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Triaxx Prime CDO 2006-1 1 $2.5 Billion CDO of RMBS Securities Deal Summary   Issue

Triaxx Prime CDO 2006-1 1

$2.5 Billion CDO of RMBS Securities

Prime CDO 2006-1 1 $2.5 Billion CDO of RMBS Securities Deal Summary   Issue Lead Placement

Deal Summary

 

Issue

Lead Placement Agent, Structurer and Arranger Co-Placement Agent Collateral Manager Deal size Expected Closing Date

Triaxx Prime CDO 2006-1 ICP Securities CIBC World Markets (with respect to the Class A-1 Notes only) ICP Asset Management, LLC

$[2,500,000,000]

[TBD]

%

Ramped at Close

[70]%

Non-call Period Asset Reinvestment Period First Payment Date Payment frequency Auction Call

[3] Years [5] Years [TBD] [Monthly for Class A-1, Quarterly for remaining] [8] Years

Deal Structure

 
   

Class A-1 2

 

Class A-2

Class B

Class X

Class C

Original Par

 

[2,250,000,000]

[200,000,000]

[30,000,000]

[10,000,000]

[10,000,000]

%

of Deal

[90.0]%

[8.00]%

[1.20]%

[0.40]%

[0.40]%

Coupon

 

L + []%

L + []%

L + []%

L + []%

L + []%

Legal Maturity

[2041]

 

[2041]

[2041]

[2041]

[2041]

MDY / S&P WAL 3

[Aaa/AAA]

 

[Aaa/AAA]

[Aa2/AA]

[A2/A]

[A3/A-]

[6.7]

 

[8.0]

 

[8.0]

[4.2]

[8.0]

Coverage Tests

 
 

Expected O/C

 

Required O/C

 

Class A

 

[101.75]%

[101.00]%

Class B

[100.49]%

[100.45]%

Class C

[100.09]%

[100.05]%

Collateral Description

 

Collateral type Average rating Max WARF Min senior most tranches Weighted average FICO Weighted average LTV Fixed / Float Max weighted average maturity Max single issuer concentration Servicer concentrations by min rating 4 Largest 3 5 with min rating of (SQ2 / RPS2 / Above Avg) Max if rated at least (SQ1 / RPS1 / Strong) Max if rated at least (SQ2 / RPS2 / Above Avg) Servicers rated below (SQ2, RPS2, Above Avg.)

100% RMBS Aaa/AAA

 

[3]

[100%]

 

[680 - 700] [70 - 75] [100]% Floating-rate [8] Years

 

[2%]

[60%] Total, [20%] Each

 

[15%]

[10%]

[0%]

Fees and Expenses

Management fee Incentive management fee Trustee / Admin fee

[0] bps Senior; [5] bps Subordinate [100]% of residual cash flow [0.75] bps plus $175,000

1 Transaction in structuring phase; Information is subject to change.

2 Class A-1 to be wrapped by AIG Financial Products Corporation

3 Weighted average lives assuming 20% annual prepayment on assets

4 Rating Categories ordered by (Moodys / Fitch / S&P)

5 Largest 3 to be selected from Bank of America, Countrywide, GMAC, and Wells Fargo This term sheet may only be distributed as an integral part of the Confidential Discussion Materials. Please review the important Disclaimer and Risk Factors contained herein. In addition, risks of investing in the offered Securities will be described more fully in the preliminary and final offering memoranda to be provided in connection with the offering of the Securities.

fully in the prelim inary and final offering memoranda to be provided in connection with the
IInntteerreesstt PPrroocceeeeddss WWaatteerrffaallll 11 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)
IInntteerreesstt PPrroocceeeeddss WWaatteerrffaallll 11
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
Taxes (2)
Trustee, administrative fees and expenses (subject to a cap) (2)
Pro-rata to Class A-1 note interest and Class A-1 commitment fee (2)
Class A-2 note interest (3)
Class B note interest (3)
Redemption of Class A-1, A-2 , and B notes (Class A & B Coverage Tests),
(in order of seniority) (3)
Class X interest (3)
Class C note interest (3)
Class X principal amount (3)
Redemption of Class A-1, A-2, B, X and C notes (Class C Coverage Tests),
(in order of seniority) (3)
Class C note deferred interest (3)
Subordinate management fee (3)
Administrative expenses in excess of capped amount (3)
Payments of incentive management fee (3)
PPrriinncciippaall PPrroocceeeeddss WWaatteerrffaallll 11
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
Unpaid items in the steps 1 - 6 of the interest waterfall (4)
After the reinvestment period, redemption of the Class A-1 notes until paid in
full (2)
After the reinvestment period, redemption of the Class A-2 notes until paid in
full (3)
After the reinvestment period, redemption of Class B notes (3)
Unpaid items in steps 7 of the interest waterfall (3)
After the reinvestment period, redemption of Class X notes (3)
Unpaid items in steps 8 - 11 of the interest waterfall (3)
After the reinvestment period, redemption of Class C notes (3)
During the reinvestment period, to the reinvestment of additional collateral (3)
Unpaid items in steps 12 - 13 of the interest waterfall (3)
Payments to incentive management fee (3)
1 Representation does not include all details of the waterfall. See the Offering Memorandum for a complete description of the Interest Proceeds
waterfall and the Principal Proceeds waterfall. Preliminary – subject to change
2 Payable monthly
3 Payable quarterly
4 Items 1-3 payable monthly, items 4 through 6 payable quarterly
This term sheet may only be distributed as an integral part of the Confidential Discussion Materials. Please review the important Disclaimer and Risk
Factors contained herein. In addition, risks of investing in the offered Securities will be described more fully in the preliminary and final offering
memoranda to be provided in connection with the offering of the Securities.
Triaxx Prime CDO 2006-1 A CDO of RMBS Securities to be Managed by ICP A

Triaxx Prime CDO 2006-1

A CDO of RMBS Securities to be Managed by ICP Asset Management LLC

1 Property of Institutional Credit Partners LLC - Confidential Materials May 31, 2006
1 Property of Institutional Credit Partners LLC - Confidential Materials
May 31, 2006

Disclaimer

Institutional Credit Partners LLC is the parent company of ICP Asset Management LLC (“ICP”), a registered investment adviser with the Securities and Exchange Commission, and ICP Securities LLC (“ICP Securities”), a member of the National Association of Securities Dealers and Securities Investor Protection Corporation (“SIPC”). SIPC protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). SIPC does not protect investments in the proposed collateralized debt obligation transaction outlined in this Confidential Discussion Material (this “Material”).

CIBC World Markets is the marketing name of the investment banking and securities business of Canadian Imperial Bank of Commerce and its affiliates worldwide (collectively, “CIBC”), including CIBC World Markets, Corp., CIBC World Markets Inc. and CIBC World Markets plc which is regulated by the Financial Services Authority (“FSA”). Both Canadian Imperial Bank of Commerce and CIBC World Markets plc have been accepted by the FSA, as a listed money market institution under the Banking Act 1987 as amended.

This Material outlines certain characteristics of a proposed collateralized debt obligation transaction. This Material is presented solely for purposes of

discussion to assist you, as a prospective investor, in determining whether you have a preliminary interest in investing in a transaction with the general characteristics described herein. This transaction is in a structuring phase and there may be material changes to the structure, terms and assets prior to

the offering of any securities (the “Securities”).

This Material is not and is under no circumstances to be used or considered an offer to sell, or a

solicitation to buy, the Securities or any other investment. Any such offering of the Securities will only be made pursuant to a final offering memorandum relating to the Securities (the “Offering Memorandum”) to be prepared by the issuer thereof (the “Issuer”). The Offering Memorandum will contain material information not contained herein and to which your attention is directed. In the event of any such offering, this Material will be deemed superseded, amended and supplemented in its entirety by the Offering Memorandum (including any preliminary version thereof). This Material is confidential and proprietary to CIBC and ICP Securities and, accordingly, except as otherwise permitted herein, this Material is to be treated as strictly confidential and not to be disclosed directly or indirectly to any party other than to your advisers or used for any purpose other than to make a preliminary analysis of the Securities. No person has been authorized to give any information or make any representations other than the information contained herein, as amended and superseded by the information contained in the Offering Memorandum relating to the eventual offering, if any, of the Securities. By accepting or reading this Material, you agree to be bound by all of the limitations described herein. Notwithstanding the foregoing, you and your employees, representatives or other agents may disclose to any and all persons, without limitation of any kind, the U.S. federal income tax treatment and tax structure of this transaction and all materials of any kind, including opinions or other tax analyses, that are provided to the recipients relating to such tax treatment and tax structure. This authorization to disclose such tax treatment and tax structure does not permit disclosure of information identifying the Issuer, the collateral manager or any other party or the pricing (except to the extent pricing is relevant to tax structure or tax treatment) of this transaction. You acknowledge and agree that ICP Securities is the structurer, arranger and lead placement agent for the offering and CIBC’s role in this transaction is limited to the placement of the Class A-1 Notes described herein.

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2

Disclaimer

You should not construe this Material, the Offering Memorandum or any prior or subsequent communication as legal, accounting or tax advice. Certain information herein is presented in summary form and is not complete and should not be relied upon as being complete. In addition, certain information contained herein has been provided by third parties and has not been independently verified by CIBC or ICP Securities and CIBC and ICP Securities make no representation or warranty, express or implied, as to the reasonableness of assumptions or as to the accuracy or the completeness of such information. An investment in the Securities presents substantial risks and investors should be prepared to suffer a loss of their entire investment. Prior to making an investment decision, you should conduct such investigations as you deem necessary in order to determine if an investment in the Securities offered by the Offering Memorandum is appropriate and suitable for you and you should consult your legal, accounting and tax advisers in order to determine the consequences of an investment in such Securities and to make an independent evaluation of such investment. CIBC and ICP Securities are not acting in the capacity of your financial adviser or fiduciary. CIBC, ICP Securities and ICP Asset Management disclaim any and all liability relating to this Material, including any express or implied representation or warranty for statements contained in and omissions from this Material. None of the Issuer, CIBC, ICP Securities or ICP Asset Management expects to update or otherwise revise this Material except by means of the Offering Memorandum. Unless otherwise specified, all information contained herein is as of May 31, 2006. The Securities and the obligations of the Issuer will not be issued by, obligations of, or guaranteed by CIBC, ICP Securities, ICP or their respective affiliates.

Forward Looking Statements: Any hypothetical illustrations (including, forecasts and estimates) contained in this Material are forward looking statements and are based upon assumptions. Hypothetical illustrations are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the hypothetical illustrations may not materialize or may vary significantly from actual results. Accordingly, the hypothetical illustrations are only estimates. Actual results will differ and may vary substantially from the hypothetical illustrations shown. In addition, certain analyses are based on mathematical models that use hypothetical inputs to calculate results. As with all models, results may vary significantly depending upon the values of the inputs used. Models used in any analysis may be proprietary, making the results difficult for any third party to reproduce. Moreover, hypothetical performance analyses will address only certain aspects of the characteristics of the Securities and will not provide a complete assessment of the results that may follow from all possible contingencies (including default, interest rate and other scenarios and certain economic features of the Securities, including call features and cash flow diversion events). You should understand the assumptions used in any analysis and evaluate whether they are appropriate for your investment purposes. You should further consider whether the behavior of these Securities should be tested based on assumptions different from those used to prepare the analyses.

Note to Historical Data: Any historical investment results of any person or entity described in this Material are not indicative of the Issuer's future investment results. Such results are intended only to give you information concerning the general experience of the relevant person or entity as an asset

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Disclaimer

manager or adviser and are not intended as representations or warranties by CIBC, ICP Securities, ICP or any other person or entity as to the actual composition of or performance of any future investments that would be made by the Issuer. The nature of, and risks associated with, the Issuer's future investments may differ substantially from (and will be subject to constraints that were not applicable to) those investments and strategies undertaken historically by such persons and entities. There can be no assurance that the Issuer's investments will perform as well as, or in a manner similar to, the past investments of any such persons or entities. For these reasons, there are limitations on the value of the hypothetical illustrations contained herein. This Material is provided to you on the understanding that as a sophisticated investor, you will understand and accept its inherent limitations, will not rely on it in making any investment decision with respect to any Securities that may be issued, and will use it only for the purpose of discussing with CIBC and ICP Securities your preliminary interest in investing in a transaction of the type described. You are urged to conduct your own investigation regarding the underlying asset classes, including reviewing any sources cited herein and obtaining additional information regarding the underlying collateral.

For investors and transactions subject to U.S. laws: The Securities described herein, if offered, will not be registered with the U.S. Securities and Exchange Commission or similar regulatory body of any jurisdiction. Accordingly, this Material may not be disseminated other than (a) within the United States of America, to investors that are (i)(A) "qualified institutional buyers" as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act") or (B) “accredited investors” within the meaning of Rule 501(a) under the Securities Act and, in each case, who are also (ii) "qualified purchasers" within the meaning of Section 3(c)(7) of the U.S. Investment Company Act of 1940, as amended ("Investment Company Act") and (b) outside the United States of America, to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act.

The offer or sale of the Securities may be restricted by the laws of the relevant jurisdiction and additional restrictions set forth in the Offering Memorandum. You are required to inform yourself of and to observe any legal restrictions on your involvement in the proposed transaction. Additional net worth and/or sophistication requirements may be required.

YOUR ATTENTION IS DIRECTED TO THE RISK FACTORS AND TAX CONSIDERATIONS WHICH WILL BE DESCRIBED MORE FULLY IN THE PRELIMINARY AND FINAL OFFERING MEMORANDUM TO BE PROVIDED IN CONNECTION WITH ANY OFFERING OF THE SECURITIES.

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Table of Contents

Section

Page

I. Executive Summary

6

II. Transaction Details

10

III. RMBS Market Overview

15

IV. About the Collateral Manager

20

V. Investment Process

25

VI. Risk Monitoring / Surveillance

38

Appendices

Page

i. Appendix I – Manager Biographies

41

ii. Risk Factors

51

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5

I. Executive Summary

I. Executive Summary 6
6
6

Executive Summary

 

Overview

 

Triaxx Prime CDO I (“Triaxx”) is a $2.5 billion Collateralized Debt Obligation secured primarily by a pool of Aaa/AAA rated Residential Mortgage Backed Securities (“RMBS”)

ICP Asset Management LLC (“ICP”) will act as the Collateral Manager and have all investment and trading authority (1)

ICP is a structured fixed income investment manager with focus in CDO, RMBS, and MBS organized in 2004 to provide comprehensive investment advisory services to institutions and qualified individuals

The partners of the firm have a strong track record in the structured credit market, having originated and participated in over $10 billion in leveraged transactions since 2000 (2) which were backed by a wide range of collateral including ABS, MBS, high yield bonds, leveraged loans, emerging market securities, and investment grade corporate debt

The investment management team has an average of 12 years of industry experience and employs a comprehensive staff to conduct credit research, market analysis, asset valuations, trading and operational support

(1)

Source: ICP

(2)

Transaction activity between January of 2000 and July of 2004 occurred while members of the team were engaged in employment at other financial institutions where members held management positions and were responsible for generating origination and structuring business activities.

 
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7

Executive Summary

 

Overview

 

Triaxx strategy consistent with current ICP market view. (1)

 

Defensive view on consumer/corporate credit Neutral/constructive view on interest rates Aggressive view on liquidity

 

Triaxx investment focus (2)

 

100% AAA RMBS Prime borrower profile on all underlying RMBS pools Diversification through obligor and servicer limitiations

(1)

(2)

Source: ICP Deal in structuring process, subject to change

CONFIDENTIAL 8
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8

8

Executive Summary

Transaction Structure (1)

Assets Collateral Collateral Manager Manager Trustee Trustee Rating Rating Agency Agency Surveillance Surveillance
Assets
Collateral Collateral Manager Manager
Trustee Trustee
Rating Rating Agency Agency Surveillance Surveillance
Aaa/AAA Aaa/AAA
RMBS RMBS
Triaxx Triaxx Prime Prime CDO CDO
Securities Securities

(1)

Deal in structuring process, subject to change

Securities (1) Deal in structuring pr ocess, subject to change Liabilities Aa2/AA- A3/A- 9 CONFIDENTIAL 9
Securities (1) Deal in structuring pr ocess, subject to change Liabilities Aa2/AA- A3/A- 9 CONFIDENTIAL 9

Liabilities

Securities (1) Deal in structuring pr ocess, subject to change Liabilities Aa2/AA- A3/A- 9 CONFIDENTIAL 9
Securities (1) Deal in structuring pr ocess, subject to change Liabilities Aa2/AA- A3/A- 9 CONFIDENTIAL 9

Aa2/AA-

Securities (1) Deal in structuring pr ocess, subject to change Liabilities Aa2/AA- A3/A- 9 CONFIDENTIAL 9

A3/A-

9 CONFIDENTIAL 9
9
CONFIDENTIAL
9

II. Transaction Details

II. Transaction Details 10
10
10

Transaction Details

Summary (1)

Collateral Manager:

ICP Asset Management, LLC

Deal Size:

[2,500] MM

Structurer and Arranger

ICP Securities LLC

Lead / Co-Placement Agents:

Lead - ICP Securities LLC / Co-placement - CIBC World Market Corp. (2)

Collateral Management Fees:

Subordinate Management Fee of 5bps; Incentive Management Fee [100]% of excess cash flow

Payment Dates:

Class A-1 monthly; Classes A-2, B, X & C quarterly

Closing Date:

[ ], 2006

Ramp-up:

[70]% at closing and remainder to be purchased over [120] days thereafter

Non-Call Period:

[3] Years

Reinvestment Period:

[5] Years

Auction Call:

[8] Years

Delivery:

Euroclear/Cedel for Regulation S; DTC for 144A / Qualified Purchasers

Legal Final Maturity:

[ ], 2041

Issuing Entity:

Bankruptcy remote Cayman Islands corporation and Delaware co-issuer

Rating Agencies:

Moody’s / S&P

Trustee / Admin Fee

[0.75] bps and $175,000

(1)

(2)

Deal in structuring process, subject to change. See confidential Offering Memorandum for complete description of terms for this transaction CIBC World Markets Corp.’s role is limited to the placement of the Class A-1 notes

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11

Transaction Details

Structure

Capital Structure (1)

Tranche

Target Rating

Par (USD)

% of Deal

Coupon / Spread

Class A-1

Aaa/AAA

2,250,000,000

90.0%

1m L + []

Class A-2

Aaa/AAA

200,000,000

8.0%

3m L + []

Class B

Aa2/AA

30,000,000

1.2%

3m L + []

Class X

A2/A

10,000,000

0.4%

3m L + []

Class C

A3/A-

10,000,000

0.4%

3m L + []

Coverage Tests (1)

Tranche

Expected O/C

O/C Test

Class A

[101.75]%

[101.00]%

Class B

[100.49]%

[100.45]%

Class C

[100.09]%

[100.05]%

(1)

Deal in structuring process, subject to change

(2)

Weighted average lives assuming 20% annual prepayment on assets

average lives assuming 20% annual prepayment on assets WAL ( 2 ) [6.7] [8.0] [8.0] [4.2]

WAL (2)

[6.7]

[8.0]

[8.0]

[4.2]

[8.0]

lives assuming 20% annual prepayment on assets WAL ( 2 ) [6.7] [8.0] [8.0] [4.2] [8.0]
12 CONFIDENTIAL 12
12
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12

Transaction Details

 

Eligibility Criteria

 

Eligibility Criteria (1)

Collateral type Average rating Max WARF Min senior most tranches Weighted average FICO Weighted average LTV Fixed / Float Max weighted average maturity Max single issuer concentration

[100]% RMBS Aaa/AAA [3] bps

[100]%

[680-700]

[70-75]

[100]% Floating-rate [8] Years

[2%]

Servicer concentrations by minimum rating (2)

Largest 3 (3) with min rating of (SQ2 / RPS2 / Above Avg) Max if rated at least (SQ1 / RPS1 / Strong) Max if rated at least (SQ2 / RPS2 / Above Avg) Servicers rated below (SQ2, RPS2, Above Avg.)

[60%] Total, [20%] Each

[15%]

[10%]

[0%]

(1)

(2)

Deal in structuring process, subject to change Rating Categories ordered by (Moodys / Fitch / S&P) Largest 3 to be selected from Bank of America, Countrywide, GMAC, and Wells Fargo

 

(3)

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13

 

Transaction Details

 

Waterfall

 

Interest Proceeds Waterfall (1)

Principal Proceeds Waterfall 1

 
 

1. Taxes (2)

 

1. Unpaid items in the steps 1 - 6 of the interest waterfall (4)

2. Trustee, administrative fees and expenses (subject to a cap) (2)

2. After the reinvestment period, redemption of the Class A-1 notes until paid in full (2)

3. Pro-rata to Class A-1 note interest and Class A-1 commitment fee (2)

4. Class A-2 note interest (3)

3. After the reinvestment period, redemption of the Class A-2 notes until paid in full. (3)

5. Class B note interest (3)

4. After the reinvestment period, redemption of Class B notes (3)

6. Redemption of Class A-1, A-2 , and B notes (Class A & B Coverage Tests), (in order of seniority) (3)

5. Unpaid items in steps 7 of the interest waterfall (3)

7. Class X interest (3)

6. After the reinvestment period, redemption of Class X notes (3)

8. Class C note interest (3)

7. Unpaid items in steps 8 - 11 of the interest waterfall (3)

9. Class X principal amount (3)

8. After the reinvestment period, redemption of Class C notes (3)

10. Redemption of Class A-1, A-2, B, X and C notes (Class C Coverage Tests), (in order of seniority) (3)

9. During the reinvestment period, to the reinvestment of additional collateral (3)

11. Class C note deferred interest (3)

10. Unpaid items in steps 12 - 13 of the interest waterfall (3)

12. Subordinate management fee (3)

11. Payments to incentive management fee (3)

13. Administrative expenses in excess of capped amount (3)

14. Payments of incentive management fee (3)

(1)

Representation does not include all details of the waterfall. See the Offering Memorandum for a complete description of the interest proceeds waterfall and the principal proceeds waterfall. Preliminary – subject to change Payable monthly Payable quarterly Items 1-3 payable monthly, items 4 through 6 payable quarterly

(2)

(3)

(4)

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14

III. RMBS Market Overview

III. RMBS Market Overview 15
15
15

RMBS Market Overview

 

Highlights

High Grade ABS Highlights:

 

Low Overall Credit Risk (1)(2)

 

-

RMBS Securities have shown strong credit performance and strong rating stability

 

Low Defaults (1)(3)

 
 

-

High Grade ABS have very low historical default rates

 

High Recovery Rates (1)(4)

 
 

-

Defaulted RMBS assets have historically high recovery rates

(1) Historical Performance is not a guarantee or prediction of future results (2) Source: Moody’s Investors Services- Structured Finance Rating Transitions: 1983-2005 (3) Source: S&P Research-Principal Repayment and Loss Behavior of Defaulted U.S Structured Finance Securities : January 2005 (4) Source: Moody’s Investors Services-Default & Loss rates of Structured Finance Securities: 1993-2005

 
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16

RMBS Market Overview

One Year Migration Rates

Rating Stability: US RMBS – 1 year migration

RMBS has historically proven to be a very safe and stable asset class

Aaa downgrade rate was 0.05% for 2005 (3)

US RMBS (2005)

Rating at End of Year

 

Aaa

Aa

A

Baa

Ba

B

Aaa

99.95%

0.00%

0.05%

0.00%

0.00%

0.00%

Aa

11.38%

88.21%

0.10%

0.21%

0.00%

0.10%

A

1.68%

8.89%

87.74%

0.96%

0.36%

0.12%

Baa

0.00%

0.52%

7.67%

89.99%

0.52%

0.91%

Ba

0.00%

0.00%

0.58%

5.52%

91.29%

1.16%

B

0.00%

0.00%

0.00%

0.00%

7.08%

91.04%

Caa or Below

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Below 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.24% 0.39% 1.45% 1.89% Based on

0.00%

0.00%

0.24%

0.39%

1.45%

1.89%

Based on Moody’s report of ratings transitions, corporate ratings were more than 9 times more likely to experience a downgrade vs. RMBS in 2005 (1)

Overall downgrade rate for 2005 was 0.9%, and has remained below 1% since 2000 (2)

was 0.9% , and has remained below 1% since 2000 ( 2 ) Caa or Below
Caa or Below 100.00%
Caa or Below
100.00%

(1),(2),(3) Source: Moody’s Investors Services- Structured Finance Rating Transitions: 1983-2005. Historical performance figures are not a guarantee or prediction of future results. Investment losses may occur, and investors could lose some or all of their investment. Nothing herein is intended to imply that an investment in the Securities described herein or TRIAXX may be considered "conservative," "safe," "risk free" or "risk averse."

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RMBS Market Overview

Twenty Year Migration

Long-term Rating Stability: US RMBS – 20 year migration

 
 

Aaa RMBS have exhibited low ratings volatility through many credit cycles

US RMBS Rating Transition Matrices (Weighted Averages, 1984-2005)

 

Aaa

Aa

A

Baa

Ba

B

Caa/below

 

Aaa

88.75%

0.34%

0.09%

0.02%

0.00%

0.00%

0.00%

Aa

7.62%

83.16%

1.60%

0.34%

0.01%

0.03%

0.01%

A

1.87%

6.23%

82.13%

1.57%

0.19%

0.04%

0.17%

Baa

0.49%

0.79%

5.26%

83.67%

1.40%

0.73%

0.71%

Ba

0.12%

0.12%

1.25%

5.60%

83.02%

1.37%

2.28%

B

0.00%

0.00%

0.07%

0.56%

4.21%

83.57%

4.42%

Caa or below

0.00%

0.00%

0.00%

0.00%

0.13%

0.00%

87.70%

Aaa

51.58%

0.88%

0.29%

0.11%

0.01%

0.04%

0.18%

Aa

22.64%

33.98%

3.34%

1.59%

0.33%

0.29%

0.66%

A

10.03%

10.31%

34.82%

2.23%

0.70%

0.52%

1.43%

Baa

3.16%

3.23%

9.48%

42.49%

1.00%

1.58%

6.18%

Ba

0.77%

0.69%

6.00%

11.62%

39.38%

1.38%

7.15%

B

0.00%

0.00%

0.00%

3.24%

1.41%

44.08%

11.55%

Caa or below

0.00%

0.00%

0.00%

0.00%

1.01%

0.00%

58.73%

0.00% 0.00% 0.00% 0.00% 1.01% 0.00% 58.73% 1 Year 5 year Only 0.45% of Aaa rated

1 Year

5 year

Only 0.45% of Aaa rated US RMBS was downgraded in one year and 1.51% was downgraded over a five year period (1)

Withdrawn (3)

10.81%

 

7.23%

7.80%

6.96%

6.23%

7.16%

12.17%

46.92%

 

37.17%

39.97%

32.88%

33.00%

39.72%

40.25%

There have been only three defaults on US RMBS classes originally rated Aaa / AAA all of which occurred in 1997 and 1998 on deals issued in 1990 or 1991 by Guardian Savings and Loan (Huntington Beach, CA) (2)

(1),(2) Source: Moody’s Investors Services- Structured Finance Rating Transitions: 1983-2005. Historical performance figures are not a guarantee or prediction of future results (3) The vast majority of withdrawn ratings actions arise from routine debt maturities, calls, or redemptions - Source: Moody’s Investors Services

18 CONFIDENTIAL 18
18
CONFIDENTIAL
18

RMBS Market Overview

Loss & Recovery Rates

Historical Loss & Recovery Rates (1)

Moody’s 5-year estimated cumulative loss rate for Aaa rated US RMBS is 0.03% (2)

Estimated Multi-Year Cumulative Loss Rates of Structured Finance Securities (4)

   

US RMBS

 

1-Year

2-Year

3-Year

4-Year

5-Year

Aaa

0.00%

0.01%

0.02%

0.03%

0.03%

Aa

0.00%

0.02%

0.03%

0.05%

0.06%

A

0.09%

0.25%

0.32%

0.33%

0.34%

Baa

0.36%

0.96%

1.59%

1.96%

2.17%

Ba

0.95%

1.81%

2.53%

2.98%

3.26%

B

1.82%

3.62%

5.18%

5.68%

5.82%

(1) Historical performance figures are not a guarantee or prediction of future results (2),(4) Source: Moody’s Investors Services-Default & Loss rates of Structured Finance Securities: 1993-2005 (3) Source: S&P Research-Principal Repayment and Loss Behavior of Defaulted U.S Structured Finance Securities: January 2005

of Defaulted U.S Structured Finance Securities: January 2005 According to S&P, the es timated ultimate recovery
of Defaulted U.S Structured Finance Securities: January 2005 According to S&P, the es timated ultimate recovery

According to S&P, the estimated ultimate recovery rate for US RMBS AAA rated securities is 98% (3)

19 CONFIDENTIAL 19
19
CONFIDENTIAL
19

IV. About the Manager: ICP Asset Management LLC

IV. About the Manager: ICP Asset Management LLC 20
20
20

About the Manager

 

Overview (1)

 

ICP is a Structured Fixed Income Investment Manager organized in 2004 to provide comprehensive investment advisory services to qualified institutions and individuals

ICP specializes primarily in fixed income alternative strategies that combine fundamental and quantitative investment disciplines, seeking to deliver uncorrelated absolute returns and income to investors

ICP is registered as an investment advisor under the Investment Advisers Act of 1940

ICP combines a group of leading structured credit portfolio managers, analysts, and traders with its proprietary analytic technology, structuring and origination capabilities, and direct access to corporate assets to control the construction of many of its structured investments

(1)

Source: ICP

CONFIDENTIAL 21
CONFIDENTIAL
21

21

About the Manager

Asset Management Structure (1)

ICP ASSET MANAGEMENT LLC
ICP ASSET MANAGEMENT LLC
Hedge Funds / Managed Accounts STRUCTURED CREDIT INCOME FUND (2) - Credit Arbitrage Strategies -
Hedge Funds /
Managed Accounts
STRUCTURED CREDIT INCOME FUND (2)
-
Credit Arbitrage Strategies
-
Capital Structure Arbitrage
CREDIT NEUTRAL STRATEGY (3)
-
Segregated Account Management
Collateralized Debt Obligations TRIAXX PRIME (4) - Term Finance Execution - Structured Credit Vehicle Mgmt
Collateralized
Debt Obligations
TRIAXX PRIME (4)
-
Term Finance Execution
-
Structured Credit Vehicle Mgmt
-
RMBS; ABS; CDO 2

-

-

-

Financing

(1)

Source: ICP.

(2)

The ICP Structured Credit Income Fund (“Fund”) is currently being marketed to investors. The Fund has not held its first closing at this time.

(3)

The Credit Neutral Strategy is currently being marketed to investors. At this time there are no segregated accounts being managed using this strategy.

(4)

TRIAXX Prime CDO 2006-1 is currently being marketed to investors and has not closed at this time.

(5)

Tandem Funding LLC is currently being marketed to investors. ICP expects this transaction to close in June of 2006.

ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
ICP expects this transaction to close in June of 2006. Conduits TANDEM (5) Balance Sheet Management
Conduits TANDEM (5) Balance Sheet Management Warehousing
Conduits
TANDEM (5)
Balance Sheet Management
Warehousing
22 CONFIDENTIAL 22
22
CONFIDENTIAL
22
 

About the Manager

 

Competitive Advantage (1)

We believe ICP’s integrated business model provides certain inherent advantages to participating in Structured Credit:

Traditionally in the Structured Credit markets, investors purchase ABS and MBS assets packaged by investment banks who have little vested interest in the long term performance of the securitized product

ICP employs a direct and active investment approach. Through its experienced investment management team and key asset origination relationships, ICP creates alpha in 3 primary ways:

experienced investment management team and key as set origination relationships, ICP creates alpha in 3 primary
 

1)

The ability to access assets at their “creation value” through its structuring and modeling expertise Refinement of investments at the loan/obligor level to mitigate "tail risk" Control of cash flow attributes designed to reduce volatility

2)

3)

(1)

Source: ICP

CONFIDENTIAL 23
CONFIDENTIAL
23

23

About the Manager

Institutional Credit Partners LLC Organizational Chart (1)

ICP Employees Thomas C. Priore CEO / CIO Operations / Investor Relations Structuring / Analytics
ICP Employees
Thomas C. Priore
CEO / CIO
Operations / Investor
Relations
Structuring / Analytics
Origination
Peter W. Gaudet
ABS/MBS Analytics
Corporate Credit
CDO Analytics
Carlos Mendez
John Vecchio
Aamer Abdullah
William Gahan
Brent Layman
John Roglieri
Kenneth Bibko
David Parseghian
Deboleena Dutta
Kevin Farley
Stanley Tobin
Lukasz Cianciara
Jonathan Maher
Ranjana Ram
Patrick Ferry
Genevieve Carpente
Maher Ranjana Ram Patrick Ferry Genevieve Carpente Operational Support HR Compliance Legal Financial

Operational

Support

HRCompliance Legal Financial Operations Business Risk Oversight

Compliance Legal Financial Operations Business Risk Oversight
Compliance
Legal
Financial
Operations
Business Risk
Oversight
Commercial Real Estate
Commercial
Real Estate
Residential Mortgages
Residential
Mortgages

Middle Market

Loans

Trade

Receivables

Leveraged

Loans

Corporate and

Consumer Assets

Leveraged Loans Corporate and Consumer Assets (1) Direct Access to Assets Source: Institutional Credit
Leveraged Loans Corporate and Consumer Assets (1) Direct Access to Assets Source: Institutional Credit

(1)

Direct Access to Assets

Source: Institutional Credit Partners LLC is the parent company of ICP. Some employees listed on the above organizational chart are employees of affiliates of ICP that will be made available to ICP to assist in ICP’s business activities. There is no guarantee that any individual will continue to be a part of Institutional Credit Partners or its affiliates

CONFIDENTIAL 24
CONFIDENTIAL
24

V. Investment Process

V. Investment Process 25
25
25

Investment Process

 

Overview (1)

 
 

ICP employs top-down and bottom-up approaches when identifying opportunities by combining its macro views on credit with its modeling capabilities and origination relationships to select and structure investments with attractive cash flow and return characteristics

Firm-wide macroeconomic views are developed by the CIO and portfolio management team on a quarterly basis

The portfolio management team and traders develop investment ideas for group review on a daily/ ad-hoc basis

(1)

Source: ICP

CONFIDENTIAL 26
CONFIDENTIAL
26

26

Investment Process

Investment Approach (1)

TOP DOWN APPROACH

Investment opportunities are ascertained based on three macro drivers – credit (corporate and consumer), interest rates and liquidity

Opportunities are appropriately positioned – defensively, neutral, aggressively – and mapped across vertical market segments

BOTTOM UP APPROACH

ICP will utilize its modeling capabilities and origination relationships to influence investment cash flow attributes through its structuring expertise, and improve the risk reward profile by mitigating tail risk at the loan/ obligor level

(1)

Source: ICP

MACROECONOMIC DRIVERS

Consumer &

Corporate Credit

DEFENSIVE
DEFENSIVE

DEFENSIVE

DEFENSIVE
DEFENSIVE
DEFENSIVE

Long / Short Interest Rates

NEUTRAL/ CONSTRUCTIVE
NEUTRAL/
CONSTRUCTIVE

Residential

Commercial

Senior Bank

Mortgages

Mortgages

Loans

Corporate Debt

Bank Mortgages Mortgages Loans Corporate Debt TARGET INVESTMENTS Mortgage Backed Asset Backed

TARGET INVESTMENTS

Mortgages Loans Corporate Debt TARGET INVESTMENTS Mortgage Backed Asset Backed Collateralized

Mortgage Backed

Asset Backed

Collateralized

Collateralized

Securities

Securities

Loan Obligations

HIGH CLAIM ON CASH FLOW
HIGH CLAIM ON
CASH FLOW
MITIGATION OF TAIL RISK
MITIGATION OF
TAIL RISK

IMPROVED

COST BASIS

Control of Cash

Loan/Obligor

Direct Access

Flow Attributes

Analysis

to Assets

ICP CAPABILITIES

Attributes Analysis to Assets ICP CAPABILITIES Liquidity High Yield Corporate Debt Commercial

Liquidity

High Yield

Corporate Debt

Commercial

Paper Conduits

MARK TO MARKET VOLATILITY
MARK TO
MARKET
VOLATILITY

Financing

A combination of top-down and bottom-up approaches are used to identify investments that reflect ICP’s macroeconomic views while providing the loan level credit support and cash flow profile it seeks

AGGRESSIVE
AGGRESSIVE
Investment Grade
Investment Grade
Debt Obligations
Debt Obligations
level credit support and cash flow profile it seeks AGGRESSIVE Investment Grade Debt Obligations 27 CONFIDENTIAL
27 CONFIDENTIAL 27
27
CONFIDENTIAL
27
Investment Process Investment Steps (1) Customize Loan Pool Create/Model Capital Structure Relative Value Creation
Investment Process
Investment Steps (1)
Customize
Loan Pool
Create/Model
Capital Structure
Relative Value
Creation Value
Analysis
Risk
Monitoring
and
Surveillance
(1)
Source: ICP
28
CONFIDENTIAL
28
Investment Process Customize Loan Pool Loan Attribute Analysis (1) Statistically analyze individual attributes of the
Investment Process
Customize
Loan Pool
Loan Attribute Analysis (1)
Statistically analyze individual attributes of the loan pool
Remove loans or create additional credit enhancement for any artificial increases in creditworthiness
caused by:
Tail Risk – e.g., a subset of loans with high FICO scores relative to the average FICO score of
the pool which increases the pool’s weighted-average FICO score
Bimodal Distribution – e.g., a pool of loans with a substantial number of loans concentrated in
the high and low end of the LTV range that leads to an otherwise acceptable weighted-average
LTV
Correlation Risk – Loans that possess more than one negative attribute, e.g. a loan that has a
low FICO score and a high LTV relative to the weighted averages of these attributes in the pool
ICP analyzes the pool by importing loan level information from the underwriter into Intex Dealmaker.
This allows us to configure pool characteristics based on the loan level population as opposed to
composite representations
(1)
Source: ICP
29
CONFIDENTIAL
29

Investment Process

Loan Attribute Analysis (1)

Sample Loan Attribute Analysis

Collateral Breakdown

 

% of pool

%MI

WA LTV

Max LTV

WA DTI

Max DTI

DTI > 45%

% Investor

 

%

No Doc

%Stated Doc

% C/O Refi

% WAC

IO

% < 100k

FICO >= 750

26.41%

0.83%

69.21%

80.00%

37.54%

49.26%

7.94%

22.32%

15.23%

36.37%

36.73%

70.58%

6.408%

0.00%

30.14

1.36

71.40

80.00

37.86

51.53

10.51

13.18

15.06

49.82

32.21

81.75

6.623

0.00

FICO 700 -749

16.98

1.10

69.46

80.00

36.41

50.10

5.11

9.56

9.52

63.03

42.19

66.35

6.641

0.00

FICO 680 - 699

13.68

0.00

70.49

80.00

38.27

49.42

11.76

1.37

10.61

52.81

53.01

70.33

6.586

0.00

FICO 660 - 679

8.17

0.00

69.11

80.00

36.45

50.04

16.71

2.92

2.33

63.89

73.25

57.73

6.535

0.00

FICO 640 - 660 FICO <= 639

4.62

0.00

70.20

80.00

41.06

50.03

16.44

10.02

0.00

42.01

62.85

44.72

6.450

0.00

% of pool

%MI

WA FICO

Min FICO

WA DTI

Max DTI

DTI > 45%

% Investor

 

%

No Doc

%Stated Doc

% C/O Refi

% WAC

IO

% < 100k

LTV < 75%

55.28%

1.48%

71200.00%

62400.00%

37.93%

51.53%

11.63%

14.30%

12.36%

46.28%

63.82%

61.51%

6.394%

0.00%

LTV 75% - 80%

44.72

0

717

624.00

37.16

50.1

7.68

10.01

11.15

53.94

16.61

82.63

6.741

0

-

-

-

-

-

-

-

-

-

-

-

-

-

-

LTV 80.01% - 85%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

LTV 85.01% - 90% LTV > 90%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

% of pool

%MI

WA LTV

Max LTV

WA FICO

Min Fico

% Investor

% % C/O Refi

No Doc

%Stated Doc

% IO

WA WAC

WAC

% > 500k

DTI < 35%

54.21%

1.15%

69.60%

80.00%

719

624

14.95%

21.80%

25.89%

45.92%

67.61%

6.586%

6.586%

58.60%

16.7

1.16

70.08

80.00

713

633

12.93

0.00

87.79

40.80

81.35

6.585

6.585

49.54

DTI 35.01% - 40%

19.23

0.00

71.34

80.00

715

626

5.87

0.00

78.62

29.25

73.07

6.48

6.48

57.35

DTI 40.01% - 45%

8.96

0.00

70.82

80.00

715

625

10.99

0.00

58.28

49.96

67.24

6.424

6.424

56.59

DTI 45.01% - 50% DTI > 50%

0.91

0.00

69.67

80.00

679

624

0

0.00

74.64

100.00

70.84

6.349

6.349

29.16

% of pool

%MI

Max LTV

WA LTV

% LTV = 70 - 74.99

% LTV

= 75 - 80

%LTV > 80

Min FICO

 

Wtd Avg FICO

FICO < 660

Max DTI

WA DTI

WAC

%

Investor

Investor Properties

12.38%

3.34%

80.00%

69.49%

11.15%

4.29%

0.00%

637

741

5.67%

0.50

0.35

6.677%

100.00%

No Doc

5.02

1.84

80.00

68.07

7.35

10.54

0.00

659

728

1.61

0.00

0.00

6.727

11.45

C/O Refi

35.23

0.95

80.00

64.45

13.87

8.28

0.00

624

705

20.81

51.53

36.84

6.452

9.96

IO Loans

20.95

0.89

80.00

71.69

13.62

10.05

0.00

624

718

9.56

50.10

37.88

6.598

13.63

Loan Level Breakout for loans for FICO < 660 and LTV >= 75%

Loan Balance

FICO

LTV

CLTV

DTI

Documentation

Occupancy

Purpose

Amort. Type

MSA

Loan Type

Original Term

143759090

563,688.67

653

80

100

38.2

FAD(Full or Alt or AUS)

Primary

Purchase

Interest Only

San Francisco, CA

 

360

202390118

551,862.00

626

80

100

46.87

FAD(Full or Alt or AUS)

Primary

Purchase

Interest Only

San Francisco, CA

 

360

202398566

650,000.00

652

77.84

77.84

19.9

NIV

Primary

C/O Refi

Interest Only

No MSA

 

360

202469862

717,896.14

650

80

96.69

46.19

NIV

Primary

Purchase

FULL AM

Washington, DC

 

360

143640241

400,000.00

641

79.28

99.3

0

No Ratio

Primary

Purchase

Interest Only

No MSA

 

360

143789923

435,317.70

638

80

90

0

No Ratio

Investor

Purchase

FULL AM

Chicago, IL

 

360

143883510

581,369.47

637

80

80

0

No Ratio

Primary

C/O Refi

FULL AM

Portland, ME

 

360

202392650

399,342.31

624

80

80

0

No Ratio

Primary

C/O Refi

FULL AM

Washington, DC

 

360

143804151

431,200.00

633

80

95

39.08

FAD(Full or Alt or AUS)

Primary

Purchase

Interest Only

San Francisco, CA

 

360

202480323

417,600.00

644

80

99.14

44.28

FAD(Full or Alt or AUS)

Primary

C/O Refi

Interest Only

Washington, DC

 

360

202490967

391,323.08

635

80

80

31.27

NIV

Primary

Purchase

FULL AM

Washington, DC

 

360

143779288

503,034.97

651

80

80

32.76

NIV

Primary

C/O Refi

FULL AM

No MSA

 

360

202488169

440,000.00

639

78.01

78.01

0

No Ratio

Primary

C/O Refi

Interest Only

Washington, DC

 

360

(1)

Source: ICP

Customize Loan Pool
Customize
Loan Pool

% > 750k

%LTV > 70%

%LTV > 80%

 

14.20%

48.51%

0.00%

28.67

54.44

0.00

34.55

45.76

0.00

36.61

52.87

0.00

20.14

45.61

0.00

0.00

43.66

0.00

% > 750k

%LTV > 70%

%LTV > 80%

 

34.08%

9.50%

0.00%

13.58

100.00

0.00

-

-

-

-

-

-

-

-

-

%LTV > 70%

%LTV > 80%

 

50.03%

0.00%

55.42

0.00

48.35

0.00

43.37

0.00

45.48

0.00

%

No Doc

%Stated Doc

%C/O Refi

%IO

10.93%

37.01%

34.37%

78.10%

100.00

0.00

54.89

55.78

15.19

43.02

100.00

64.73

9.29

49.73

38.97

100.00

ICP analyzes each loan pool to determine whether average collateral attributes represented by the issuer represent the true risk of the collateral pool. ICP stratifies various risk attributes in several ways to identify any unfavorable correlations among a borrower’s credit, capacity, and collateral. Those loans exhibiting a combination of unfavorable characteristics are individually analyzed.

T hose loans exhibiting a combination of unfavorable characte ristics are individually analyzed. 30 CONFIDENTIAL 30
30 CONFIDENTIAL 30
30
CONFIDENTIAL
30
Investment Process Customize Loan Pool Identify Salient Loan Attributes (1) FICO – Credit score based
Investment Process
Customize
Loan Pool
Identify Salient Loan Attributes (1)
FICO – Credit score based on the borrower’s debt payment history and borrowing levels
Debt-to-Income Ratio (DTI) – Amount of debt relative to income before and after current mortgage loan.
DTI measures the borrower’s ability to service debt
Loan-to-Value Ratio (LTV) – Amount of the mortgage loan relative to the asset’s value. LTV reflects the
leverage of the loan vis-à-vis the borrower’s equity
Spread at Origination (SATO) – Risk premium relative to the market on the loan as determined by the
underwriter
Loan Size – Size of the mortgage loan balance (Conforming, Jumbo, Super Jumbo)
Lien Position – Lender’s claim priority on the underlying asset in a foreclosure
Loan Purpose (Purchase, Cash Out Refinance, Rate Refinance, Investment) –
Purchase – Loan to purchase a primary residence
Investor – Loan to purchase or refinance an investment property or a second home
Refinance – Loan to change terms of the mortgage (e.g. monthly payment, maturity of mortgage,
interest rate)
Cash Out Refinance – Loan to monetize equity in asset. Generally increases leverage of the
homeowner
(1)
Source: ICP
31
CONFIDENTIAL
31
Investment Process Customize Loan Pool Identify Salient Loan Attributes (Cont.) (1) Servicer – Entity responsible
Investment Process
Customize
Loan Pool
Identify Salient Loan Attributes (Cont.) (1)
Servicer – Entity responsible for collecting mortgage payments and remitting payments to the trustee
Geographic Diversity – Concentration of mortgages in the pool by state, zip code, and/or Metropolitan
Statistical Area
Documentation Level – Level of income and asset documentation provided to the underwriter
Full documentation – Substantial information regarding employment, assets, and past and present
income of the borrower
Alternative & Lite documentation – For qualified borrowers, certain omissions of information and/or
verifications are allowed to varying degrees
No documentation – For qualified borrowers, minimal information is required
Amortization Schedule – Schedule of principal payments expected over the life of the mortgage loan.
The schedule is determined by the term of the loan and any interest only or negative amortization
provisions in the loan
Loan Age – Number of months since the issuance of the mortgage loan
Note Rate – Gross interest rate paid by the borrower
Prepayment Penalty – Monetary disincentive for prepayment of mortgage principal
(1)
Source: ICP
32
CONFIDENTIAL
32
Investment Process Customize Loan Pool Effect of Loan Attributes on Loan Pool Characteristics (1) Effect
Investment Process
Customize
Loan Pool
Effect of Loan Attributes on Loan Pool Characteristics (1)
Effect of Loan Attributes on Delinquency, Loss Severity, and Convexity by Order or Importance
Delinquency
Loss Severity
Convexity
• FICO
• Lien Position
• Prepayment Penalty
• DTI
• LTV
• Note Rate
• SATO
• Loan Size
• SATO
• LTV
• Geographic Location
• Loan Age
• Documentation Level
• Servicer
• Documentation Level
• Loan Purpose
• Amortization Schedule
• Loan Purpose
• Geographic Location
• Loan Purpose
• LTV
• Lien Position
• Documentation Level
• Loan Size
• Amortization Schedule
• SATO
• FICO
• Loan Age
• FICO
• DTI
• Loan Size
• DTI
• Servicer
• Servicer
• Loan Age
• Geographic Location
• Amortization Schedule
(1)
Source: ICP
33
CONFIDENTIAL
33
Create/Model Investment Process Capital Structure Subordination Analysis (1) Determine appropriate subordination
Create/Model
Investment Process
Capital
Structure
Subordination Analysis (1)
Determine appropriate subordination level
Identify and review historical credit performance of mortgage loan pools similar to the target
mortgage loan pool, emphasizing the following attributes:
Delinquencies
Cumulative Default Rate
Loss Severity Levels
Recovery Lag
Servicer Advances
Identify optimal subordination methodology
Identify market price levels of AAA, mezzanine and other subordinate securities backed by similar loan pools.
Using relative value analysis in conjunction with ICP’s OAS model, normalize price levels to account for
differences in the capital structure.
Quantify use of principal subordination, over collateralization or excess interest to enhance target investment.
Evaluate the economic impact to securitization then make appropriate changes to the capital structure
The ability to recast subordination levels and methodology based on ACTUAL loan characteristics allows ICP’s
investments to withstand multiples of model and historic loss experience
(1)
Source: ICP
34
CONFIDENTIAL
34
Investment Process RMBS Structural Analysis ( 1 ) Create/Model Capital Structure Use Intex Dealmaker* (“Intex”)

Investment Process

RMBS Structural Analysis (1)

Create/Model Capital Structure
Create/Model
Capital
Structure

Use Intex Dealmaker* (“Intex”) to create ideal capital structure

Download Intex output to Polypaths** option adjusted spread (OAS) calculator, which employs a Monte Carlo simulation to provide insight into the cashflow variability of a security

*Intex Dealmaker is a third party software application utilized by the majority of the underwriter
*Intex Dealmaker is a third party software application
utilized by the majority of the underwriter community to
create and model RMBS and ABS
** Polypaths is a third party software application
capable of running security cash flows through various
prepayment and term structure models

Analysis of the resultant cashflows under model derived stressed interest rate and pre-payment scenarios allows ICP to identify and extract asymmetry within the capital structure

(1)

Source: ICP

CONFIDENTIAL 35
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35
Create/Model Investment Process Capital Structure Collateral Origination Process (1) STEP 1: STEP 2: STEP 3:
Create/Model
Investment Process
Capital
Structure
Collateral Origination Process (1)
STEP 1:
STEP 2:
STEP 3:
STEP 4:
Customize Loan
Pool
Create/Model
Capital Structure
Create Fixed
Create Hedged
Relative Bond
Floater
• Pool of loans analyzed
and selected
• Create senior/sub
structure to establish
AAA credit support
• Re-allocate principal
allocation to shorten
duration of senior
• Swap fixed-rate
Accelerated Senior to
floating
• Verify pool versus
transaction criteria
• Purchase Senior A
• Retain fixed-rate
Accelerated Senior (AS)
• Sell corresponding
Inverse Floater/IO
• Sell sub note
• Sell the Non-Accelerated
Senior (NAS)
Example Economics: <PRICE>
• Purchase amortizing
hedge to uncap the
floating rate senior
note
Hedged
Floater
Amortizing
Senior A
AS
+
=
Floater
Hedge
L+50
<97-26>
<97-30>
<3-2>
L+50
<96-30>
Loan
<100-0>
Pool
Subordinate
NAS
Inverse Floater / IO
<90-24>
<96-25>
<1-12>
(1)
Source: ICP
36
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36
Relative Investment Process Value/Creation Value Analysis Target Asset Valuation Methodology (1) Deduce the creation
Relative
Investment Process
Value/Creation
Value Analysis
Target Asset Valuation Methodology (1)
Deduce the creation value of the security under consideration by valuing each of the other nodes of
the bond tree
Analyze relative value on the security vs. comparable assets in the secondary marketplace
Perform relative value analysis on a nominal basis (static cashflow) and on a OAS basis (Monte
Carlo simulation).
Static cashflow analysis will incorporate supply and demand technical factors for a
particular structure as well as look at nominal spread, yield and price relationships in the
market. Additionally, it will include static scenario analysis from Bloomberg and
computational materials provided by the underwriter
OAS relative value analysis is conducted using Polypaths with proprietary enhancements
to pre-payment models. This analysis quantifies the implicit as well as explicit options in
any security
ICP’s capability to discretely manage the asset risk (loan level) and liability risk (our
investment) may enable us to mitigate return volatility and construct investments that increase
the probability of excess returns
(1)
Source: ICP
37
CONFIDENTIAL
37

VI. Risk Monitoring / Surveillance

VI. Risk Monitoring / Surveillance 38
38
38
Risk Risk Monitoring / Surveillance Monitoring and ABS/MBS Risk Management (1) Surveillance Step 1 Step
Risk
Risk Monitoring / Surveillance
Monitoring
and
ABS/MBS Risk Management (1)
Surveillance
Step 1
Step 2
Step 3
Portfolio Mark –
To-Market
Determine
Creation Value &
Perform OAS
Analysis
WAL at
Origination vs.
Current WAL
Step 6
Step 4
Step 5
Hold
Original C/E vs.
Current C/E
Stressed Prepay
And Default
Analysis
Hold/Hedge
Sell
(1)
Source: ICP
39
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39
Risk Risk Monitoring / Surveillance Monitoring and Portfolio Reporting/Monitoring (1) Surveillance Servicer Reports
Risk
Risk Monitoring / Surveillance
Monitoring
and
Portfolio Reporting/Monitoring (1)
Surveillance
Servicer Reports
Report Configuration
Portfolio Reporting and Alerts
Portfolio Alerts
Alert Configuration
Portfolio
Deal Inputs
ABS
MBS
Deal Waterfall
Deal Transaction Reports
Deal Transaction Reports
Amortization
Schedule
Deal Waterfall
Deal Waterfall
Deal Reports
Test Compliance
Pool Migration Test
Indentures
Tranche Cash Flows
Tranche Cash Flows
Collateral Reports
Risk Analytics
Portfolio Optimization
Portfolio Cash Flows
Correlation Analysis
Stress Tests
Risk Decomposition
Investor Reporting
Hedge Schedules
Asset Performance
Asset Performance
Industry Projections
Convexity and Duration Test
Collateral Mark-to-Market
Hedge Performance
Hedge Performance
Market and Credit Database
Trustee ReportsMoody’s Ratings Reports
S&P Ratings Reports
Fitch Ratings Reports
Research Reports Industry Outlook
Servicer Data Bloomberg
Credit Reports
(1)
Source: ICP
40
CONFIDENTIAL
40

Appendix I – Management Biographies

Appendix I – Management Biographies 41
41
41

Appendix I – Management Biographies (1)

Portfolio Management

Thomas C. Priore: Mr. Priore is the President and Chief Executive Officer of Institutional Credit Partners LLC and the Chief Investment Officer of ICP Asset Management LLC. He brings fourteen years of structured credit investment and origination experience to ICP. Prior to founding ICP, Mr. Priore managed the Fixed Income and Structured Products Group at Guggenheim Capital Markets where he oversaw a team of thirty professionals focused on investing and underwriting Collateralized Debt Obligations, Collateralized Loan Obligations, Collateralized Mortgage Obligations and other Asset Backed Securities. The team at Guggenheim pioneered various structured credit implementations designed to improve secondary CDO market liquidity and to originate new issue CDOs focusing on eliminating the economic inefficiencies and the inherent conflicts among debt and equity participants in CDO structures. He oversaw the origination of $5.5 billion in new issue and the proprietary trading efforts of the group. Before joining Guggenheim in 2000, Mr. Priore was a First Vice President at PaineWebber Inc. for eight years in the Fixed Income Sales and Trading department where he was responsible for originating the firm’s first cash flow ABS backed CDO in 1998. Mr. Priore is a graduate of Harvard University with a B.A. in American History and holds an M.B.A. from Columbia University. In addition he holds Series 7, 63 and 24 licenses with the NASD.

William F. Gahan: Mr. Gahan is a Managing Director at ICP Asset Management LLC. He brings sixteen years of European, US and Emerging Market credit experience to ICP. Prior to joining ICP, Mr. Gahan worked as a portfolio manager with the Greenwich Capital proprietary trading group. His portfolio responsibilities included long and short strategies across global distressed, high yield, and investment grade markets. Mr. Gahan's previous work experience includes consulting distressed debt capital raising and nine years at Paine Webber/Kidder Peabody as an Executive Vice President in their credit trading and sales team. Mr. Gahan is a graduate of the University of Virginia with a BS in International Relations.

(1)

Source: ICP

CONFIDENTIAL 42
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42
is a graduate of th e University of Virginia with a BS in International Relations. (1)

42

Appendix I – Management Biographies (1)

 

Portfolio Management

Aamer Abdullah: Mr. Abdullah is a Vice President at ICP Asset Management LLC where he is a member of the Asset Backed Securities (ABS) and Mortgage Backed Securities (MBS) portfolio management team. Mr. Abdullah has been a trader in the securitized products markets since 1997. After graduating from Yale University with degrees in Electrical Engineering and Economics he joined the Mortgage Trading Desk at Credit Suisse First Boston (CSFB). At CSFB Mr. Abdullah held the role of a senior trader on the Agency CMO desk which was top ranked in league tables for 2000. He continued onto run the Non-Agency CMO desk which was consistently ranked in the top three in league tables. While at CSFB he was promoted to Vice President. He then joined Deutsche Bank’s Securitized Products Group in 2003 as the Head of Private Label MBS with the title of Director. His responsibilities there