Page 1 of 2 BN 09/13 Merrill's Kenneth Margolis Leaves Amid CDO Slowdown (Update1) By Bradley Keoun Sept. 13 (Bloomberg) -- Kenneth Margolis, a Merrill Lynch & Co. managing director who helped oversee the firm's business of packaging bonds and loans into so-called collateralized debt obligations, quit amid declining sales of the securities. His departure was confirmed by Jessica Oppenheim, a spokeswoman for New York-based Merrill. The Wall Street Journal reported earlier today that he's resigning to join New York- based money manager Harding Advisory LLC, citing a person familiar with the matter. A call to Harding President Wing Chau wasn't returned. Margolis couldn't be reached for comment. Wall Street traders who specialize in CDOs are leaving or losing their jobs as the market shrinks. Royal Bank of Scotland Plc's RBS Greenwich Capital unit said last month it ``resized'' a department that deals with CDOs to comport with ``market demand.'' Executives at Lehman Brothers Holdings Inc. also are leaving, the Wall Street Journal said. ``Demand for the talent of putting together lots and lots of tranches of different kinds of debt has substantially shrunk given the credit crunch,'' said Gustavo Dolfino, president of WhiteRock Group LLC, a financial-services executive-search firm based in New York. ``It is a cycle, and underwriting guidelines are tougher.'' CDO sales, once the fastest-growing part of the debt market, fell to the lowest in more than a year in August as investors became increasingly concerned about losses on home loans in the underlying collateral pools. Merrill was last year's biggest CDO underwriter, with about $55 billion of sales, according to Thomson Financial. Billions Downgraded Since June, New York-based Standard & Poor's and Moody's Investors Service have downgraded billions of dollars of CDO securities that they previously rated as high as AAA. The CDOs contained bonds backed by U.S. subprime and second mortgages. About $16 billion of CDOs were issued in August, down from $157 billion in March, the most active month of this year, JPMorgan Chase & Co. analysts said in a Sept. 10 report. About $60 billion of the securities were sold in June. Some senior CDO traders and executives may quit their posts as dwindling sales reduce year-end bonuses, Dolfino said. ``The company doesn't want to keep someone and pay him a few million bucks a year if he's not going to originate anything, and even when he does they can't sell it,'' Dolfino -----------------------------====================------------------------------ Copyright (c) 2007, Bloomberg, L. P. Page 2 of 2 said. The securities firms may add jobs in Asia, where debt markets are growing, Dolfino said. CDO Issuance Declines Margolis joined Merrill in August 1999 from Credit Suisse Group Inc., according to Financial Industry Regulatory Authority records. He joined First Boston Corp., which was later bought by Credit Suisse, in 1991, according to the records. His title at Merrill was co-head of global cash CDOs. His co-head, Harin de Silva, remains in his post, reporting to Dale Lattanzio, head of Merrill's fixed-income division for the Americas region, Oppenheim said. David Sherr, Lehman's head of global securitized products, plans to step down at the end of the year, the Wall Street Journal reported, citing people with knowledge of the matter. John Beaman, a senior trader of commercial mortgage-backed securities, has quit, the Journal said, citing associates. Kerrie Cohen, a spokeswoman for New York-based Lehman, declined to comment. --Editor: El-Gabry (ehs/weg) To contact the reporter on this story: Bradley Keoun in New York at +1-212-617-2310 or bkeoun@bloomberg.net. To contact the editor responsible for this story: Erik Schatzker at +1-212-617-3849 or eschatzker@bloomberg.net. -----------------------------====================------------------------------ Copyright (c) 2007, Bloomberg, L. P. ############################ END OF STORY 1 ##############################