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It's time to let you in on a dirty little secret: You may not own the stock you own. That's right, if you invest with a brokerage firm, the shares you bought are almost certainly not held in your name. Technically, they're held in the name of the Wall Street firm you do business with, hence the term "street name."
No, you haven't been robbed. Ultimately, the decision to hold shares on the books under a different name doesn't affect the economic ramifications for you. You¿re listed as the "beneficial owner," even though the firm is the official owner of the shares. But, you are giving up some rights, and investors concerned about good corporate governance might want to get that stock back in their own names.
Here's the problem: If your stock is technically owned by, say, Merrill Lynch, then Merrill Lynch gets to do things with it that might work against your wishes. Take short selling. Investors who want to sell shares short need to first borrow those shares. The lenders are often the big Wall Street firms that are handing out Street-name shares. So, if you feel that a company you own is a victim of aggressive short selling, chances are your own shares are being used to fuel the shorting.
Also, your brokerage firm can cast ballots on some corporate matters affecting a company without getting your input. Technically, this can only happen in votes considered ¿routine¿ by securities regulators. But, there's a big catch: some big events, like board elections, are considered "routine" under law.
The good news is that you can easily fix the Street name problem: Just request that your brokerage firm makes you the listed owner of the shares. If they refuse, find a new firm.
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Wednesday, August 06, 2008
Fitch Downgrades $269.8MM from E*Trade ABS CDO IV, Ltd.
Comtex
NEW YORK, Aug 06, 2008 (BUSINESS WIRE) ----Fitch Ratings downgrades and removes from Rating Watch Negative seven classes of notes issued by E*Trade ABS CDO IV, Ltd (E*Trade IV). The following rating actions are effective immediately:
--$6,355,290 class A-1A to 'CCC' from 'BBB+';
--$137,275,766 class A-1B-1 to 'CCC' from 'BBB+';
--$35,936,397 class A-1B-2 to 'CC' from 'BBB-';
--$19,755,611 class A-2 to 'CC' from 'BB+';
--$48,918,656 class B to 'CC' from 'B';
--$16,935,745 class C to 'C' from 'CCC';
--$4,576,666 class D to 'C' from 'CC'.
Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS.
E*Trade IV is a cash flow structured finance (SF) collateralized debt obligation (CDO) that closed on Dec. 1, 2005 and is managed by Vertical Capital, LLC. As of the June 30, 2008 trustee report, 61% of the portfolio is comprised of 2005, 2006, and 2007 vintage U.S. subprime residential mortgage-backed securities (RMBS), 4.7% consists of U.S. SF CDOs, and 12.5% is comprised of 2005, 2006 and 2007 vintage U.S. Alternative-A (Alt-A) RMBS.
Since November 2007, approximately 70.5% of the portfolio has been downgraded, with 13.4% of the portfolio currently on Rating Watch Negative. 67.7% of the portfolio is now rated below investment grade, of which 46.7% of the portfolio is rated 'CCC+' and below. Fitch notes that, overall, 65.2% of the assets in the portfolio now carry a rating below the rating it assumed in November 2007. The negative credit migration experienced since the last review on November 21, 2007 has resulted in the Weighted Average Rating Factor deteriorating to 23.55 from 12.48, continuing to breach its covenant of 6.16.
As of the June 30, 2008 trustee report, the interest coverage (IC) tests were passing their respective triggers, but all of the overcollateralization (OC) tests were failing. The class A/B IC test was 139.9%, passing its 113.3% trigger. The class C IC test was 124.0% compared to the 103.0% trigger. The class A/B OC test was 64.9% compared to the 106.7% trigger, the class C OC test was 60.7% compared to the 102.3% trigger, and the class D OC test was 54.5% compared to the 101.4% trigger. The weighted average coupon (WAC) was passing its test at 5.6% compared to 5.5% trigger. However, the weighted average spread (WAS) was failing at 1.71% compared to the 1.74% trigger.
As a result of the failure of the Net Outstanding Portfolio Collateral Balance to be at least equal to the Aggregate Outstanding Amount of the Class A Notes, E*Trade IV is in an Event of Default.
To date the trustee has not received notification from the noteholders or the hedge counterparty, AIG Financial Products Corp., as to what action to take regarding the Event of Default. Holders of at least 66 2/3% of the aggregate outstanding amount of each class (voting separately) and hedge counterparty are entitled to direct the trustee to take certain actions with respect to the collateral debt securities and the notes. Fitch expects the classes A-1A and A-1 B-1 notes to benefit from the Event of Default as their pro rata seniority in the capital structure enables the classes to receive most of their principal due. In the event of a sale and liquidation of the collateral, Fitch expects that the proceeds from the liquidation of the collateral will not be enough to pay the senior classes, A-1A and A-1 B-1, in full. Classes A-1 B-2, A-2, and B are expected to receive some interest and zero principal. Payment of interest to the class C and D notes have been paid in kind (PIK) since November 2007 by writing up the principal balance of each class by the amount of interest owed, and thus these classes will receive zero interest and principal going forward.
The classes are removed from Rating Watch as Fitch believes further negative migration in the portfolio will have a lesser impact on these classes. Additionally, Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date.
The ratings of the classes A-1A, A-1 B-1, A-1 B-2, A-2, and B notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C and D notes address the likelihood that investors will receive ultimate payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date.
Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
SOURCE: Fitch Ratings
Fitch Ratings Kevin Kendra, +1-212-908-0760 (New York) Brian Vorderbrueggen, +1-212-908-9102 (New York) Alina Pak, CFA, +1-312-368-3184 (Chicago) Sandro Scenga, +1-212-908-0278 (Media Relations, New York)
Copyright Business Wire 2008
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