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Spread widening: A global ABS trend
Nora Colomer, Asset Securitization Report--SourceMedia (July 29, 2002)

European primary issuance reached EURO70.2 billion year-to-date last week, with four new issues pricing before the traditional lull of August holidays. For the first time in a stretch, deals are pricing wider than initial price talk as investors look for higher returns than those offered earlier in the year, sources said.

Fiat's ABS transaction priced its triple-A rated notes at 20 basis points over Treasurys and its single-As at 50 basis points over Euribor - two and six basis points wider, respectively, than the previous FCC Auto ABS Compartiment 2002-1. The deal was co-managed by HSBC and JPMorgan Securities.

"The sense of malaise that has been plaguing the equity markets for the past two months has finally filtered into the consumer ABS/MBS market," commented Deutsche Bank. "To date, consumer ABS/MBS have benefited from seemingly endless investor appetite, with new issues pricing tighter over the past year. The most recent FIAT auto ABS was reportedly met with a below-normal' investor reception, pricing at a 20 basis points margin following initial guidance of 15 to 18 basis points over. Going forward, we expect market participants to more aggressively scrutinize consumer ABS/MBS securitizations. More spread tiering could result, reflecting the differences in collateral and servicer quality."

Harbourmaster CLO priced the third transaction in this series. Unlike the past two transactions, this EURO414 million managed arbitrage CDO was backed by both leverage loans and ABS notes. The prior two were backed by 100% leveraged loans. The triple-A rated notes priced at 55 basis points over Euribor; the single-A notes priced at 170 basis points over, and the triple-B notes priced at 250 over. The single-A and triple-B tranches came in 30 basis points wider than Harbourmaster CLO II, which Dresdner Kleinwort Wasserstein said reflected the widening seen for managed arbitrage launch spreads further down the curve.

Also pricing last week was the Italian lease-receivables transaction, ABF Finance S.r.l, which managed to print inside of prior Italian lease receivables. "Levels are in line with other leasing deals from Italy, demonstrating the resilience of this asset class to the widening of other corporate risk-related asset classes," said Dresdner.

A total of EURO3.8 billion in Italian lease-backed notes have been issued in the first half of 2002, according to Moody's Investors Service, accounting for 33% of total issuance volume in Italy. However, last week's deal did not escape the widening trend experienced in other sectors during the marketing period. The triple-A notes priced at 35 basis points over Euribor - at the wider end of the original price talk in the 32 to 35 over range - and the double-A priced 10 basis points wider than the initial talk of 50 basis points over Euribor.

Silver Funding - a trade-receivables deal backed by U.K. and U.S. office supplies and related services - priced its two tranches of triple-A classes at 40 basis points over Libor, wider than original talk of 30 to 35. The single-A notes priced at 87 basis points and 90 basis points over. The EURO15million Class 3F tranche was slated to be issued in U.S. dollars but switched currency denomination, reflecting a higher demand for Euro paper, said one analyst. But the notes are still backed by the pool of U.S. receivables.



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