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The SEC’s Misleading Take On Its Own Rating Agency Report

Despite Its Own Findings, It Claims Success and Congratulates Itself Despite the SEC‘s allegations of rampant bad ethics, widespread noncompliance with internal standards, insufficient controls, and little change in Moody’s, S&P’s, and Fitch’s dominance over the industry, the SEC declared victory in a recent press release[1] announcing its latest reports on its oversight of the more…

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SEC Allegations Against Rating Agencies Keep Piling Up

In a recently released report, the SEC alleges that Moody’s, S&P, and Fitch have, on multiple occasions, engaged in improper actions and had failures strikingly reminiscent to those that they engaged in and suffered from prior to the Great Recession.  It further alleges that a majority of the smaller Rating Agencies have engaged in similar more…

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Are Catastrophe Bonds a Man-Made Disaster Waiting to Happen?

Are Catastrophe Bonds (“Cat Bonds”) driving the possibility of a “collapse” in the $575 billion reinsurance industry? In a new book, Making a Market for Acts of God, detailed in the Financial Times, Professor Paula Jarbzabkowski of Cass Business School and two other researchers make such an argument. But their case is incorrect on several more…

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Payment Default Impending on Yellow Pages Securitization

Another dubious milestone was reached on Friday: Local Insight Media Finance’s ratings were lowered to ‘D’ by S&P.  These downgrades follow a series of ratings reductions for these whole business securitizations backed by cash flow generated by yellow pages phone directories.  These ratings reflect the failure of these securitizations. The immediate cause of these downgrades were more…

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Subprime Auto Loans: Breakdowns Up Ahead

The overheated subprime auto loan market is heading for a breakdown.  Capital is pouring into this market despite – and driving – its increasingly poor credit characteristics.  This market’s increasingly weakened underwriting standards will result in increased borrower defaults, the collapse of industry lenders, substantial investor losses, and a renewed shortage of credit to potential more…

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Record Timeshare Securitization Issuance Disproves Skeptics

Skeptics move aside: vacation timeshare securitization exceeded all volume records in 2012. With this paper’s attractiveness to investors and issuers, and with continued industry growth, the volume record is poised to be broken again this year. Despite successful issuance since the 1980s, timeshare remains an underappreciated asset class that offers premium returns relative to its more…

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Debunking WSJ’s Hewlett-Packard Receivables Attack

This week, the Wall Street Journal’s Rolfe Winkler wrote an article that called Hewlett-Packard’s methods for generating cash flow into question. The article was inflammatory enough to elicit an official response from HP and set off a flurry of similar articles around the blogosphere. Here’s the problem: Winkler’s concerns and allegations about HP’s receivables sales more…

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Rapid Amortization Doesn’t Help When There’s No Cash

Investors are facing extraordinary losses in Local Insight Media’s whole business securitizations. This short “Judicious Note” highlights the rating actions S&P took with respect to these notes this week and, more importantly, its related comments (“Local Insight Media Finance LLC Series 2007-1 And 2008-1….”, published 11-Dec-2012). S&P’s comments on the state of these securitizations illustrate more…

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A Bad Whole Business Securitization

Yellow Pages Whole Business Securitization Printing Red Ink Last month, a dubious milestone passed almost unnoticed; Moody’s announced that a U.S. Whole Business Securitization will be defaulting on its payments of interest by the end of this year or early next year.  Yes, it can’t even make its interest payments (much less repay the outstanding more…

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