If someone thought that the game changed, think again.
This comes from Max Keiser and Stacy Herbert:
Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Now, Moodys downgraded the Aaa tranche of this CDO with six notches to A3 because its default rate for loans in the Aaa tranche soared to 7 percent. No problem for Morgan Stanley. They managed to repackage this paper throwing in some credit enhancement, collateral, reducing the poorly performing assets, make the equity tranche a little larger and throw in a CDS and hop… the same loan pool gets another Aaa rating.
Everybody is repackaging again. Goldman plans to sell 200 mln USD of repackaged commercial mortgage-backed paper soon.
And attention folks: this is all approved by your local regulators.
On the other hand: somewhere there is still demand for this kind of paper. Maybe it’s your own pension fund buying...
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This comes from Max Keiser and Stacy Herbert:
Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.
Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.
Now, Moodys downgraded the Aaa tranche of this CDO with six notches to A3 because its default rate for loans in the Aaa tranche soared to 7 percent. No problem for Morgan Stanley. They managed to repackage this paper throwing in some credit enhancement, collateral, reducing the poorly performing assets, make the equity tranche a little larger and throw in a CDS and hop… the same loan pool gets another Aaa rating.
Everybody is repackaging again. Goldman plans to sell 200 mln USD of repackaged commercial mortgage-backed paper soon.
And attention folks: this is all approved by your local regulators.
On the other hand: somewhere there is still demand for this kind of paper. Maybe it’s your own pension fund buying...
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