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ABS Market Remains Down On Bad News Even the housing/GSE bill fails to lift ABS market participants' dour mood
Asset Securitization Report--SourceMedia (July 28, 2008)
The U.S. House of Representatives approval of the long-awaited housing bill did not boost morale among traders last week since it came after a slew of negative ABS market announcements.
The bill would insure up to $300 billion in refinanced mortgages and place tougher regulations on Fannie Mae and Freddie Mac while also providing a federal backstop for the guarantors, among other amendments.
However, this development came after Moody's Investors Service announced a review for potential downgrade of Financial Security Assurance (FSA) and Assured Guaranty.
The rating agency cited material shifts in the demand for financial guarantees and the potential sensitivity of these franchises to future losses, among other concerns.
While FSA issued a statement saying they were taking note of Moody's concerns and working to re-establish its "triple-A-stable, claims-paying ratings," Assured fired back with a conference call and a statement, maintaining that the review had nothing to with deterioration in the monoline's capital base. The monoline said that Moody's stress-case loss estimates on its RMBS portfolio did not change significantly from its prior estimates and that Assured Guaranty Corp. and AG Re continue to exceed the capital requirements for their current ratings of 'Aaa' and 'Aa2,' respectively.
But despite the optimism from the guarantors, trading remained quiet. Issuance of nonprime auto loan ABS might be dampened by the Moody's rating action on FSA, Merrill Lynch said in a report last week. The guarantor wrapped two deals in 2Q08 - the $750 million AmeriCredit Automobile Receivables Trust 2008-A-F and the $308 million Consumer Portfolio Services Auto Receivables Trust 2008-A.
Spreads continue to remain wide, according to traders, who cited the continued bank write-downs and remaining uncertainties over the future of the guarantors, despite help from the government.
As a result, both the primary and secondary markets have been slow. However, deals getting done represent a good mix of consumer ABS, Merrill said. These deals include auto, credit card, student loan and rate reduction ABS deals.
New transactions hitting the market last week included a $346 million auto transaction, Merrill Auto Trust Securitization 2008-1. The deal priced short-term triple-A paper at eight basis points over interpolated Libor. One-year triple-A paper priced at 115 basis points over its benchmark, while two-year paper priced at 190 basis points over its benchmark and three-year triple-A paper priced at 220 basis points over its benchmark. Wachovia Securities was co-manager on the transaction.
Also pricing last week was the Louisiana Utilities Restoration Corp. Project/ELL Series 2008 (ASR, 7/21/08). Barclays Capital, Citigroup Global Markets, JPMorgan Securities, Loop Capital Markets, Doley Securities, Stephens and Dorsey & Co. all managed the deal. Two-year triple-A paper priced at 78 basis points over its benchmark. Six-year triple-A paper priced at 120 basis points over swaps.
American Express Credit Account Master Trust, Series 2008-6, priced $1.53 billion via RBS Greenwich Capital, JPMorgan Securities and Credit Suisse Securities. Seven-year triple-A paper priced at 300 basis points over one-month Libor.
Other credit card deals floating around the market included a newly launched $400 million single-tranche credit card deal, Chase Issuance Trust Class A 2008-11 Notes, via JPMorgan. Barclays Capital and Lehman Brothers are co-managers on the transaction.
Citigroup and Morgan Stanley are also shopping a $347 million student loan securitization for the New Jersey Higher Education Student Assistance Authority. The transaction is expected to close on July 31.
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