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Update on Maiden Lane II


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  • 3 months later...

Toxic paper continues to move. Maybe it was not that toxic just opaque. There is a little for everyone in this article (AIG, MBI, GKK, CT, MS, BCS). Just listened the Northstar conference call (NRF) and they mentioned how European banks are being more aggressive in selling CDO bonds at very discounted prices.


Barclays and Morgan Stanley snap up debt



Barclays and Morgan Stanley on Tuesday won an auction of $1.5bn of packaged commercial mortgage debt sold by UBS, people familiar with the deal said, in the latest test of investor demand for assets once dismissed as “toxic”.


The Swiss bank sold slices of collateralised debt obligations amid a burst of renewed demand this year for securities that were at the heart of the financial crisis. As central bankers keep interest rates low, investors have flocked to the highest yielding assets, including boom-era mortgage debt.


The Federal Reserve Bank of New York is also benefiting from the risk appetite of investors and selling securities from Maiden Lane III, a debt portfolio acquired as part of the government bailout of AIG, the insurer, in 2008.



UBS sold securities in CDOs called “Wave” that were created in 2007 by Wachovia, the US bank that Wells Fargo acquired in 2008 as the former buckled under mortgage-related losses. The CDOs contain commercial mortgage bonds arranged in 2006 and 2007 at the height of the US property boom.


People familiar with the transactions said that Morgan Stanley bought the riskier securities and paid more than 48 cents on the dollar, while Barclays paid more than 66 cents on the dollar.



The sale will enable UBS to reduce assets that under new Basel III banking rules the bank would be required to hold large amounts of capital against, a person familiar with the bank’s thinking said. The CDOs were freed up for sale after UBS and MBIA, the monoline insurer, in March agreed to settle a lawsuit over credit default swaps that MBIA had sold UBS on this and other mortgage debt.


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