For the first time in roughly one year, AmeriCredit Corp. offered auto loan ABS backed by a full guaranty from Financial Security Assurance (FSA). In somewhat of a surprise, FSA changed its policy on cross-collateralization across all transactions, a policy that had many believing AmeriCredit would simply wait out the life of its outstanding FSA-wrapped deals.

AmeriCredit hit the ABS primary market last week with a $915 million 2003-C-F auto loan securitization, via Deutsche Bank Securities, the proceeds for which will be used to pay down the $1 billion auto loan warehousing facility AmeriCredit set up via DBSI in March (see ASR 3/24/03). In order to do business again with the non-prime auto lender, which has seemingly found its way back into the market's favor, FSA limited the cross-collateralization of excess interest to a transaction-specific basis, versus the trust-wide cross-collateralization standard within FSA's surety agreements.

FSA had not wrapped an AMCAR transaction since September 2002. In the past year, AmeriCredit has priced three deals, two wrapped by MBIA and one by XL Capital Insurance.

"It has been our stated goal at AmeriCredit this year to diversify surety exposure," said company spokeswoman Susan Sheffield. "We have had securitizations wrapped by three different sureties this year," she added.

While some viewed this as a "vote of confidence from FSA on behalf of AmeriCredit," others had a slightly different point of view. "At the time, many thought AmeriCredit couldn't securitize without them," said one source away from the most recent transaction. "But guess what? Both MBIA and XL Capital were willing."

Under the new program with FSA, once AMCAR 2003-C-F hits its overcollateralization target of 18%, the excess interest may be retained by the issuer, rather than being diverted to any other FSA-wrapped transactions. This is a break from FSA's previous business strategy, of which cross-collateralization across all transactions was an integral part.

All other aspects of the surety agreement remained the same as before, AmeriCredit's Sheffield confirmed, including the fees FSA charged.

Additionally, this change is, in effect, a one-way street, with the ability for excess cash from any of the previous securitizations to cross over to any transactions made under the new agreement, but not vice versa.

AmeriCredit has certainly turned things around since the start of the year. As of late February, ACF stock was trading at roughly $2.50 a share before bottoming out at a 52-week low of $1.55 in March. Since then it has done nothing but gain, topping off at $11.05 as of last Thursday's close. AmeriCredit's five-year high is just over $60 per share.

In its most recent earnings announcement, which had been delayed as the company reviewed its accounting for certain swap transactions, the company reported an improved cash position. Researchers at JPMorgan Securities note that AmeriCredit's available liquidity increased to $317 million over the quarter ending June 30. This is up $79 million from the previous quarter in 2003, JPMorgan adds.

However, JPMorgan pointed out that AmeriCredit forecasts cumulative credit losses for the 2000, 2001 and 2002 vintage trusts to fall in the 13% to 14.5% range, "50 basis points higher than previous expectations." Currently losses for these trusts are at 11.66%, 8.27% and 3.54%, respectively.

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