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Presenting Timberwolf

Tyler Durden's picture





 

We are going through the March 2007 prospectus, with an emphasis on the Risk Factors section. We are convinced Timberwolf will feature prominently during tomorrow's questioning of Tom Montag. Another question: will Tannin and Cioffi appear as surprise witnesses. We have yet to encounter any discussion of how and why Abacus may have been involved in this deal, or why, as Montag so eloquently put it, it was "one shitty deal."

The following risk factor caught our eye:

Recent Developments in RMBS May Adversely Affect the Performance and Market Value of RMBS. Recently, the residential mortgage market in the United States has experienced a variety of difficulties and changed economic conditions that may adversely affect the performance and market value of RMBS. Delinquencies and losses with respect to residential mortgage loans generally have increased in recent months, and may continue to increase, particularly in the subprime sector. In addition, in recent months housing prices and appraisal values in many states have declined or stopped appreciating. A continued decline or an extended flattening of those values may result in additional increases in delinquencies and losses on RMBS generally.

Another factor that may result in higher delinquency rates is the increase in monthly payments on adjustable rate mortgage loans. Borrowers with adjustable rate mortgage loans are being exposed to increased monthly payments when the related mortgage interest rate adjusts upward from the initial fixed rate or a low introductory rate. Borrowers seeking to avoid these increased monthly payments by refinancing their mortgage loans may no longer be able to find available replacement loans at comparably low interest rates. A decline in housing prices may also leave borrowers with insufficient equity in their homes to permit them to refinance. Furthermore, borrowers who intend to sell their homes on or before the expiration of the fixed rate periods on their mortgage loans may find that they cannot sell their properties for an amount equal to or greater than the unpaid principal balance of their loans. These events, alone or in combination, may contribute to higher delinquency rates and, as a result, adversely affect the performance and market value of RMBS.

In addition, numerous residential mortgage loan originators that originate subprime mortgage loans have recently experienced serious financial difficulties and, in some cases, bankruptcy. According to published reports, those difficulties have resulted in part from declining markets for mortgage loans as well as from claims for repurchases of mortgage loans previously sold under provisions that require repurchase in the event of early payment defaults, or for material breaches of representations and warranties made on the mortgage loans, such as fraud claims. These difficulties may affect the performance and market value of RMBS.

More relevantly, here is the reference obligation portfolio. ABAC 2006-HG1A C/D is featured, the progenitor to the fateful 2007 Abacus. We are collating data on the other reference securities to see how much of its own toxic crap Goldman repackaged and sold off to Bear in this last ditch effort to clean up its books.

We challenge readers to match up the above securities with those that were on the AIG salvage list by counterparty: i.e., which of these had AIG exposure associated with them, and thus which of the counterparties received full payment by the FRBNY just because Ben Bernanke, Hank Paulson and Tim Giethner didn't want to see their banking masters raped by reality. Below is the infamous Schedule A that was initially confidential until Darrell Issa got involved.

 

More to come.

The section on the soon the be infamous Greywolf Collateral Manager:

Certain management, administrative and advisory functions with respect to the Collateral Assets will be performed by Greywolf Capital Management LP, a Delaware limited partnership ("Greywolf"), as the Collateral Manager under a Collateral Management Agreement between the Issuer and Greywolf dated as of the Closing Date (the "Collateral Management Agreement"). Pursuant to the terms of the Collateral Management Agreement, the Collateral Manager will (i) monitor the Collateral Assets and provide certain information with respect to the Collateral Assets to the Trustee, (ii) direct the disposition of the Collateral Assets under the limited circumstances described herein, (iii) direct the reinvestment of the proceeds therefrom in Eligible Investments, (iv) monitor the Cashflow Swap Agreement and determine whether and when the Issuer should exercise any rights available under any Cashflow Swap Agreement, and (v) direct the reinvestment of Default Swap Collateral with the consent of the Synthetic Security Counterparty. The Collateral Manager will perform its duties in accordance with the requirements set forth in the Indenture and in accordance with the provisions of the Collateral Management Agreement. The Collateral Manager is also subject to certain other conflicts of interest. See "Risk Factors–Other Considerations–Certain Conflicts of Interest" and "Risk Factors–Other Considerations–The Collateral Manager."

A description of Greywolf:

Greywolf is an SEC- registered investment adviser and currently manages over $2,000,000,000 in capital. Greywolf was founded in 2003 by a team of former employees of Goldman Sachs fixed income trading division and now has 29 investment professionals with extensive experience in distressed, high yield and structured product investing. A copy of the Collateral Manager’s Form ADV is being delivered to investors in connection with the delivery of this offering circular as Appendix B hereto.

Key Greywolf personnel include the now deceased former Goldmanite Greg Mount:

Gregory Mount, Partner. Mr. Mount joined Greywolf in September 2005 as a Partner and is responsible for structured product investments. Mr. Mount will be the co-portfolio manager of Timberwolf I, Ltd. with Joe Marconi. Prior to joining Greywolf, Mr. Mount worked at Goldman Sachs for 9 years from which he retired as a Partner of the firm in 2005. Mr. Mount founded Goldman's CDO business in 1996 and later held numerous senior positions in credit derivatives and structured products, including co-head of the Structured Products Group, which consisted of the CMBS, RMBS, ABS and CDO businesses and head of Portfolio Credit Derivatives which encompassed cash and synthetic CDOs. Mr. Mount also initiated Goldman's proprietary CDO investment activity in 2003 and was the primary decision-maker for that portfolio at its inception. Mr. Mount received a B.S. in Electrical Engineering from M.I.T. in 1987, and an M.B.A., with high honors, from The University of Chicago Graduate School of Business in 1992.

Not for nothing, but pretty much everyone at Greywolf worked previously at Goldman Sachs.

The "Conflicts of Interest" section on page 115 is quite entertaining.

Lastly, the full listing of constituent CDOs together with ratings, issue dates and Collateral Managers can be seen below. Goldman was in such a rush to offload securities, that it packaged $20 million of Cambria 7A which had been issued weeks prior, just like STAK 2006-2A and SHERW 2006-3A.

 

Full Timberwolf prospectus.

 

 


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Mon, 04/26/2010 - 21:49 | Link to Comment casino capitalism
casino capitalism's picture

See this is a good example of the problem of leverage - CDO's of CDO's.  It seems to me good derivatives reform would include a central registry of actual collateral and a flag that allows only one securitization of each underlying asset.  also, there should be a maximum notional amount of credit default swaps on underlying reference assets, again monitored via a central registry.  This would be one wa to effectively limit the amount of leverage.

Mon, 08/23/2010 - 02:16 | Link to Comment qrs521
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Mon, 04/26/2010 - 21:53 | Link to Comment David Fiderer
David Fiderer's picture

Of course it's a shitty deal. All of the assets, at least  on pages 161 and 162 on the scribd file, are all deeply subordinated tranches of others CDOs. remember, anything that isn't rated AAA is deeply subordinated.

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