CDOs/CLOs

Despite ratings volatility and concerns over near-term ABS coming due, the outlook on Mitsubishi Motors Credit of America (MMCA) retail auto ABS is not as grim as it appeared a year ago, according to research from Barclays Capital.

Legacy Benefits Corp. recently closed what may be the first true senior settlements securitization, a $70 million transaction led by Merrill Lynch.

Primary U.S. ABS issuance slowed last week, to the tune of $8.3 billion, as the focus on mortgage ABS continued. With the credit card sector accounting for under $1 billion and auto-related supply just topping $1 billion, the home equity sector once again led the way, with a little help from the student loan sector.

The Blackstone Group has decided to bypass the bank loan market to finance its $3.1 billion acquisition of Extended Stay America. Instead, the private equity firm is financing the hotel chain buyout with commercial mortgage-backed securities (CMBS), according to a market source. The news came after investors had been looking forward to sinking their teeth into the hefty $2.7 billion new money bank credit that was expected to back the acquisition. Bear Stearns, who advised Blackstone on the acquisition, and Bank of America were earmarked to arrange the deal's financing at the time it was announced earlier this month.

Nearly two years after re-entering the U.S. ABS market, UBS will look to expand its business throughout 2004, moving into the auto loan and credit card sectors of the market. Known primarily for its mortgage-related and CDO presence, UBS is making inroads into both the prime and non-prime sectors of the consumer sectors, activity it expects will make the underwriter more visible in the second half of the year.

With its first-ever term Libor floater under its belt, nonprofit student lender NorthStar Capital Markets is the latest name in the rapidly growing sector. But unlike some new entrants, NorthStar plans on a more tempered approach to securitization. The primarily graduate-and professional-school lender does not plan to flood the market with ABS, but will offer just one deal a year, according to Chief Financial Officer Jamie Wolfe.

Moody's Investors Service withdrew its rating on $152 million in senior notes and $19 million in second priority senior notes, due Dec. 12, 2008, issued by Aeltus CBO Limited, a CDO that closed in December 1996.

Panelists at last week's ABCP conference, hosted by the Strategic Research Institute, expect CDOs and other traditionally term ABS vehicles to continue incorporating short-term instruments into their structures, so long as the funding curve remains steep.

NordLB has structured the capability to issue ECP into its Hannover Funding ABCP conduit. Hannover can issue in both euro and sterling commercial paper, and intends to do so as a way to mitigate the use of a currency swap when originating non-dollar assets. Hannover's back-office administration is handled by Global Securitization Services, which is able to issue the CP through its London office. NordLB has yet to originate its first non-dollar asset, but expects this to happen imminently.

Year to date as of 03/24 Term (days) 03/18 03/19 03/22 03/23 03/24 1-week