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For them that missed it, a recording of last week's webinar: How to Stay Ahead of the Financial Crisis is now available on the West Librarian Relations website. I'm listening to it now because I love hearing the sound of my own voice.
This morning I ran some searches in Westlaw Business' Registrations & Prospectuses database to try to gauge whether TALF is having an effect on asset-backed securitization. The asset-backed finance market has, famously, evaporated since the credit crisis began. In January of 2006, for example, WB records 99 asset-backed transactions. This January, there were 5. February, with 3 deals, marked the low water mark. In the last 30 days there have been 16 deals. 4 were already in process before TALF was announced and 5 aren't TALF elgible because they're backed by ineligible assets (mortgages, mostly).
That leaves nine deals that can be directly attributed to TALF: 5 auto loan pools, 2 credit card pools, and 2 student loan pools. These nine deals total about $11 billion.
Two of the auto loan deals are being originated by large car dealerships (World Omni Financial and CarMAx Auto Financing).
Next week I'm going to be presenting (three times) a webinar on how Westlaw and Westlaw Business can help you stay atop developments in the ongoing financial crisis. *ahem*The financial crisis has changed the legal landscape. From the kaleidoscope of Madoff-spawned litigation to the regulatory shakeup that's waiting in the wings, it is a difficult time to keep current. Westlaw and Westlaw Business can help by providing tools that make it easier to:
* Track legislative developments
* Monitor administrative, civil and criminal proceedings
* Find crisis-related corporate disclosure
* Keep tabs on bailout transactionsTimes are as follows: Eastern Standard all.
Tuesday, April 14th: 12:30 pm
Wednesday, April 15th: 1:00 pm
Thursday, April 16th: 3:00 pm
Please email me if you'd like the webinar information.
This week I've been researching cross-border M&A transactions. I've found a lot of the information I need using Westlaw Business' Deal Maker Roundups.
I asked Rob Peters, WB Senior Manager for Business Law Research, to give me some background on how the information in the Roundups is gathered. He told me the Roundup search pulls data directly from two WB databases: M&A Transactions and Registrations & Prospectuses.
A Deal Roundup can be assembled for a particular advisor (lawyer, auditor, or underwriter) and further narrowed by transaction type (merger, debt, equity). The Roundup search can also create dynamic league tables.
Search results can be downloaded as a pdf.
WB's databases are updated continuously by specialized content teams. They review filings and press releases as they are issued. So, the Roundup search tool allows the creation of dynamic, up-to-date league tables and advisor reports.
Trends noted by Westlaw Business' SEC Currents Extra:
Recent staff comment letters show that the SEC is looking more closely at how companies are spending their TARP windfall.
Part one of a two-part article on takeover defense focuses on companies that have proposed to adopt staggered board structures.
Westlaw Business has new pre-formatted searches to help you find the risk disclosures that are all the rage this season, including:
Bernard Madoff - Adverse Exposure Discussion Extracts issuer disclosure centering on adverse exposure to fraudulent activity involving Bernard L. Madoff Investment Securities LLC.
Risk Factors/10-K - Exposure to Auto Industry Extracts issuer disclosure in form 10-K identifying risk centering on exposure to the trends or activities associated with the automotive industry.
A Troubled Asset Relief Program search criteria has recently been added to the M&A Transactions database on Westlaw Business. To find capsule descriptions of all one hundred and thirty (who knew!) transactions scroll down to the "deal description" pull-down menu and click on "EESA 2008 Transaction." Each deal summary includes dates, value and links to the relevant filings.
It must be a pretty lonely feeling for Grand Canyon Education, Inc (LOPE). When their S-1 was declared effective on the 19th, they became the first company to go public since August. They took their lumps yesterday (IPO price was $12.00, first trade on NASDAQ was $10.00), but the last time I checked, they were trading at $12.12.
It made me wonder how many IPO dreams have been cruelly extinguished by the current crap market. 50, it turns out: the Registrations & Prospectuses search on Westlaw Business helped me find them. Under the "Deal Info" tab, I put "IPO" in the "Deal Description (contains)" field and "withdrawn" in the "Registration Status" field. This search returned 50 registrations statements withdrawn since August 1st. The list is in reverse chronological order by withdrawal date. Some of the underlying S-1s were filed as long ago as March!
Of the ten most recent withdrawals, six cite adverse market conditions as the cause - the other four don't provide an explanation. I also found a couple of deals that were withdrawn because the issuer decided to do a private placement or was merged out of existence.
Many thanks to Leroy at WB for helping me find this information!
A couple of days ago, a librarian in California posted a question on pll-sis about tracking corporate exposure to losses and litigation from auction rate securties (ARS). I have a couple of suggestions for accomplishing this with West resources.
Public companies with proportionately large ARS exposure would have to disclose this risk in the Risk Factors section of their 10-K. I used the 10-K search function on Westlaw Business and narrowed my search to item 1A - Risk Factors. Then, I used the free text search to look for "auction rate." I found more than 200 companies that specified their auction rate securities portfolio as a potential risk.
To find lawsuits I used Westlaw. Trial filings from ARS-related suits are included in the FC-FILINGS database (financial crisis, trial filings). I searched "auction rate" /30 "auction rate" and found 51 filings from ongoing ARS lawsuits.
To track developments going forward, both of these searches can be saved as Alerts.
One of the things I learned from the SEC Office of Inspector General report on Bear Stearns is that way back in 1990, Congress gave the SEC the authority to police the risks taken by broker-dealers. The power was granted by the Market Reform Act of 1990 (PL 101-432).
In response, the SEC's Division of Trading and Markets promulgated rules 17h-1T and 17h-2T (57 FR 32159-01). The capital "T" stands for temporary. These rules, adopted in September of 1992 and fully effective at the end of the year, were never revisited and never made permanent. The OIG Report is very critical of Trading and Markets' decision to never finalize 17h-1T and 2T. The temporary rules require broker-dealers to file form 17-H, Risk Assessment Report for Brokers and Dealers.
I tried to find a filed form 17-H, but discovered that they are confidential (it was in the rule, but I didn't read carefully enough). So, I asked my friends at Westlaw Business to start a FOIA request to see if they could lay hands on a couple. Did you know that WB did FOIA requests? If I manage to get one, I imagine I'll still need someone to translate it for me.
In other Bear Stearns report news, Race to the Bottom has a post about the wealth of information about the SEC investigative process the report contains.
Available today, for free, on the Westlaw Busines website: Bailout 101
In yesterday's SEC Currents there was a story about the role played by the Resolution Trust Corporation in developing the asset securitization methods that investment banks have recently used to blow themselves up.
I thought this as good an opening as any to talk about asset securitization and about the Resolution Trust Corporation.
WHAT IS ASSET SECURITIZATION?
Asset securitization allows a business (called the "originator") to turn a steady trickle of cash into a great, huge whack of cash. The steady trickle is generally some kind of loan receivable like credit card or mortgage payments.
Let's imagine our originator is a bank with a portfolio of residential mortgages.
1. The bank organizes a new company called a special purpose vehicle (SPV).
2. The SPV buys all the bank's residential mortgages.
3. Then, the SPV sells securities (called asset-backed securities - ABS) on the public market.
The bank gets cash and relieves itself of the burden of policing mortgages or getting clobbered if borrowers default. The risk associated with the mortgages shifts to the SPV's shareholders.
Stop, I hear you cry - who in their right mind would buy these ABS? Good question! Not so many people it turns out, so originators developed ways to enhance the appeal of ABS. Some of the methods included:
* A guaranty by the originator
* Third party letters of credit
* Several tranches
The tranches enhancement segregates risk from gain - some tranches bear all potential losses and some get all the gain. Thus, the risk is shifted from the bank to the holders of only one tranche. And what poor unfortunates buy these all-risk securities? The originators, of course.
For a very nice treatment of the origin of ABS see: Culver, The Dawning of Securitization, Probate & Property, March/April 1994 (8-APR PROBPROP 34).
WHAT WAS THE RTC's ROLE?
Mortgage-back securities were invented by Ginny Mae and Fannie Mae in the 1970's. Ginny and Fannie pooled and sold only residential mortgages (in the example above, imagine the bank selling its mortgages to Fannie and Fannie organzing the SPV).
The Resolution Trust Corporation (RTC) came on the scene in 1989 to clean up after the collapse of many savings and loan banks in the late 1980's. RTC, created by the Financial Institutions Reform and Recovery Enforcement Act of 1989 (FIRREA, PL 101-54), was supposed to buy the assets of the failed S&Ls and resell them in hopes of making a little money for taxpayers.
RTC ended up owning a large portfolio of commerical mortgages. Because of the complexity involved, no one had attempted to package commerical mortgages as ABS. Realzing that the alternative of disposing of the mortgages individually would be even more difficult, RTC developed methods for packaging commercial mortgages as ABS.
To see an example of an RTC ABS deal see the S-11 filed by Lehman Structured Securities on 8/12/1996. The securties being sold are called Commerical Mortgage Pass-Through Certificates Series 1996-1. For something more recent, try Bear Stearns Alt-A Trust, 424B5, 2/01/06.
NEXT: Risk
Today Bank of America and Merrill Lynch filed an S-4 joint proxy statement. To help you navigate the recent deluge of filings, here's a recap of other major crash-related documents filed thus far:
Washington Mutual, Inc (WAHUQ)
9/30, Bankruptcy Court, District of Delaware
* Voluntary petition for bankruptcy, file # 08-12229
American International Group & The Federal Reserve (AIG)
9/26, 8-K:
* Credit Agreement (ex 99.1)
* Guarantee and Pledge Agreement (ex 99.2)
Bear Stearns & JP Morgan Chase (JPM)
4/11, S-4
* Joint proxy statement and prospectus
* Agreement and plan of merger (Appendix A)
Lehman Brothers
9/15, Southern District of New York, Bankruptcy Court
* Voluntary Petition for Bankruptcy, file # 1:08-BK-13555
Merrill Lynch & Bank of America (MER, BAC)
10/2, S-4
* Joint proxy statement and prospectus
* Agreement and Plan of Merger (Appendix A)
Per this article in today's special edition of SEC Currents: the Fed has revised its policy statement to allow hedge funds and private equity funds to acquire larger stakes in banks and bank holding companies.
Section 304 of Sarbanes-Oxley was supposed to create a mechanism allowing the SEC to recapture executive compensation distributed based on fishy accounting. As this article notes, 304 has never been used.
The Corporate Library recently reported that 300 companies had adopted private clawback mechanisms. For a thorough discussion, have a look at this post by Amy L. Goodman of Gibson Dunn on the Harvard Corporate Governance Blog.
If you seek precedents, Westlaw Business has canned searches to help find (a) recently adopted clawbacks and (b) 14a-8 challenges to shareholder clawback proposals.
