Credit stability incorporated in rating opinions

A round up of this week's structured credit news

Credit stability incorporated in rating opinions
S&P has confirmed that it is incorporating credit stability as an important factor in its rating opinions; in other words, when assigning and monitoring ratings, it will consider whether an issuer/security has a high likelihood of experiencing unusually large adverse changes in credit quality under conditions of moderate stress. In such cases, the agency says it will assign the issuer/security a lower rating than it would have otherwise. S&P anticipates that the change will have a more pronounced impact in certain areas of the structured finance segment, particularly on its ratings of derivative securities or those where credit risk is primarily a function of market values, such as ABS CDOs and CPDOs.

S&P intends to implement the new approach over a period of about six months. It will apply to ratings on all types of issuers and securities, and to both new and existing ratings.

The agency is incorporating credit stability in its ratings in light of the high degree of credit volatility displayed by certain derivative securities during the past 18 months. By explicitly recognising stability as a factor in our ratings, S&P intends to align their meanings more closely with its perception of investors' desires and expectations.

Transactions and structures that create more significant credit cliff risks would likely experience the largest impact from the action. The change could require modifications to the specific or detailed rating criteria for certain types of issuers or securities.

RMBS recovery assumptions revised
S&P has revised its recovery assumptions for US RMBS collateral backing certain ABS CDO transactions. The agency says it will use the revised recovery assumptions to rate and survey ABS CDO transactions backed specifically by Alt-A, sub-prime, home equity loan and tax-lien RMBS issued in the US during or after Q405.

In addition, S&P will review the expected recovery upon default applicable to CDO tranches that are backed by the affected RMBS collateral on a case-by-case basis. The agency believes the revisions are appropriate, given the observed difference between the originally expected behaviour and the actual behaviour of certain RMBS collateral. These changes reflect S&P's opinion that, based on its current expected losses, the projected credit support for the affected securities is insufficient to maintain its previous recovery assumptions.

To estimate recoveries for the affected RMBS collateral, S&P applied its newly revised RMBS surveillance criteria to sub-prime and Alt-A RMBS issued from Q405 through to Q207. It then calculated the average write-down amount of each rated RMBS that experienced any write-downs in its cashflow analysis.

Fitch reviews counterparty criteria
Fitch Ratings has initiated a review of its counterparty criteria for global structured finance transactions in light of recent market turmoil. Fitch says the aim of the criteria revision will be to make changes which can better mitigate the potential risk of near-term counterparty default from high investment-grade levels, while continuing to maintain a transparent criteria approach.

The review will affect all counterparty criteria and will apply to the structured finance and structured credit transactions the agency rates globally. The documentation is expected to be published by December, initially in the form of an exposure draft to seek market comment.

Fitch's current counterparty criteria generally specifies that only counterparties with issuer default ratings (IDRs) at or above certain levels are compatible with structured finance securities which have been assigned the highest investment grade ratings. The rating levels depend upon the type of counterparty exposure and are detailed in four dedicated criteria reports, addressing hedge counterparties, qualified investments, account banks and liquidity facilities.

In some cases (for example, in the case of Lehman), the bank proceeded to insolvency or receivership from a high investment grade level in a short space of time, with no - or limited - government intervention forthcoming. This meant that, for transactions affected, there was insufficient time for transaction parties to implement remedies provided for in transaction documentation.

Transaction documentation typically provides for a 30-day period following breach of rating triggers to pursue remedies that usually includes finding an alternative counterparty or posting collateral. As a result of the Lehman example, in particular, a number of structured finance transactions with Lehman counterparty exposure have been placed on rating watch negative, with multiple category downgrades possible.

Lehman-related CSOs downgraded
S&P has lowered and kept on watch negative its ratings on 27 tranches from 21 synthetic CDOs. The ratings on six tranches in one transaction have been lowered and removed from watch negative, while the ratings on 12 single-tranche CDOs on were placed on watch negative. The downgrades follow the agency's review of Lehman-related synthetic CDO transactions, where Lehman acts as either the credit support provider or guarantor to various Lehman-related entities that act as swap counterparty to the affected transactions.

At the same time, S&P has withdrawn some ratings for different reasons across five separate deals, either because of lack of information or note redemption with no loss to noteholders, or because of a direct ratings link to Lehman Brothers Holding entities that are no longer rated. A total of 39 deals are affected by these rating actions.

S&P believes that the notes on which it has lowered its ratings will not have enough funds to pay the principal balance and accrued interest on liquidation of the relevant transaction. The tranches with ratings remaining on watch negative reflect its opinion that the notes will be fully paid on the liquidation of the transaction.

These notes benefited from both subordinated swap termination payments and the requirement that Lehman post collateral one period in advance on the coupon owed to the notes. Furthermore, S&P has not taken rating actions on tranches where the proceeds from the liquidation of charged assets and the provision for overcollateralisation is not expected to be lower than the principal of the notes.

Some transactions remain on watch negative while the agency confirms the current status with the trustee. These transactions have features that differ from plain vanilla synthetic CDOs. Depending on the information received from the trustee, S&P may take further rating actions or withdraw its ratings.

Asian CSOs impacted
S&P has also lowered its ratings on seven tranches relating to seven Asia Pacific (ex-Japan) synthetic CDO transactions and kept the ratings on watch negative. The downgraded deals involve Lehman Brothers Special Financing as a swap counterparty and Lehman Brothers Holdings as a swap guarantor. The rating actions reflect the agency's view on the likelihood of loss incurred by the affected transactions.

S&P believes the downgraded notes may not have enough funds to pay the principal balance and accrued interest in full if the supporting collateral is liquidated at present. Once it receives final payment reports, and if the notes experience a loss, S&P will downgrade them to single-D. However, if the notes are paid back in full, it will withdraw the ratings.

ISDA comments on CDS misperceptions
ISDA has emphasised that the Lehman Brothers default and CDS settlement have not created the financial disruption that critics of the CDS business have claimed. First, because the number of CDS trades outstanding on Lehman includes a significant number of transactions that offset each other, settlement payments are only a fraction - about 1% to 2% - of the approximately US$400bn notional of CDS trades referencing Lehman.

Second, because firms are required to mark their positions to market and to post collateral, any additional exposure arising from the cash settlement is incrementally minimal. And finally, despite the failure of this major dealer institution - as well as several other large counterparties - the CDS business continues to function effectively. CDS contracts have been consistently more liquid than their cash market equivalents, ISDA stresses.

In addition, ISDA points out some fundamental misperceptions about the nature of CDS. The biggest misperception facing the CDS business in general is its role in today's financial crisis.

"The root cause of problems of the financial sector is too many bad mortgage loans. While many of the loans were structured into MBS or were repackaged as CDOs and sold to investors around the globe, no individual product or instrument was at fault; the economic fundamentals of those underlying exposures were simply not sustainable," the Association says in a statement.

It goes on to emphasise that CDS, like other privately negotiated derivatives, are bilateral, privately negotiated contracts between counterparties. The business is conducted within a sound policy framework established by policymakers, supervisors and legislators that retains a great degree of market discipline to guide the conduct of swaps participants. Within that framework, CDS trading is subject to extensive regulatory oversight, risk management controls, corporate governance and financial reporting requirements.

"As we move forward, global public policymakers have signaled their intent to review and restructure the global regulatory framework for financial institutions and financial instruments," explains Robert Pickel, ISDA ceo. "The industry welcomes this discussion, and we believe it will provide a forum for explaining and understanding the important benefits that privately negotiated derivatives offer to industry participants around the world. The CDS market continues to operate efficiently and the ISDA framework on which the CDS market arranges settlement of trades is providing legal and operational certainty for the industry in a time of economic uncertainty."

Japanese CSA updated
ISDA has announced the publication of updated documentation for use in arrangements with counterparties or collateral assets located in Japan. The revised version of the 1995 ISDA Credit Support Annex (Security Interest - Japanese Law) has been published to reflect changes in legislation in Japan.

The template is intended for use in documenting bilateral security and other credit support arrangements between counterparties for transactions documented under an ISDA Master Agreement, under which at least one of the parties and/or the collateral is located in Japan as credit support. This Annex assumes that Japanese law will govern questions of perfection and priorities relating to posted collateral located in the country and is designed mainly to provide documentation for parties wishing to minimise exposure to counterparties through collateral arrangements in respect of cash, deposit accounts, Japanese government bonds or other marketable securities situated in Japan.

The revisions made to the 1995 version reflect new netting, bankruptcy and securities clearing system legislation, which were implemented after the Japanese Annex was published in 1995.

Free services on offer for buy-side
Xtrakter has launched XBIS, a series of free information services - including ISIN lookups and traded price data - for buy-side professionals. The service allows users to verify basic reference and pricing data on their desktops without having to install any software. XBIS taps into Xtrakter's new data warehouse and accesses trade information directly from TRAX, an OTC trade matching and regulatory reporting system for the capital markets.

CFOs on watch
Moody's has placed four CFOs backed by equity interests in diversified funds of hedge funds on review for downgrade: Antarctica CFO I (approximately €234m of securities affected), RMF Four Seasons CFO (€211.5m), Sciens CFO I (€240m) and Phenix CFO (€182.5m). The rating actions reflect deterioration in the transactions' overcollateralisation level, due to severe market conditions.

Mixed performance for SME CDOs
Fitch says pan-European SME CDO performance has been mixed, with balance sheet SME CLOs being the best performer while many capital market mezzanine SME CDOs continue to suffer poor performance. These transactions were reviewed using the agency's revised corporate CDO methodology, as their portfolios are much more concentrated compared to typical SME CLOs. Consequently, these deals have not behaved in ways typical of a granular SME CLO transaction.

Despite the continued dislocations in capital markets, six new Spanish SME CLOs have been rated by Fitch between Q108 and Q308. According to the originators, almost all the deals that have been issued are to be used as collateral with the European Central Bank to obtain liquidity.

Since the beginning of the year, negative rating outlooks (NROs) were assigned to 19 tranches from 14 Spanish SME CDOs. The NROs reflect increasing arrears, exacerbated by current concerns regarding industry concentration in real estate and construction-related sectors. The current levels of credit support for the classes on NROs compare unfavourably with the 90+ day delinquency trends when projected forward over the next one to two years.

Outside of Spain, the performance of balance sheet SME CLOs has remained largely stable and has been this year's best-performing segment of the European SME CLO market, according to Fitch. Most of the transactions currently show default levels that are in line with expectations. Collateral pools in these transactions tend to be large and granular, and individual loan defaults do not therefore have an extensive impact on the structure.

Fitch is currently reviewing its SME CDO criteria and methodology to derive default assumptions for non-publicly rated obligors for SME CDOs, as part of its updated CDO methodology approach, and work is expected to be completed later this year. The updated criteria will most likely apply to all SME CLO transactions, except for the capital market mezzanine SME CDOs.

CDO manager ratings updated
Fitch has updated its CDO manager rating criteria to reflect its increased focus on the infrastructure, history, investment processes and related controls of rated CDO managers. Performance as a core metric has been removed to make the analytical approach consistent with the agency's other operationally-oriented asset manager ratings.

The updated framework provides a refreshed, more focused assessment of a CDO asset manager's core operational capabilities, Fitch says. While performance is no longer a standalone rating metric, the agency will continue to assess managers' performance track record in each relevant asset class so that the CDO CAM rating reflects managers' experience through the cycle and its portfolio management capabilities.

Fitch will revise existing CDO CAM ratings to reflect the updated criteria, although the approach is not expected to result in material CAM rating actions in the aggregate. The agency also notes that a significant number of CAM ratings may be withdrawn as a result of significantly reduced CDO new issuance, limited secondary market activity for CDOs and/or reduced investor demand.

WaMu protocol launched
ISDA has launched the 2008 Washington Mutual CDS Protocol, which is open until 20 October. The auction is scheduled for 23 October and will determine the final price for certain Washington Mutual obligations.

"The success of ISDA's protocol and auction process demonstrates a fundamentally important point about our business," comments ISDA executive director and ceo Robert Pickel. "Our industry, working through ISDA, has invested a significant amount of human and financial resources to build a robust framework and infrastructure for the privately negotiated derivatives business. The framework works and is helping the financial industry to negotiate the difficult economic times that have resulted from sub-prime lending issues."

Monolines to benefit from TARP?
A US Treasury spokesperson has denied speculation that the government is considering taking stakes in selected bond insurers. But Michael Cox, credit strategist at RBS, suggests that the monolines may benefit from TARP in other ways. "They may, for example, seek to sell assets in CDOs in which they are the controlling creditor to TARP. TARP may make banks more likely to agree to commutations of CDS, particularly as the credit quality of the monolines falls and hence the value of the protection also falls, as they could sell the assets on which they have purchased protection into TARP. The benefit or otherwise of this will only become clear once we understand how TARP will value assets," he notes.

Portfolio compression runs completed
Markit and Creditex have announced the successful completion of a second round of industry-wide portfolio compression runs for the credit derivatives market in North America. Live portfolio runs took place on 16 October for CDS contracts referencing several widely traded North American technology, media and telecommunications companies. It achieved a 54% gross notional reduction across all participating counterparties, with 13 credit derivatives dealers participating.

Markit and Creditex were selected by ISDA to provide infrastructure to support commitments made by major market participants to the Federal Reserve Bank of New York relating to improved operational efficiency and risk reduction.

The first North American compression run was held on 27 August for widely-traded telecommunications companies. Compression runs for CDS referencing European technology, media and telecommunications companies occurred on 4 September and 11 September.

Corporate CDS under pressure
The number of global companies with five-year CDS trading above 500bp has risen to 271, up from 138 in September and 80 in May, according to analysts at BNP Paribas. Most of the companies are in the financial sector, followed by consumer cyclicals; a geographical breakdown shows that the majority are in the US (200), with fewer in Europe (60) and in Asia (11). "While the distribution of US corporate debt coming due is not particularly front-loaded, more than US$130bn of notional will probably have to be refinanced by 2010. This amount, which would have been easily absorbed before August 2007, will be quite a lot to swallow if the current situation persists," the analysts note.

In Europe, the situation appears to be a somewhat more manageable, with less than €50bn of bonds and loans coming due in the next two years. Nonetheless, the prospect of these companies soon having to go to the markets (or to the banks) to fund themselves in the current environment is of concern.

Markit Metrics data released
According to the latest Markit Metrics report, average monthly credit derivatives deal volume per dealer hit 25,000 in September, with just under 18,000 trades electronically confirmed. On average around 93% of total deal volume was confirmed electronically, with approximately 97% of total deal volume eligible for electronic confirmation (96% of eligible trades were electronically confirmed).

Average outstanding confirmations were just under 3000, and average business days' worth of outstanding confirmations aged over 30 days stood at 0.3 days. Finally, the average number of pre-netted settlements reached 300,000, while the average number of post-netted settlements totalled 25,000.

Monoline risk-adjusted pricing analysed
The risk-adjusted pricing indices associated with bond insurers that underwrote at least a billion dollars of par in H108 illustrate the effects of a financial guarantee market in flux, according to S&P. While insured new-issue volume is significantly lower in all business lines, it appears insured secondary market transaction volume and pricing are the strongest they have ever been. The risk-adjusted pricing index is a measure that shows how much premium has been charged per unit of risk.

S&P believes that new business prospects for existing insurers as well as new entrants are uncertain given that, while the US public finance new-issue market was active in the first half of the year, the insured penetration rate was significantly reduced - and is likely to remain so for the next several years - and the structured finance business for the insurers is dormant. The agency expects that disciplined underwriting will be key for the bond insurers going forward as they develop a book of business that has strong risk/reward characteristics which may generate earnings well into the future.

The risk-adjusted pricing indices are calculated by S&P for financial guarantees written in a given period (usually one year) for each of the four broad financial guaranty business lines: US public finance, US structured finance, international public finance and international structured finance. A book of businesses' weighted average premium rate is divided by its weighted average capital charge to produce the risk-adjusted pricing index. Capital charges are assigned to all insured transactions and are used to determine theoretical losses in S&P's capital adequacy model.

The insured volume trends in each of the three business lines for which there was a meaningful amount of business underwritten highlight a refocus of strategies by bond insurers towards the lower-risk public finance market and away from the higher-risk structured finance market. Reflecting the current disruption for most sectors in the US structured finance market, H108 insured volume was down substantially.

Those sectors experiencing the greatest decline in volume included pooled debt and mortgage-backed and home equity line of credit. With little competition and insurers being very selective in what they underwrite, pricing was very robust and the quality of underwriting, as measured by S&P's capital charges, was sound. For this business line, the agency believes that pricing may remain strong and underwriting quality sound because of the limited number of participants, as most insurers have restricted underwriting in this line.

In the international structured finance business line, most of the production in H108 was in the mortgage-backed and home equity sector, compared with a concentration in the corporate CDO sector for the same period in 2007. Insured par production has long been dominated by private placement corporate CDOs due to what appears to be limited acceptance in capital markets of the financial guaranty product, as illustrated by historically low insured par volume.

The global capital markets' wariness of the financial guarantors, combined with a pullback by the insurers in insuring CDOs, may all but close them out of this market in S&P's view. Proposed insurance regulation may also limit, if not prohibit, activity in CDO sector.

Credit risk stress-tested
A paper entitled 'Stress Testing Credit Risk: Comparison of the Czech Republic and Germany' has won the Financial Stability Institute's Award for 2008.

In quantitative terms, credit risk is the most important risk in banking books, according to the paper. This has recently been evidently shown again in the example of the US sub-prime crisis.

Moreover, the crisis occurred despite various improvements in credit risk management (for example, the progress in the field of credit risk analysis applied by banks on the portfolio level - spurred by Basel II), as well as the increasing availability of a wide range of instruments that make credit risk more liquid (for example securitisation and credit derivatives). Hence, credit risk remains a major threat to financial stability in a globalised financial world, where the cross-border contagion of crises particularly threatens countries with a weak banking sector, the paper says.

Credit risk analysis for the financial sector as a whole can be perceived as a crucial means to prevent the occurrence of financial crises. This can be realised by means of a regular robustness test on a country's banking sector against credit risk; for example, by means of stress tests being carried out by supervisory bodies and central banks providing hints to detect financial system fragility.

Within the framework of credit risk modelling and stress testing, the study investigates and compares two countries - the Czech Republic and Germany. The paper seeks to provide answers to various questions, including: which macroeconomic variables are the most important to explain credit risk; whether there are country-specific differences; and what impact the occurrence of unfavourable macroeconomic circumstances can have on the macro and micro (portfolio) level, respectively.

EVVLF downgraded
Moody's has downgraded the MTNs (US$455m currently outstanding) and capital notes (US$209m) issued by Eaton Vance Variable Leverage Fund from Baa2 and Ca to Caa3 and C respectively. The rating actions reflect the deterioration of the market value of the vehicle's asset portfolio. Moody's will review whether the expected loss of the MTN programme is consistent with the expected loss implied by a Caa3 rating.

EC calls for credit risk mitigation proposals
Charlie McCreevy, the European Commissioner for internal market and services, has called for concrete proposals as to how the risks from credit derivatives can be mitigated to be developed by the end of the year. He also plans to have a systematic look at derivatives markets in the aftermath of the lessons learned from the current turmoil. As such, all the main players concerned are set to convene in order to work through these issues.

"I am aware of the many reasons why more of these derivatives are not exchange-traded," the Commissioner explains in a statement. "However, I am not convinced that more derivatives could not be standardised. This is one of the issues we need to look at in the time ahead. But there is a far more pressing need and that is to have a central clearing counterparty for these derivatives."

CPDOs hit
Moody's has downgraded the ratings of 13 series of CPDO notes, both static and managed, with approximately €714m of debt securities affected. The rating actions are based on a worsening of the net asset value of the transactions, following recent market events.

Separately, the agency has downgraded to C the rating of the Series 8 US$100m SURF CPDO, following the unwinding of the transaction portfolio due to a strategy unwind event that occurred on 9 October. Moody's has also withdrawn the rating of Series 2007-2 €135m Ulisse Capital CPDO because the agency believes it lacks adequate information to maintain a rating.

Analytical tool launched
S&P has launched Rating Review Triggers on its ABSXchange platform. The tool, available free of charge for both ABSXchange users and other market participants, is designed to give investors more information about the ongoing performance of collateral pools backing individual mortgage securities and an early warning indicator of potential future rating actions on these securities.

It is the first time that an analytical tool used by S&P ratings analysts as part of their European RMBS surveillance has been made available for free to the marketplace. Providing it free to the market is one of a number of measures that S&P is taking to improve the transparency of structured finance instruments, including publishing more information about assumptions and stress tests underpinning its analysis and 'what if' scenario analyses that show how ratings might be affected by extreme economic or market conditions.

ABSXchange is an internet-based portal that offers deal performance data, portfolio monitoring capabilities, cashflow analysis, advanced analytics and detailed reporting for the structured finance market. It provides the same quality of data and analytics throughout the life of a structured finance transaction as existed at its initial offering.

The development is part of the first major update to the ABSXchange platform since it was acquired by S&P in September 2007. The platform is run by S&P's new business unit, Fixed Income Risk Management Services (FIRMS), which is separate from S&P's ratings business.

Triggers offers users a desktop view of the credit performance of RMBS transactions tested against specific metrics. It is a user-friendly, web-based application that provides a visual indicator of credit performance to denote a transaction's trends across two positive and four negative tests.

The positive tests assessed are pool factor and credit enhancement ratio, while delinquency ratio, delinquency growth, cumulative loss growth and cumulative loss ratio are monitored as negative tests. At a certain test threshold, Triggers notifies the user that a transaction will need to be reviewed and raises the possibility of a rating review.

IMF calls for coherent response
Restoring financial stability in Europe is the main policy priority for governments, and requires a comprehensive and coherent global approach, according to a new report from the IMF. European policymakers have recognised that coordination of crisis management measures is essential, with several central banks announcing a coordinated interest rate cut in October and expanded liquidity provision.

European leaders also agreed on the principles of crisis management and followed up with a number of measures aimed at stabilising markets, including extended deposit insurance, bank recapitalisation programmes and debt guarantees (see SCI passim). While the various measures retain some country-specific flavor, they represent an important move toward a new coherence in European policy efforts.

"Times are no doubt extraordinarily uncertain, but we are now seeing the concerted response that demonstrates policymakers' awareness that the global crisis needs a global response. For Europe, this crisis provides a catalyst for improved cross-border coordination, and we encourage European leaders to follow up with bold steps on their recent commitment to concerted and coordinated action, to resolve this crisis swiftly," comments Alessandro Leipold, acting director of the IMF's European department.

Beyond immediate crisis management, Europe will need to rethink its financial stability arrangements, the IMF warns. This will require action on a range of fronts, including stepping up joint financial oversight, introducing mechanisms to strengthen market discipline and improving the cross-border crisis resolution frameworks.

Sigma-backed CDOs downgraded again
S&P has lowered to single-D and removed from credit watch with negative implications its credit ratings on nine synthetic CDOs issued by the C.L.E.A.R. vehicle. These rating actions reflect the recent downgrade of the underlying collateral - debt issued by Sigma Finance - which the issuer purchased using note proceeds in each transaction.

Japanese CDOs impacted
S&P has lowered to single-D its ratings on eight other tranches relating to eight Japanese synthetic CDO transactions and removed the ratings from credit watch with negative implications. The agency carried out the aforementioned rating actions after lowering from triple-C minus to single-D the ratings on the transactions' collateral securities on 17 October and removed the ratings from watch negative.

Total return indices launched
Markit has launched the Markit iTraxx Europe Financial Total Return indices. The new indices replicate the performance of a sample portfolio that buys or sells an iTraxx CDS contract and invests the remaining notional amount in money market instruments. The indices have been designed to serve as a benchmark for institutional investors with debt positions in financial institutions.

The new indices are comprised of the following: iTraxx Europe Senior Financials 5-Year Total Return Index; iTraxx Europe Subordinated Financials 5-Year Total Return Index; iTraxx Europe Senior Financials 5-Year Short Total Return Index; and iTraxx Europe Subordinated Financials 5-Year Short Total Return Index. Markit has licensed Deutsche Bank to offer exchange-traded funds on these four products.

Commercial property indices flat for August
Commercial real estate prices as measured by Moody's/REAL Commercial Property Price Indices (CPPI) essentially remained flat in August, posting a small decrease of 0.1% over the level measured in July. August was the second month in a row that the CPPI showed virtually no movement in prices.

"Although we have not seen a significant decline in prices since June, we believe it is premature to call a bottom at this time," says Moody's md Nick Levidy. "Rather, the low transaction volume suggests that the flattening of prices is more likely the result of loss avoidance on the part of sellers."

"At some point," adds Levidy, "with increased pressure on sellers and more distressed assets in the marketplace, we expect that volume will pick up and prices will continue to drop."

Transaction volume was down 25% in August from the previous month, and stands at less than half of what it was at the start of the year.

Overall, the CPPI suggests commercial property values are essentially flat since 2006, while they have increased by almost 9% since 2005 and by nearly 30% since 2004. With the small August decline, prices have decreased by 11.2% from August 2007 and 11.5% since the peak in October 2007. It is important to note, however, that less than 1% of mortgage loans originated in 2007 mature prior to 2010, somewhat mitigating refinancing risk, at least for now, says Moody's.

Carador reports
As at the close of business on 30 September 2008, permacap Carador's unaudited net asset value per share was €0.6497, decreasing by 4.70% in September. This month's calculations include an estimated €545,352.85 worth of net cashflow interest received in the month (to be allocated between capital and income), which equates to €0.0109 per share.

The board has declared a dividend in respect of the six-month interim period ending 30 September 2008. This dividend is payable on 31 October 2008 and has not been accrued for in the September valuation.

Reval releases new upgrade
Reval has released its latest upgrade of HedgeRx Version 8.1. The new version includes new structured interest rate and credit modules and has expanded compliance reporting for IFRS 7, FAS 161 and FAS 157.

Reval's software-as-a-service platform has the ability to upgrade clients to the new version instantly. Its multi-asset class solution now covers foreign exchange, interest rates, exotic interest rates, credit, energy and commodities.

AC & CS