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Hunting for diversity, safety investors pony up for SL, autos
Asset Securitization Report--SourceMedia (February 19, 2007)

Donna Mitchell

Last week Federal Reserve Chairman Ben Bernanke managed to say something that both the stock market and the Treasurys market wanted to hear. There would be no pressing need to cut the target funds rate to spur economic expansion, and inflation was not yet out of hand.

While the experts went on to challenge or further decipher Bernanke's real meaning, the asset securitization market continued to pay up for quality paper. Several deals from the credit card, auto and student loan ABS sectors priced last week to unwavering support from investors.

The auto sector continued to set the bar lower - the yield bar, that is. Two deals got very favorable pricing after their benchmarks moved from fixed to floating.

Short-term money managers paid up, for instance, on the $1 billion Nissan Auto Loan Trust, lead managed by HSBC. That deal saw its short-term piece price at five basis points under Libor. It also priced the 3.33-year paper at flat to the one-month Libor. World Omni Auto Receivables Trust, led by Credit Suisse, also priced its short-term tranche at five basis points under the benchmark, in this case the four-month Libor.

Last week's auto deals benefited from a move to a floating-rate standard, and investors accepted that very well. It is also a function, say market participants, of the presently inverted swap curve.

"Investors like [auto paper] because it is short," the source said. "Real estate is getting beat up, but money still has to go to work somewhere."

Sallie Mae continued to benefit from investors' current attitudes. Last month, the student loan ABS issuer came to market with $4 billion of debt, which represented its biggest deal at the time. Last week, it enjoyed particular goodwill from an investor community eager for diversity and respite from their anxieties concerning HEL ABS.

Rated AAA' almost throughout, pricing talk on SLM Student Loan Trust's one-year piece was at two basis points under the three-month Libor. Morgan Stanley acted as lead manager on the transaction, whose 6.68-year tranche was expected to price at 18 basis points over the benchmark.

"Student loan ABS is one of the categories that was [identified] to grow this year, as opposed to last year," said one market professional. "People are looking at student loans as a way of picking up diversity in paper. The demand for diversity will help them."

Deutsche Banc Securities acted as lead manager on the $325 million Advanta Business Card Master Trust, the only credit card deal that priced by press time. Its five-year, triple-A rated tranche priced at five basis points over the one-month Libor.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.



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