CDOs/CLOs

F inancial Pacific Leasing, the small-ticket leasing company that brought its lone term securitization to market last July, is preparing for an $80.5 million IPO, according to an S-1 filing submitted to the Securities and Exchange Commission on April 9.

By Erkan Erturk, Ph.D., director, and Tom Gillis, managing director, Standard & Poor's Ratings Services

Year to date as of 04/15 Term (days) 04/09 04/12 04/13 04/14 04/15 1-week

A flurry of CDOs priced during the last few days of March and the first few days of April, for about $9.5 billion in proceeds in a single Monday-to-Friday period - a tally that includes one rather massive euro-denominated deal.

The aircraft sector of the ABS market is still grasping at straws when it comes to mapping out its future and deciding on what changes should be implemented, panelists said at a recent gathering hosted by UBS. As a result, differences in valuations and rating methodologies offer structurally savvy investors opportunities for incremental yield in the tight credit environment.

The Metris Companies returns to the ABS primary market this week with a $200 million, three-year MBIA-wrapped series 2004-1, led by Banc of America Securities and Deutsche Bank Securities. This is another positive step for the issuer following recent defeasement of outstanding transactions and public backing from MBIA in its efforts to access the capital markets.

The U.S. ABS primary market sprinted to a holiday dampened $9.25 billion of new-issue supply, the overwhelming majority of which - $7.5 billion - came in the home equity sector. While the credit card sector did enjoy an active week of new issuance, volume totaled just $1.75 billion.

The aircraft finance industry, in a rut unlike any seen in the last 10 years, needs more than structural changes to right itself, according to U.S. regional airlines equity analyst Robert Ashcroft, a director at UBS, offering his conference summation remarks. Rather than focusing on structural topics that dominated the day, Ashcroft provided his thoughts on disclosure regarding aircraft values, fleet-lease rates and aircraft re-marketability that pose risks that structure has proven unable to mitigate.

While ratings methodology has remained the same for aircraft-lease ABS, all three rating agencies have altered their underlying assumptions, panelists said at UBS' Opportunities in Structured Aircraft Debt conference. Assumptions that have been tweaked relate primarily to asset residual values and lease rates, while diversity and asset life are viewed as being still-viable assumptions for rating aircraft lease transactions.

The five most visible and liquid aircraft lease ABS are all very similar in nature, but offer differing levels of value, according to Gus Kelly, senior vice president of debis AirFinance. Each of the five selected transactions were issued prior to Sept. 11, 2001, near or above one billion dollars in size and had similar loan-to-value ratios - approximately 90% - upon pricing.