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More Work, Less Play at Vegas Gathering
Asset Backed Alert, Harrison Scott Publications Inc. (February 1, 2008)

Plenty of work awaits the nearly 6,000 individuals who are heading to Las Vegas this weekend for the American Securitization Forum's annual industry conference.

In the past, such gatherings have been marked by non-stop partying, golf and other off-site distractions, often funded by seemingly bottomless entertainment budgets that accompanied what had been furious market growth. But that was before the credit crisis shut things down.

This year, many dealmakers expect to spend their four days at the Venetian Hotel hunkered down in meeting rooms with business contacts as they address ways to weather the prolonged market slump. The 1,500 investors on hand will be especially busy.

To be sure, many conference-goers will be buzzing about S&P's Thursday downgrade of FGIC's bond-insurer rating to "AA" (from "AAA"). They'll also want to compare notes about MBIA and XL Capital, whose top ratings the agency put on watch for possible downgrades.

The ASF conference begins Feb. 3. While a good number of buysiders will undoubtedly take time off to watch the Super Bowl that day or head off for various diversions later in the week, they also view the ASF summit as a rare opportunity to meet with servicers of securitized loans. And that will take up much of their time.

Servicers have come into the spotlight in recent months as loan performance has plummeted, and holders of bonds whose payments depend on those cashflows want to know more about what the shops are doing to keep up on collections. "We're hoping to meet with as many servicers as we can to get a sense of how serious they are about doing what they do," said Allan Berliant, who runs a $13 billion portfolio of triple-A-rated asset- and mortgage-backed securities at Boston money manager GMO.

As part of their efforts to measure how well servicers are combating borrower defaults, especially among subprime mortgages, Berliant and his peers plan to grill the firms on modifications they've recently made to some credits. They're also interested in whether everyone is playing by the rules.

For example, there has been some grumbling lately among investors that servicers have been dragging their feet when it comes to reporting loan defaults to trustees. The theory hinges on the fact that servicers often operate as units of issuers, which frequently hold subordinate or residual interests in their deals. By waiting to disclose defaults, the thinking goes, the servicers can keep payments flowing to the bottom pieces of the transactions for longer periods - installments trustees might cut off if they knew just how rotten the collateral performance really was.

The result is that senior bondholders can get shortchanged in the long run, investors said. Servicers have countered that if there are any delays, it might be because certain markets are flooded with foreclosed-upon homes that are taking longer and longer to sell. Many servicers also say cost-cutting measures at their parent companies have hindered their abilities to keep payments flowing.

With bondholders placing so much emphasis on servicing, issuers and underwriters will face more competition than usual for face time with potential purchasers of their deals - meetings they view as indispensable right now given weak demand for all types of structured products. While sellers have often gone out of their ways to spoil investors at the securitization industry's main conferences, a surplus of willing buyers meant one-on-one meetings weren't always a priority in the past. Now, with the credit market in the dumps, the opposite it true.

In addition to holding sitdowns at the conference venue, sellers whose expense accounts are still intact plan to pry investors away with golf trips and meals at high-end restaurants, where they'll present the case that their deals are safe bets. "This is the first chance we're going to have to really discuss what's happening with investors since everything went bad," one issuer of student-loan bonds said.

Investors, meanwhile, will likely view the added attention as an invitation to press for information that wasn't necessarily available on past offerings. "I find the fact that they want to meet with us now kind of interesting," one said. "For years we had to beg for that kind of attention."

About 800 issuers are registered for the conference.
So just how busy will attendees be? ASF executive director George Miller said this week that the trade group was having trouble finding enough people to play in the gathering's annual golf tournament on Tuesday. The organization needs only 140 players - equal to about 2% of the expected conference turnout. In the past, the contest has been a cinch to fill. "It gives you an idea of how much work is going to be getting done," Miller said.

Investors, meanwhile, are reporting that they have an average of 40-50 meetings lined up for this year's conference. Most had 15-20 on their schedules in previous years.

That partly reflects an overriding sentiment that the summit offers securitization specialists the best chance so far to take stock of how the credit crisis has influenced the industry's direction. Only one other large-scale gathering has taken place since the market crashed, and that event - Information Management Network's "ABS East" gathering in Orlando last October - drew only about a quarter of the headcount expected for ASF's confab.

Given that, it's a certainty that the future of home-loan securitizations, shaky CDO performance and upcoming regulatory changes will be among the most talked-about topics at panel discussions, banquets, cocktail parties and in the halls at ASF's gathering. Attendees will also try to get a better read on the degree to which mortgage-related troubles are spilling over into other asset classes, such as credit cards (see article on Page 3). They'll be engaged in the usual networking as well.

At the same time, widespread layoffs in the structured-finance business means there will be plenty of job hunting going on. "There's going to be resumes flying all over the place," one CDO-structuring professional said.

So far, 5,700 individuals are officially signed up for the ASF conference. That number is likely to climb, however, as unregistered attendees show up.



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