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ABS Market Sidelined With Wall Street Fears: Market goes into a wait-and-see mode as many participants ponder their fate
Asset Securitization Report--SourceMedia (September 22, 2008)

Gabrielle Stein

The mood in the ABS market was understandably gloomy last week, as traders expressed disbelief and apprehension about the sector, not to mention the financial industry as a whole.

While many traders were furiously unwinding their positions with Lehman Brothers, others were sitting on the sidelines waiting for the news to shake out.

This was especially the case in the primary ABS market. "Nobody wants to bring a deal to market under these conditions," an ABS trader said. "We are just waiting around to see what will happen next."

The secondary market did see some activity last week, he said, but it was relatively contained as bank liquidity woes and fears of pending layoffs remained front and center.

While Lehman employees took solace in the fact that a Barclays acquisition would save many U.S.-based jobs, Merrill Lynch awaited word on what groups would be transferred over to Bank of America in an acquisition.

One headhunter suggested that the fixed-income unit at Merrill could see sizeable layoffs, while groups like M&A and the firm's overseas businesses would remain relatively intact.

Market fear continues to put pressure on spreads, which are gaping out to new historic wides.

Spread movement in consumer and commercial sectors is expected to lag other structured products, which has been the case for most of this year, Merrill said in a report last week.

Tiering among issuers and sectors such as auto, credit cards, student loans as well as sub-sectors like prime and subprime will remain pronounced, the bank said.

American Express Credit Account Master Trust, Series 2008-8 launched a $738 million credit card securitization, arranged by RBS Greenwich Capital and Merrill Lynch. Lehman Brothers, Williams Capital Group, and Morgan Stanley were co-managers on the deal, though the market waits in limbo to see how the fates of some of these banks play out.

Pricing on the triple-A piece with a two-year average life was at 110 basis points over one month Libor. The single-A piece, also with a two-year average life, was priced at 325 basis points over one month Libor.

American Express also launched a ninth series out of the same trust last week, this time the $624 million deal was arranged by RBS Greenwich and Deutsche Bank Securities. Pricing on the five-year triple-A paper was at 160 basis points over one month Libor and at 400 basis points over one month Libor on the five-year single-A paper.

While increasingly harsh economic conditions and rising unemployment continue to threaten consumer spending and put pressure on new card deals coming to market, Moody's Investors Service analysts recently placed 1 in 25 odds on a downturn severe enough that credit card charge-offs rise into the low double digits, UBS pointed out in a research report, calling those odds "optimistic."

Other deals to hit the market under rough conditions include an auto deal from JPMorgan Securities to the tune of approximately $353 million, according to a presale report from Fitch Ratings.

JPMorgan Auto Receivables Trust (JPMART) 2008-A is the third auto loan securitization issued by the trust.

The most recent transaction to be issued prior to these notes was JPMART 2007-A in February 2007.

While the deal includes high-quality borrowers with a weighted-average FICO score of 729, and high seasoning of 22 months, the current economic outlook could affect both delinquencies and losses, the rating agency said.

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



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