Thursday, August 9, 2007

In the Tank

And I thought the second quarter was bad.

One-Month LIBOR shot up overnight to 5.54%, crushing DSCRs on floating rate deals that -- until today -- were the only reliable way to finance large transactions. Forget finding fixed-rate financing -- 3Cap's friends at Deutsche, Wachovia, LaSalle, and Credit Suisse aren't even quoting. The few, the brave few who ARE quoting are giving notice that their quotes are good for about 24-hours, and any terms provided are subject to market conditions.

A good friend at Citigroup has sized up 2 deals since the weekend. Neither are likely to transact.

And now, I'm sure you've read that BNP Paribas has frozen 3 funds, a la Bear Stearns, citing the "fact" that they couldn't "fairly" value their holdings.

Rumor has it that Wachovia may report sizable losses in its CMBS lending and securitization operations from aggressive loans that they haven't been able to securitize. But given that Wachovia is one of the faster banks on the street to clear loans off their shelves, I find it hard to believe that there won't be several others (if the rumor is true, of course).

Most b-note players are out on the golf course for the rest of the month, as subordinate financing becomes more scarce by the day. No one can finance their originations via CDOs, so why bother?

I keep hearing the first-year guys and summer associates yell in delight about how the 10-yr Treasury yield has fallen 10 bps this morning, as if the 10-year matters right now.

The New York Sun says the mayhem may actually be good for the markets. Wha? In what time frame? And for whom? Certainly lower leveraged pension funds, maybe insurance companies and balance sheet guys in the short term. But long term? How is it "good for the markets" when you cut transactions by at LEAST 50% over the course of at least the next year??

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