Tag Archives: Collateralized debt obligation

Fabrice Tourre: The Last (Gold)Man Standing

While most Goldman Sachs employes are busy starting new hedge funds or preparing for new jobs, like central bank president or chief economist for a major European bank, Fabrice Tourre stands as the only Goldman banker to face a trail.  However, something strange happened recently, something that may spin the case in an unexpected direction.

“It’s impossible that only one person was involved with fraudulent activities in connection to the sales of these mortgage securities.”

G. Oliver Koppell

Yeah, yeah…we know that… The “Fabulous Fab” is just a trader who carried out the order of his superiors. An order that was very simple and impossible to misunderstand: “Make money!” It is, however, harder to figure out how a newspaper accidentally gets hold of a laptop, accidentally found in the trash, accidentally containing crucial evidence.

I won’t waste any time speculation about something I’m sure I’ll never find out.

But that seems to be the case at moment – the mysterious laptop, that is.

The New York Times published recently a long article about Fabrice Tourre, who as of now stands as the only Goldman Sachs employee charged individually in the firm’s CDO follies.

Tourre appears to be keen on fighting the civil charges in court, something that, according to US financial media, has caused a little bit nervousness amongst the top Goldman Sachs executives.

Many have suggested that Tourre in fact has little choice but to engage in a  scorched earth defense in an attempt to make it clear that many people are to blame for the scandal, besides himself.

Fingers have been pointing at his boss, Jonathon Egol, and questions raised on why he was not charged.

But the article in NYT is built new information that arrived in a reporters hands in a rather odd way.

The article explain that a New York filmmaker was  given a laptop by a friend who claimed it had been found in the trash.

Amazingly, it had many email to Fabrice Tourre on it. Including several emails from Egol that suggest he had a dire view of the market, one that Tourre didn’t necessarily share.

And even more amazing – the emails continues to stream in.

Based on those emails, the NYT concludes that Tourre’s legal team will focus on the fact that he was in fact a small player, and cannot alone be held accountable for the entire ABACUS fiasco.

According to Fierce Finance, it is likely that others will be drawn into the center stage.

Indeed, it would be remarkable  if Tourre alone is found guilty. That would mean that one single trader is capable of taking down the whole global economy!

The NYT  indicates that Tourre has been made a scapegoat, and that other Goldman executives should be charged.

One interview suggests that Tourre was targeted because he was prone to logorrhea, unlike his colleagues.

Anyway, he has hired a legal team that (also amazing) do not have ties to Goldman Sachs.

Everything is set for a very interesting case. But a case built on email is not necessarily a strong one.

“Perhaps, the SEC should make one final push to settle,” Fierce Finance writes.


Of course! Now, I get it….

Related articles:
Why Goldman should be hoping that SEC drops Fab case
Fabrice Tourre, a minor player in larger CDO drama


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Filed under Laws and Regulations, National Economic Politics, Philosophy

US Bank TruPS CDO Defaults Near 14% on Deferral Transfer Spike

Three new bank defaults from previously deferring issuers resulted in another increase on U.S. bank TruPS CDO defaults to 13.7%, according to the latest default and deferral index results from Fitch Ratings.

“Banks that issued between $20 and $75 million of TruPS outstanding in CDOs have been the primary drivers of new default and deferral activity since the beginning of this year.”

Derek Miller

The CDO Cashflow Waterfall

Last month’s new defaults totaled $72.5 million (affecting 10 CDOs). Additionally, 22 banks began deferring interest payments on roughly $302.5 million of collateral in 23 TruPS CDOs, according to Fitch Ratings.

“Second-quarter acquisition activity resulted in two banks curing their deferrals,” says Director Johann Juan.

“The acquiring banks resumed payments in June on the full balance, including accrued interest on the TruPS issued by the acquired entities.”

Amid increased deferrals in June, the pace of new deferrals continues to slow and has for the last three quarters, according to Senior Director Derek Miller.

“Banks that issued between $20 and $75 million of TruPS outstanding in CDOs have been the primary drivers of new default and deferral activity since the beginning of this year,” says Miller.

The three new bank defaults bring the total to 123 (affecting 82 CDOs).

The 362 banks now deferring are affecting interest payments on $6.5 billion of collateral held by 83 TruPS CDOs.

Fitch’s Bank Default and Deferral Index tracks defaults and deferrals by banks and bank holding companies within Fitch’s rated universe of 85 bank TruPS CDOs (encompassing approximately $37.7 billion of bank collateral originated).

The index includes all types of securities issued by banks and bank holding companies such as TruPS and senior and subordinated debt.

Fitch publishes the Index results monthly.

‘Fitch Bank TruPS CDO Default and Deferral Index’ is available by clicking on the link or by going to ‘www.fitchratings.com’ under the following headers:

Sectors >> Structured Finance >> Structured Credit >> Research

Related Research: Fitch Bank TruPS CDO Default and Deferral Index (As of June 2010)

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Fitch Downgrade Debt Securities Worth $775 Million To Junk

Fitch Ratings has downgraded all classes of LNRs, CDOs, VI LTDs and LLCs (LNR VI) as a result of increased interest shortfalls and negative credit migration on the underlying portfolio. Fitch believes that default is inevitable.

“100% of the portfolio now has a Fitch derived rating below investment grade.”

Fitch Ratings

Fitch Ratings has downgraded all classes of LNR, CDO, VI LTD, and LLC (LNR VI) as a result of increased interest shortfalls and negative credit migration on the underlying portfolio. Since Fitch’s last rating action in February 2009, the credit quality of the portfolio has declined to a current weighted average Fitch derived rating of ‘CCC-‘, down from ‘B-/CCC+’ at last review.

Further, 100% of the portfolio now has a Fitch derived rating below investment grade; 75.4% has a rating in the ‘CCC’ category and below. As of the June 2010 trustee report, 85% of the portfolio is experiencing interest shortfalls.

As a result of these shortfalls and the CDO’s substantial hedge termination obligation, classes C and below are deferring interest payments, the rating agency says in a statement.

This transaction was analyzed under the framework described in the report ‘Global Rating Criteria for Structured Finance CDOs’ using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio.

However, given that the total percentage of assets experiencing interest shortfalls exceeds the credit enhancement to all classes, and that Fitch expects minimal principal recoveries on these assets, Fitch believes that default is inevitable.

As such, all classes have been downgraded to ‘C’.

LNR VI is backed by 131 tranches from 28 commercial mortgage-backed securities (CMBS) obligors, all of which are from the 2006 or 2007 vintages.

The transaction closed in August 2007, and is considered a CMBS B-piece resecuritization (also referred to as first loss CRE CDO) as it primarily includes junior bonds of CMBS transactions.

Fitch has downgraded the following classes as indicated:

–$242,084,000 class A-1 to ‘C’ from ‘BB+’;

–$132,558,000 class B to ‘C’ from ‘B’;

–$149,951,000 class C to ‘C’ from ‘CCC’;

–$25,995,000 class D to ‘C’ from ‘CCC’;

–$21,476,000 class E to ‘C’ from ‘CC’;

–$44,195,000 class F to ‘C’ from ‘CC’;

–$28,825,000 class G to ‘C’ from ‘CC’;

–$24,631,000 class H to ‘C’ from ‘CC’;

–$55,280,000 class J to ‘C’ from ‘CC’;

–$39,459,000 class K preferred shares to ‘C’ from ‘CC’;

–$15,456,000 class L preferred shares to ‘C’ from ‘CC’.

The Rating Outlooks for classes A-1 and B were Negative prior to today’s downgrades. Fitch does not assign Rating Outlooks to classes rated ‘CCC’ or lower.

These rating actions reflect the application of Fitch’s current criteria which are available at ‘www.fitchratings.com’ and specifically include the following reports:

* ‘Global Structured Finance Rating Criteria’ (Sept. 30, 2009);

* ‘Global Rating Criteria for Structured Finance CDOs’ (Dec. 16, 2008).

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Filed under International Econnomic Politics, National Economic Politics