search   Knowledge Bank printable version
 News
 Knowledge Bank
 Deal Information
 International
 Software
 Publications
 Industry Events
 Advocacy Forums
 Links
 Site Utilities
 Contributors
 Free Offers
 Home

Click here to
Update Registration
Information

Please be advised that the use of Securitization.net ®
is subject to the
Terms & Conditions

of use and the
Privacy Policy

Download

Best viewed in

Knowledge Bank > Rating Criteria > Commercial Paper
Select an area


FREE Three-week trial of Asset-Backed Alert's newsletter

Conduit Output Buoyed by Issuance Twists
Asset Backed Alert, Harrison Scott Publications Inc. (May 19, 2006)

A few recent shifts in the asset-backed commercial paper market should bolster issuance volume for the rest of the year.

The rising deal flow would preserve a growth streak that has persisted for more than a year, even as a once-prolific flow of mortgage-related collateral has begun to tail off. As of this week, the Federal Reserve Board pegged asset-backed commercial paper outstandings at $914 billion, up 7% from $849 billion at yearend.

"I don't really see any reason for growth to slow," said Scott Spiegel, a director in the asset-backed CP group at Credit Suisse. "The second half looks like it's going to be a lot like the first half."

The rising tide of conduit activity is evident in the volume of paper that the market's top-20 administrators have in the hands of investors, as all but five of them boosted their vehicles' outstandings during the second half of 2005 - by substantial amounts in many cases, according to figures compiled by Moody's.

Citigroup, the perennial frontrunner among administrators in terms of outstandings, increased its volume by more than $7 billion, to $67 billion, during the July-December stretch. However, Citi didn't finish the year as far ahead of second-place ABN Amro as it had become accustomed to, as that bank's conduit outstandings jumped by $19 billion, to $65 billion, over the same period.

In addition to new business, ABN's total rose because the Dutch bank changed the way it reports outstandings, Moody's conduit chief Jonathan Polansky said. Indeed, the restatement caused ABN's mid-2005 volume, which was previously reported at $38 billion, to be listed now at $46 billion.

As has been the case for a while, issues by vehicles that invest in structured products or fund mortgage-related credits dominated conduit investors' portfolios at yearend. That's still true, but it was only recently that industry players were wondering whether the dwindling mortgage supply might slow the market's relentless march toward $1 trillion of outstandings. It turns out that other asset classes, including auto loans, have picked up the slack.

The new-conduit pipeline is also brimming with vehicles that mimic the market-value arbitrage techniques used by structured investment vehicles and collateralized debt obligations called SIV lites. "We haven't really seen a time like this in a while. The market is very hot," Credit Suisse's Spiegel said. "Everybody is looking at these types of vehicles."

Why the interest in such entities? Administrators want to capture some of the profits available to sponsors of leveraged SIVs and SIV lites, who are finding it profitable to retain portions of their subordinate capital notes. Those securities usually carry risk commensurate with triple-B-rated securities, while currently offering average returns of 150-190 bp over Libor. That's 40-80 bp higher than comparable home-equity loan bonds.

 

 

© Copyright 2014. The Mayer Brown Practices. All rights reserved.

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the “Mayer Brown Practices”). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. “Mayer Brown” and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

Legal Notices | Attorney Advertising | Site Index | Contact Webmaster

*The site links listed on this web site are for reference use only.
The firm does not necessarily sponsor, endorse or verify the accuracy of the content contained in any of these sites.