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AmeriCredit Getting Lifeline From Deutsche
Asset Backed Alert, Harrison Scott Publications Inc. (May 16, 2008)

Deutsche Bank is poised to buy up to $2 billion of subprime auto-loan bonds from AmeriCredit, and then stash the illiquid paper in commercial-paper conduits it runs.

The triple-A-rated securities, featuring a bond-insurance policy from FSA, will represent a large portion, or perhaps all, of a term securitization that AmeriCredit is about to conduct - with Deutsche running the books.

Deutsche's underwriting assignment coincided with an April agreement by the bank to buy the resulting bonds, working through a branch in the Cayman Islands. It plans to syndicate the purchase among several of its conduits, possibly including Gemini Securitization, one of the world's 15 largest CP-issuing vehicles.

By splitting up the transaction in such a manner, Deutsche hopes to avoid overwhelming any single conduit with too many subprime assets at once. At the same time, the bank is set to receive underwriting fees in exchange for facilitating AmeriCredit's bond sale through its own vehicles.

It will also reap other perks from AmeriCredit, including stock options in the publicly traded lender. AmeriCredit has a year to follow through with the deal, but is expected to move forward within the next four weeks.

The agreement marks the first time that Deutsche will have underwritten such a large term securitization for a client with the intent of taking down the transaction through its conduits, as opposed to simply setting up a conduit facility in the first place. Other banks and issuers, meanwhile, are keeping close watch on the proceedings as a novel means of funding subprime assets that have been thought of as toxic since the credit crunch began last summer.

Indeed, it's probable that AmeriCredit would have a tough time finding buyers other than Deutsche for such a large batch of its term bonds. While there's still a chance that the Fort Worth, Texas, company could locate other takers for parts of its deal, it's looking more likely that it will tap its agreement with Deutsche for the full amount - a move that the two sides may have initially envisioned as a fall-back option.

Still, AmeriCredit has been shopping its offering to a broad audience, creating a buzz last week that the company was about to step up with a securitization it has had on deck for several months. That transaction, which is technically the same as the one AmeriCredit is conducting through Deutsche, had been on hold as investor wariness about consumer credit resulted in extremely wide spreads on subprime auto-loan paper.

Only one other subprime auto-loan securitization has priced this year. That $310.4 million transaction, completed by Consumer Portfolio Services in April, came at extraordinarily fat yields.

AmeriCredit hasn't completed a securitization since September, and its willingness to accept the terms of its arrangement with Deutsche - despite what appear to be high funding costs - reflects an urgency by the company to raise money.

As it waited for an opening to conduct its next bond offering, the lender has relied on warehouse facilities to fund new loans. If the bond sale were to remain on hold throughout this year, however, the outfit would "not have sufficient funds to finance new loan originations," according to a May 9 SEC filing.

The lack of liquidity has already forced AmeriCredit to reduce its loan-production target for this year to $3 billion. It has also discontinued its direct-lending and leasing efforts, and has stopped buying loans from some originators.

Last year, AmeriCredit issued $7.2 billion of auto-loan paper. Of that amount, $5.2 billion was backed by subprime credits, according to Asset-Backed Alert's ABS Database.



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