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Some Issuers Take Leap, Despite Wide Spreads Gulf: New business flow remained modest despite economic stimulus
Asset Securitization Report--SourceMedia (January 28, 2008)
Congressional leaders and the White House were busy announcing a $150 billion economic stimulus plan that aimed to benefit consumers and businesses last week. The package would deliver stipends of up to $1,500 per household, and give tax incentives for businesses to continue spending.
That news, however, did not seem to make enough of a change in issuer and investor attitudes to ramp up ABS activity for the week. New business flow remained modest. A stranded cost transaction and, for a change, an RMBS deal crept into the securitization pipeline last week, breaking up a week in which issuers and dealers were focused on getting credit card and auto deals done. They were also settling into a new routine of issuance, according to sources.
Sources said that Citigroup Global Markets was leading a $1 billion auto transaction from GMAC secured by plain vanilla auto loans. Goldman Sachs and ABN Amro were co-managers on the transaction. At press time, a source familiar with the matter said most of the classes were oversubscribed, although the bank was tight lipped about the deal.
"I think the market is slowly getting better," a market source said.
Equifirst Loan Securitization Trust, an RMBS issuer, ventured into the ABS market again last week via Barclays Capital, after its debut in mid-2007. According to the latest information available at press time, it was the only RMBS transaction to hit the securitization market.
The Equifirst deal had company among underrepresented asset classes. CenterPoint Energy was preparing a $490 million stranded cost transaction via Citigroup and Credit Suisse.
The Texas energy company is coming back to market after it placed an offering some two years ago. Market sources expect the transaction to price this week, albeit at much wider spreads than its previous pricing, given the current environment.
The Capital Auto Receivables Asset Trust, also being led by Citigroup, bore that out, according to sources. Some notes on the deal were expected to price at Libor plus 75, whereas comparable notes from a JPMorgan Securities-led transaction priced at 45 over Libor.
Other issuers had to pay up for their two-year note offerings. Early on last week, the Wachovia Auto Loan Owner Trust, 2008-1, came to market with a $583 million deal via Wachovia Securities. The short-term notes priced at Libor plus eight basis points, while the one-year, triple-A rated notes came in at 85 basis points over. The triple-A-rated, two-year notes on that deal came in at EDSF plus 125 basis points.
The Driver GMBH trust, an occasional issuer in the public market since November 2004, was prepping a $1.2 billion transaction that was expected to close last week. Pricing guidance was not available.
Those issuers, however, appear to be bucking the trend among those who would like to issue paper, but are sitting on the sidelines.
"On the issuers' side, I don't think they like the levels that are out there," a trader said. "Those are still pretty wide levels."
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