assets supply has been substantial in recent years prior to 2007, and some research suggests that we can see upwards of sixty billion in 2009 as TALF kicks up because the borrowers are hungry for credit."

CLO DOWNGRADES: MORE TO COME AND MOVING UP THE CAPITAL STRUCTURE

"Moody's announcement today that it had downgraded over 2,000 CLO tranches is just the first step in a process that will likely be more painful as time passes," says Ross Heller, Managing Director of CDOs and Corporate Credit at NewOak Capital, LLC. "Both Moody's and S&P have focused on subordinate tranches of CLOs thus far, but it is indisputable that Senior, AAA-rated tranches should face downgrades as well. The credit profile of senior CLO tranches has been significantly impacted by the poor performance of underlying leveraged loans, and despite the cashflow mechanics of CLO structures, the these tranches are significantly weaker today from a credit standpoint than at the time of issuance. The ultimate credit loss of senior CLO tranches is certainly open for debate, but the concept that subordinate bonds can be downgraded 5 to 8 notches on average while the AAAs remain untouched should not be."

SHOULD WE HAVE A WORLD CURRENCY?

Vincent Truglia, managing director of global economic research at NewOak Capital LLC, says: "For years the world had the equivalent of a world currency - gold. It worked when the world's economies were relatively unsophisticated. However, it proved disastrous during the early 20th century. The US recovery from the depths of the depression only began when the US abandoned the gold standard in early 1933. The euro has not proved any better for many countries within it. Traditional economic theory would argue strongly against a world currency."

NewOak Capital News for the Week of March 23, 2009

Corporate Defaults: 30% Over Next 5 Years?

"As part of the recent move by Moody's to put over 3,000 CLO tranches totaling $100 billion from 760 transactions on review for significant 4-5 notch downgrades, the rating agency acknowledges the fact that corporate defaults will jump substantially in the coming year" said Mark Pibl, Managing Director of high yield and leverage loans at NewOak Capital, LLC. "Implicit in their new assumptions is that corporate defaults will be 30% over the next 5 years".

"One other aspect is that awareness that senior secured bank loans that default in this market will experience significantly lower recovery rates (approximately 50%) than recent consensus views of an historical average of 70%" adds Pibl. "This average itself is based on a bifurcated results of either 50% during recessionary environments or 80% during strong economic times. The adage that "averages can be misleading" has lead investors to make poor investment decisions.

For Mr. Pibl's bio, click here

Incentives for special servicers -- are they aligned with investors?

"The sheer volume of loans becoming delinquent creates a multi-faceted problem for Special Servicers," says Craig Lieberman, Managing Director of Commercial Real Estate at NewOak Capital LLC, noting that Realpoint reports the balance of commercial mortgage loans in CMBS transactions classified as delinquent has increased 241% from a year ago breaching the $10 Billion dollar barrier. "The logistics of working out a rapidly increasing volume of loans given the staffing levels in the industry are daunting," Lieberman says, adding " the prospect of an affiliate losing bond income from the investment and potential loss of control rights when losses are realized may test provisions in place to align the top of the capital structure with the bottom."

For Mr. Lieberman's bio, click here

ECONOMY: IS FINANCIAL CRISIS SPREADING WORLDWIDE? A LOOK AT U.S FOURTH QUARTER GDP NUMBERS

"Although fourth quarter revisions to US GDP numbers were a negative shock to the market, let's focus on what the details tell us about the nature of the downturn," says Vincent Truglia, Managing Director of Global Economic research at NewOak Capital LLC. Truglia notes the drop in the US net trade deficit was over $155 billion at an annual rate in the fourth quarter from the third quarter of 2008. Normally an improvement in the US trade balance would be viewed as a good thing, yet Truglia ascertains that if improvement is too rapid, it implies that the income this deficit represented to other countries is falling at a fast rate. "These numbers clearly show that fiscal and monetary stimulus are needed worldwide on an unprecedented level to counteract the US trade reversal," he concludes.

For Mr. Truglia's bio, click here

A NEW LOAN MODIFICATION PROGRAM: WILL IT ACTUALLY WORK THIS TIME AROUND?

"Mortgage modification and refinancing programs announced this week are a step in the right direction as they require a loan-by-loan analysis be conducted by the servicers" said Jim Dougherty, a Managing Director with responsibility for residential whole loans at NewOak Capital, LLC, a New York based advisory and asset management firm. "Prior attempts to prevent foreclosures via blanket modification programs failed, with upwards of 50% of modified mortgages redefaulting within six months, since they tended to ignore the most relevant issue - can the borrower actually afford to live in the house? This plan tries to address some past flaws, yet while agency mortgage refinancings with relaxed appraisal standards and targeted modifications based upon a borrower's capacity to pay sound promising, we can't escape the reality that a recession brings higher unemployment. A modification plan based on debt-to-income ratios won't work if a person's income is zero."

For Mr. Dougherty's bio, click here

What We Do Solutions Asset Management Capital Markets Advisory

About NewOak Our Team Philosophy Market Outlook/Blogs Contact Us

Media Story Ideas for Journalists NewOak Capital in the News Press Releases Executive High Resolutions Photos

NewOak Capital 485 Lexington Avenue 25th Floor New York, NY 10017 Switchboard: (212) 209-0850 Fax: (212) 209-0704

Securities Offered Through NewOak Capital Markets LLC, Member FINRA, SIPC and MSRB
©2010 NewOak Capital LLC. All Rights Reserved.   |   Disclaimer    |   Disclosures