Cerberus MBS Vehicle Finds Traction Cerberus Capital Management

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Cerberus MBS Vehicle Finds Traction Cerberus Capital Management Powered By Docstoc
					                    Cerberus MBS Vehicle Finds Traction
    A Cerberus Capital hedge fund that buys devalued mortgage
bonds is about to hit a milestone.
    After struggling to find backers at the outset, the Cerberus
RMBS Opportunities Fund saw its assets surge to $875 million
as of March 1. It’s expected to reach $1 billion soon.
    The fund launched last August with $188 million, following                          MARCH 16, 201
                                                                                                                  2                               Idle Citigroup
                                                                                                                                                                              Bids Farewell
an extended marketing campaign that had some players in the
                                                                                         7 DISTRESSED
                                                                                                                                                    Citig                                                  to Van Devente
                                                                                         2 Scio Rolls Out
                                                                                                          Fifth   ABS Vehicle
                                                                                                                                                          roup has dism
                                                                                                                                                  within its treasury issed Hugh Van Deventer from                                              r
                                                                                                                                                  frequent issuer of department — a move that sign the leading securitization role
hedge fund industry wondering whether Cerberus would call                               2 Investor Grou
                                                                                       2 Prime Auto Loan
                                                                                                        ps   Target Settleme
                                                                                                           s Show Muscle
                                                                                                                                                     Van Deventer was it-card bonds.
                                                                                                                                                 this week, and will let go from his longtime post
                                                                                                                                                                                                          als an end to the
                                                                                                                                                                                                                             bank’s role as a
                                                                                                                                                                                                            as director of capi
off the effort. But the vehicle has fared well in attracting inves-                   3 DBRS Drafts
                                                                                      3 Shenkman Retu
                                                                                                       Rental-Bond Crite
                                                                                                                                                       e highest-pro le Citi in the next month or so. He
                                                                                                                                                securitization prog         of Van Deventer
                                                                                                                                                since its formation ram. at e ort has produced
                                                                                                                                                                                              ’s duties was man
                                                                                                                                                                                                        229 deal
                                                                                                                                                                                                                                tal mar
                                                                                                                                                                                                                won’t be replaced. kets
                                                                                                                                                                                                                   aging Citi’s cred

tors since then, with $175 million arriving so far this year. The
                                                                                                                                                                       in 1998, accordin
                                                                                                          rns to CLO Mark
                                                                                                                           et                   has scaled back
                                                                                                                                                                 dramatically in          g to Asset-Backed s totaling $177.7 billion
                                                                                     3 Mortgage-Ser                                            deposits for fund                    rece                       Alert’s ABS Data
                                                                                                       vicing Rights on
                                                                                                                         Block                                     ing. Now, Van Devent years as the bank has relied mor base, but
                                                                                                                                               institution’s issua
                                                                                                                                                                   nce will remain nter’s dismissal is seen as con rma e heavily on
progress is attributable mainly to a gain of 3.6% that Cerberus
                                                                                     3 Servicing Deal
                                                                                                                                                                                     suppressed for the
                                                                                                                                                   Indeed, Citi didn                                     foreseeable futu tion that the
                                                                                                        to Spawn Bond
                                                                                    4 Harley Program                                          just two deals total ’t complete any credit-card secu                       re.
                                                                                                                                                                     ing $1.5 billion                    ritiz
                                                                                                         on Cruise Control                                                            in 2011. Going forw ations in 2010 and placed
notched in its first six months, with no down months.                               4 Fund Eyes Equi
                                                                                   5 Cerberus MBS
                                                                                                       ty-Sharing Strat
                                                                                                                                             Volcker Stalem
                                                                                                                                                                                                            ard, it’s expected
                                                                                                                                                                                                                  See CITIGROUP
                                                                                                                                                                                                                               to tap the
                                                                                                                                                                                                                                    on Page 4
                                                                                                      Vehicle Finds Tract
                                                                                                                                                                           ate Creates Co
    Looking forward, the manager sees ample opportunity to                         5 Floorplan Start
                                                                                  6 Heavier Liftin
                                                                                                     up Aims to Issue
                                                                                                                                                Securitization attor
                                                                                                                                            to prepare for a           neys are urgi
                                                                                                                                                                                                         nduit Scramble
                                                                                                                                                               previously unth ng banks that run commercial-

pick up home-loan bonds on the cheap. It’s targeting securities
                                                                                                                                            cker Rule to take                   inka                                 paper conduits
                                                                                                   g Ahead for Liqu
                                                                                                                    idations                                    e ect even if the ble scenario: that Congress will
                                                                                 18 INITIAL PRIC                                               Citigroup aand                     regulation isn’t                    allow the Vol-
                                                                                                 INGS                                                            J.P. Morgan are                    nalized.
                                                                                                                                           been discussing                        among a number
                                                                                                                                                              possible continge                      of conduit operators
underpinned by adjustable-rate accounts that already have re-                                                                              Dodd-Frank Act                        ncy plans with their
                                                                                                                                                              prov                                    lawyers, who wide that have
                                                                                                                                              At issue is the procision as forbidding banks from
                                                                                                                                          the Comptroller           ess under which                  sponsoring cond ly view the
                                                                                                                                                                                      the Volcker Rule                uits.

set, with the opinion that they will beat performance expecta-
                                                                                                                                                             of                                         would take e ect:
                                                                                                                                          of regulations by the Currency, FDIC, Federal Rese                               It’s up to
                                                                                                                                                              July 21. Progress
                                                                                                                                                                                 has been slow, how and SEC to dra a nal set
                                                                                                                                          grant the agencies
                                                                                                                                                               mor                                    ever, and only Con
                                                                                                                                             Until now, bank e time.                                                     gress can
tions even without an improvement in the housing market or                     THE GRAPEVINE
                                                                               Mary  am Muessel has
                                                                                                                                         the measure wou s gured that either the regulator
                                                                                                                                         gress would dela create an exemption for conduitss charged with implementing
                                                                                                                                                            y implementation
                                                                                                                                                                                 of the directive.
                                                                                                                                                                                                    by the deadline
                                                                                                                                                                                                                     or that Con-
the broader economy.                                                            investment o cer le her job as chief
                                                                                                      for BNP Paribas
                                                                               group, destinati al credit-product
                                                                                                                                        Europe’s Bad-B
                                                                                                                                                                                                   But Federal  Reserve Chairman
                                                                                                                                                                                                              See VOLCKER on
                                                                                                                                                                                                                               Page 18
                                                                                                                                                                       ank Managers
    The shop also sees itself turning a profit by repackaging
                                                                               joined BNP with unknown. Muessel
                                                                              chase of a majority
                                                                                                   the bank’s 2009
                                                                                                                                            Several “bad bank
                                                                                                                                                              s” in Europe have
                                                                                                                                                                                                      Reverse Roles
                                                                                                                                                                                   started buying
                                                                              employer, Fortis stake in her former
                                                                                                                                            RBS and Standard
                                                                                                                                        said, while a num Chartered Bank already are pick structured products.
bonds into so-called re-Remics.
                                                                              years there as chie . She had spent ve                   similar moves.
                                                                                                                                                          ber of institutions                    ing
                                                                                                                                                                               including Nationwid up some positions, sources
                                                                             a structured-producinvestment o cer of                                                                                  e Building Soci
                                                                                                      t buying unit that                   In each case, the                                                         ety consider
                                                                             repackaged som                                                                  investments appe
    In a March 7 letter to investors, Cerberus pointed to rising            lateralized debt
                                                                            she logged three
                                                                                               e of its holdings
                                                                                               obligations. Befo
                                                                                                                  into col-
                                                                                                                  re that,
                                                                                                                                       charged with the
                                                                                                                                      Rather than rout
                                                                                                                                      individuals are
                                                                                                                                                          unwinding of hold ar to be coming at the urging
                                                                                                                                                         ing the purchase ings that lost value during the of managers
                                                                                                                                                       pitching the inve s directly into their bad banks, credit crisis.
                                                                           asset-managemen s at the helm of the
mortgage-bond prices since Jan. 1 and large-scale sales of securi-         Capital Access.
                                                                           GenRe Securities
                                                                                                 t business at Ame
                                                                                             She also has work rican
                                                                                              , and for a brief
                                                                                                                 ed at
                                                                                                                                     meant to satisfy
                                                                                                                                     even in a market
                                                                                                                                                        regulator y need
                                                                                                                                         Industry players nturn.
                                                                                                                                                                          stments for so-c
                                                                                                                                                                         s or to ensure acce
                                                                                                                                                                                            alled liquidity book ever, those
                                                                                                                                                                                             ss to cash for pare s, which are
                                                                                                                                                                                                                 nt operations

ties by the Federal Reserve as signs of demand from “real-money”
                                                                                                                time                 many bad-bank         don’t see the disti
                                                                                             See GRAPEVINE
                                                                                                                                                       managers formerly         nction as particula
                                                                                                             on Back Page
                                                                                                                                                                             ran liquidity book       rly important.
                                                                                                                                                                                                 s containing large Indeed,

investors. The letter was signed by Joshua Weintraub, who heads
                                                                                                                                                                                                           See ROLES on
                                                                                                                                                                                                                          Page 17

the 30-member team running the fund, along with founder Ste-
phen Feinberg and mortgage specialist Brendan Garvey.
    Cerberus’ ability to find investors in part signals an increas-
ing sentiment among those players that the firm has moved             timately, the buyout giant lost virtually nothing on the bets, one
beyond its problematic investments in Chrysler and GMAC. Ul-          investor said. 

     ASSET-BACKED ALERT: March 16, 2012, 5 Marine View Plaza, Suite 400, Hoboken NJ 07030. 201-659-1700

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