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ABS Market Sees Signs of a Summer Slowdown: Two weeks of slim deal flow start off the traditional issuance hold up
Asset Securitization Report--SourceMedia (June 9, 2008)

Gabrielle Stein

Last week saw another round of light ABS issuance, which, after several weeks of steady issuance, had traders increasingly certain that the summer slump has begun to take effect.

ABS issuance the last two weeks was a measly $3.2 billion, according to data from UBS, though in part that was because the Memorial Day holiday shortened the previous business week.

"The market is pretty dead right now; I haven't seen many new deals come across my desk," a trader said. He added that while new consumer ABS deals will continue to get done, there won't be an uptick in volume as the summer progresses.

As of May 30, year-to-date issuance was just under $90 billion with 49% in credit card transactions, 28% in autos, 18% in student loan deals and 3% in equipment financings, according to a JPMorgan Securities report.

A market source noted that while credit cards still have the highest number of deals that have come to market this year, there is no more appetite for this paper versus auto or student loan transactions. "This is just a function of how much supply there was to securitize," the source said.

Meanwhile, AAA' spreads continue to push in, although the momentum has slowed somewhat with slower trading, JPMorgan said.

However, new deals did manage to trickle in, notably in pairs. Citigroup Global Markets and Credit Suisse came to market with a $246 million time-share deal, Marriott Vacation Club Owner Trust 2008-1. The deal was structured in a single tranche and rated triple-A with pricing at 325 basis points over swaps and close to a four-year average life. Wells Fargo is the trustee.

Similarly, UBS Securities closed a $115 million time-share deal, Silverleaf Timeshare Loan Backed Notes 2008-A. Triple-A paper priced 500 basis points over swaps with a two-and-a-half-year average life. Double-A paper priced 550 basis points over swaps with the same average life.

Two tobacco securitizations were circulating last week. The Bank of New York Trust Co. served as the trustee for both deals.

South Carolina is issuing $298.26 million in ABS secured by tobacco funds under Series 2008. Proceeds from the deal, whose primary underwriter is Goldman Sachs, will be used to refund a portion of South Carolina's $727.655 million of outstanding tobacco settlement asset-backed bonds and the Series 2001B tax-exempt bonds. The money will also be for funding approximately $16.4 million in the liquidity reserve account and for paying the costs of issuance on the Series 2008 bonds, according to a presale report from Fitch Ratings.

Michigan is also issuing $123.14 million in ABS secured by tobacco funds. The deal, which is being arranged by Citigroup, will be used to refund approximately $70.91 million of outstanding tobacco settlement asset-backed bonds, Series 2006B bonds.

The funds from the deal will also be for purchasing $50 million of Michigan's Series 2006C capital appreciation turbo term bonds in the open market; for making a deposit of $60 million in the state's general fund; for the payment of capitalized interest through Dec. 1; and for paying costs of issuance on the series 2008 bonds, a Fitch presale report said.

Detroit Edison, a unit of DTE Energy Co., also announced last week that it is offering $300 million in first-mortgage bonds with a 10-year maturity via lead underwriters Citigroup and KeyBanc Capital Markets. Pricing on the notes is at 170 basis points over Treasurys, according to a company filing with the Securities and Exchange Commission. Expected ratings on the notes are A3' from Moody's Investors Service and A-' from Standard & Poor's and Fitch Ratings, the filing said.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.



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