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Slow Week as Market Heads to Las Vegas: Job cuts affect desks, leaving few to mark bonds
Asset Securitization Report--SourceMedia (February 4, 2008)
On a macroeconomic level, the Federal Reserve was expected to follow its 75 basis point reduction with another when it met last Wednesday. For the asset securitization market, however, it would take more than a rate reduction for investors and issuers to become comfortable enough to kick start the sector.
Consumer assets continue to hold up the securitization market, kicking off last week with one transaction each from the credit card and auto asset classes. The Bank of America Credit Card Trust Class A, 2008-1, priced a $2 billion, highly rated credit card transaction at 58 basis points over its triple-A-rated notes. Banc of America Securities was lead manager on that transaction, while Deutsche Bank Securities, JPMorgan Securities and Merrill Lynch were co-managers.
From the auto class, the Hyundai Capital Auto Funding was expected to price a $400 million transaction via Standard Chartered Bank.
The KHFC Student Loan Backed Securities was also planning a student loan transaction, and Sallie Mae was expected to price a $1.5 billion transaction comprised of all triple-A notes.
It wasn't all about the consumer ABS classes, however. As expected, the CenterPoint Energy Transition Bond Company priced its $487 million deal, via Citigroup Global Markets. The five-year, triple-A notes priced at swaps plus 64 basis points.
Deutsche Bank was said to be working on a 57 million ($84.2 million) CLO transaction called CONE 2008-2, according to market players familiar with that asset class.
"That market is still hurting," said one trader. "The amount of investors still over there has dropped a lot."
Ever since the virtual collapse of the structured investment vehicle (SIV) market, CLO issuers have not had much of an investor base for their assets. What will likely happen with the CONE transaction, he said, is that issuers place the debt onto a secondary book and try to move it in small increments whenever possible.
Once again, the RMBS and mortgage-related asset classes were not represented in last week's roundup of deals. A lot of investors continued to shy away from the asset class, because they would have a hard time justifying buying any of it.
Even if investors wanted to purchase mortgage paper, the severe job cuts have scaled back sales coverage at several banks, said one buy side source, adding that one shop scaled back so drastically that there was hardly anyone left to mark bonds.
"The clients have no support," said the investor source. "They told me to have someone else mark the bonds, but no one wants to mark someone else's bonds."
Some investors and issuers planned to lay low until after this week's, conference, the ASF 2008 conference in Las Vegas. Given the number of jobs that investment banks have cut from their structured finance groups lately, many market players engaged in persiflage to describe the conference, referring to it as a job fair. Others said they would hold off until after they got a sense as to what their contemporaries in the industry were thinking.
"A lot of issuers and investors want to get in front of each other and find out what is going on," said one trader.
(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.