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Deal Flow Unchanged Post Labor Day: Market jitters over GSE liquidity problems hinder ABS deal flow
Asset Securitization Report--SourceMedia (September 8, 2008)

Last week Fitch Ratings followed Moody's Investors Service and Standard & Poor's and downgraded the preferred stock rating of Fannie and Freddie to 'BBB-' from 'A+' and 'A', respectively.

At recent levels, all consumer ABS looks attractive, but until the impact of the housing collapse on consumer finances becomes clear it is unlikely that the market will see renewed sector interest, UBS said in a recent report. Furthermore, with Freddie and Fannie guarantee volume down dramatically, there is not much hope for a housing market recovery until the credit crunch eases up, the bank said.

Very few deals got through the ABS market, as many traders took off early and returned late from the holiday weekend. The over $4 billion student loan securitization for Sallie Mae managed to squeeze through, with a $3.9 billion five-year triple-A tranche priced at 150 basis points over three month Libor. This is the widest price on record for a Sallie Mae FFELP deal, and another sign that investors are still pulling away from consumer assets, UBS said.

Banc of America Securities, RBC Capital Markets, RBS Greenwich Capital and Credit Suisse were lead managers on the deal. Launching into the market last week was Bank of America Auto Trust 2008-1, a $5.7 billion auto securitization via Banc of America Securities. The securities are backed by retail auto loan receivables, which finance the purchase of mainly new and used cars and light-duty trucks. The collateral in 2008-1 is similar to that for previous Bank of America-originated ABS transactions, particularly GEARS 2005-A, GEARS 2004-A, and CARSS 2004-A, according to a presale report from Fitch.

However, the weighted average FICO score for the deal is 762, higher than those scores seen in previous Bank of America transactions. Scores were 729 for GEARS 2005-A, 732 for GEARS 2004-A, and 732 for CARSS 2004-A, the rating agency said. Offsetting the higher quality borrowers is the heavy SUV concentration in the pool, which has seen declining wholesale values, Fitch said. The SUV/truck concentration in the pool is 52.93%, including 18.02% in pickup trucks and 34.91% in SUVs.

Also coming into the market last week was a $400 million student loan deal for the Massachusetts Educational Financing Authority; it is the first private student loan securitization of the year from the state authority (see page 9). Assured Guaranty is providing a wrap for the deal, and market participants expect that wrap will help push it through the market.

On the CDO death-watch, currently there are 222 defaulted issues with a total outstanding balance of approximately $186 billion, according to a report from JPMorgan Securities. Within this number, 77 issues totaling approximately $79 billion outstanding are in acceleration status and 72 issues totaling approximately $29 billion are liquidating or have liquidated. 45.42% of the total notional amount of vintage 2007 CDOs has been recently downgraded by Moody's and/or S&P, the bank said.

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