Securitizations: On the Mend
It's official. The markets for asset- and mortgage-backed securities bottomed out in 2009. After only 182 asset-backed deals that year, the market rebounded in 2010 as deals jumped more than 45 percent, to 264, according to Thomson Reuters. The mortgage-backed market had an even bigger transformation. Deals leaped more than 300 percent, from a moribund 16 transactions in 2009 to 65 in 2010. While volume was nothing like the heyday of 2006--when there were 2,400-plus asset- and mortgage-backed securities deals--lawyers within the industry are grateful that market is on an upswing.
"Things were a lot better in 2010," says Michael Gambro of Cadwalader, Wickersham & Taft, whose firm ranked first in the mortgage-backed market with 16 issues as issuer's counsel, and ranked third with ten issues as manager's counsel.
However, the story was a little different for asset-backed securities. Bingham McCutchen's Reed Auerbach--whose firm led the way on the manager's side with 58 issues and tied for first on the issuer's side with Kirkland & Ellis--says that while overall volume throughout the industry was up, the market was uneven as government regulations and lack of consumer spending affected certain types of assets, such as student loans and credit cards.
One other big change for the industry is that the complicated deal structures seem to be over--at least for now. "The deals have had better underwriting standards, better collateral, structures that are easier to understand, more transparency, and less leverage," says Auerbach.
Looking to 2011, impending Dodd-Frank and Securities and Exchange Commission regulations could hurt the market. "There's a danger of overlearning the lessons of the financial crisis and making it very burdensome on issuers," says Kirkland's Kenneth Morrison, whose 19 asset-backed security deals from the issuer side marked a healthy increase from 2009, when it only had five deals. "Most of the problems were on the mortgage-backed securities side. . . . Asset-backed securities were never really a problem."
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