With nearly $30 billion in issuance, December was an action-packed month for the asset-backed commercial paper market, which polished off the year as a larger component of total CP outstandings than corporate CP for the first time, according to data from the Federal Reserve.
While the robust issuance was not necessarily surprising, as banks, with yearend balance-sheet concerns, account for much of the market, December also saw a deluge of new programs launching.
In its weekly update (in this instance, covering a three-week time period), Moody's Investors Service announced it had globally rated nine freshly structured ABCP conduits in the last few weeks of 2001.
"I thought the market had run out of new programs," said Moody's head of ABCP Sam Pilcer, noting that many of the new programs are specialized, and from banks with already established ABCP conduits.
Of the highlights, Abbey National launched Fulbeck Funding, which, similar to an early December conduit from Hypo-Und Veriensbank (HVB) called HARP, will act as a swap counterparty, transferring risk off Abbey National's balance sheet with minimal credit enhancement. The trade allows the banking entities to receive favorable regulatory treatment (see ASR 12/17/01, p. 5).
Fulbeck is the first completely synthetic securities arbitrage ABCP conduit, according to Moody's.
Other highlights include Wachovia/First Union's first securities arbitrage program, called Patriot Funding, which will complement First Union's Variable Funding Capital Corp., a fully supported multiseller ABCP conduit that is oriented towards small business loans and lease receivables. Additionally, First Union also runs Centre Square Funding Corporation, and Wachovia has two middle market trade receivable oriented conduits: Blue Ridge Asset Funding Corp. and Centric Capital Corp.
So far, there has yet to be an instance of a conduit being shut down from bank-merger and overlap concerns. In this case, the new Wachovia entity actually added another to its existing quiver of conduits, though it's expected to be primarily managed by the Charlotte, NC-based team, formerly First Union.
New conduits also came from Deutsche Banc, Credit Lyonnais, Banco Santander (see p. 20) and others.
Meanwhile Salomon Smith Barney's new program, Cobblestone Funding, a partially supported multiseller, was set up so that Salomon can temporarily warehouse deals prior to the term market, some of which may or may not fit the criteria for CitiBank's several existing conduits, sources said. Also, over the past month Citibank's CXC has been tweaked so that it can issue medium term notes. Unlike its ABCP, the MTNs require a liquidity backup line of $250 million, according to Moody's.