The home stretch to 2009 has begun, and ABS market participants appear to have kicked up their heels in hopes that the new year will bring a rebirth in the securitization space.
Last week, U.S. ABS players gathered at the New York headquarters of the Securities Industry and Financial Markets Association and the American Securitization Forum to discuss industry concerns and recommendations for reviving the ABS space after over a year of stalled activity (see story on page 15).
Activity was slow both on the primary and secondary sides of the ABS market, industry participants said last week. They also reaffirmed the belief that there will be light trading and virtually no new deal flow until the end of the year, as ABS market participants face end-of-the-quarter constraints on their balance sheets.
New issuance remained flat except for a $600 million Nissan Motor Co. auto securitization that hit the market last week, Nissan 2008-C. The deal was upsized from $500 million, according to reports.
Pricing on the short term paper was at 75 basis points over interpolated Libor. One-year triple-A paper priced at 350 basis points over one-month Libor and two-year triple-A paper priced at 400 basis points over the benchmark. Three-year triple-A paper priced at 450 basis points over swaps.
The deal will be collateralized by retail auto loan receivables financing the purchase of new and used Nissan and Infiniti cars and light-duty trucks manufactured by Nissan Motor Co., and all originated by Nissan Motor Acceptance Corp., according to a Fitch Ratings presale report.
JPMorgan Securities and RBS Greenwich Capital were lead arrangers on the transaction. Banc of America Securities, Citigroup Global Markets, Deutsche Bank Securities, HSBC Securities and Societe Generale were co-managers.
The deal is a glimpse of hope for the consumer ABS market, which continues to feel the trickle down effects of the credit crunch.
Specifically, on the auto ABS side, with the threat of bankruptcy from the U.S. auto suppliers and the lack of funding for new loans, the outlook for auto ABS issuers is not promising, at least in the near term.
Ford Credit has about $15 billion of U.S. public auto loan ABS outstanding, according to a report last week from Merrill Lynch. Credit performance on these deals has been negatively impacted by the weak economic environment, although it remains within expectations, Merrill said. However, the bank noted that as a result of Ford's limited access to the public debt and securitization markets, its ability to support its dealers and consumer financing needs has been "significantly impaired."
While CLOs have stayed out of the recent spotlight, economic deterioration is rising in the leveraged loan market, JPMorgan analysts said in a report last week.
Based on samples of over 500 U.S. CLOs, the average concentration of distressed-rated assets - performing, but rated below 'CCC+' - increased from 4.1% in July to 5.8% in October, the bank said, noting that there is increasing concern about CLO trading activity, especially in cases of loan ratings downgrades to 'CCC'.
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