CDO liquidation leaves junior triple As with nothing

By Mike Peterson

Tuesday, March 10, 2009

According to an announcement by the trustee, Wells Fargo, all the collateral from a 2006 CDO of ABS has now been liquidated

Subscriber-only article

This article is available only to Creditflux subscribers and free trial users within 30 days of publication.

Already a subscriber? Not logged in? Click here to login.

If you have not already done so,
you may request a FREE TRIAL by clicking here

This trial will give you:
  • 4-weeks' free online access to our
    most recent subscriber-only articles
  • Daily breaking news alert sent by email
  • A print copy of Creditflux

If you currently have a free trial, you will see this message when you try to view articles older than 30 days.

Comment by: Anonymous. Posted 15 years ago [2009-03-11 20:28:31]

I would think it likely that an Event of Default meant that the Class A-1 became the Controlling Class and chose to liquidate as is their right. I would be surprised if "terrorist" liquidiations could be initiated by junior tranches. Before an EoD is triggered normally equity tranches have a call right, but that is usually conditional on the proceeds being sufficient to pay down all debt tranches at par - clearly not happening in this day and age!

Comment by: Anonymous. Posted 15 years ago [2009-03-11 14:38:03]

I agree with the sentiment below. Does anyone know who (ie which class) ended up voting for the liquidation? I assume it was a junior class that had lost everything already so had nothing to lose by running an auction. This shows up how badly thought through the whole securitisation structures were. I also think there are real issues with the way these auctions are run - very little information (or badly out of date at best) and no time. No wonder numbers are so low. And there is a lot more of this coming down the pipe!

Comment by: Anonymous. Posted 15 years ago [2009-03-11 09:21:38]

It proofs that liquidations in this environement are to be named a criminal act. There is no value for anyone and it should be stopped by the regulators: First and foremost, investors have to realize losses without any recovery potential, secondly the market will never recover like this. Last but not least, the Rating Agencies that have gotten it that plainly wrong should be closed down and be stopped to do any further damage to all of us taxpayers.

Comment by: Anonymous. Posted 15 years ago [2009-03-10 15:18:27]

Actually, I think that the problem is liquidating collateral at this point in time. If you are the senior most class, you benefit from liquidation since there is subordination. However, if the idea is to maximize for ALL tranches, then I think you increase the likelihood of recovery if one waits until more buyers come in (particularly for a 2006 vinatge).

Comment by: Anonymous. Posted 15 years ago [2009-03-10 15:10:20]

For the most part, the only chance you have of recovering ANYTHING in these deals, is if you are truly super senior. Otherwise, you will get nothing back...

CLOs

more stories...