Scottsdale, Ariz. - Amid airy courtyards and a relaxed atmosphere at the Fairmount Princess, attendants at last week's 9th Annual Asset Securitization Symposium, hosted by the Strategic Research Institute, tended to focus on lessons from the 2002 ABS market.
"I'm looking forward to doing something with all of the funny money I got from Wall Street last year," jested Joseph Donovan, ABS chief at Credit Suisse First Boston, in reference to the conference sponsored casino night.
Contending with the good and the bad appeared to be the opening panel's theme, although market participants should be taking further steps, they said. Picking apart so-called trends, crunching the numbers, and, most importantly, framing the long-term ramifications of the market's bad news were mentioned.
The fall of big five accounting firm Arthur Anderson, for example, is expected to have ramifications for the ABS market down the road. Major consequences, such as increased cost to issuers and the way services are priced, were cited.
The stability of the monolines, rating volatility and the role of the trustee were topics of interest during the session.
"It's tough to figure out if people are moving toward or away from wraps. Wraps are moving out of the big four asset classes," said Donovan, indicating autos, credit cards, home equity (excluding manufactured housing) and student loans as the big four.
Panelists also noted that deals are growing in size. For example, nearly 47% of 2002 transactions were $1 billion or more, according to CSFB. The market continues to favor triple-A paper.
Juxtaposing 2002 to 1997, a year when the economy was in full swing, revealed an interesting footnote to history - only seven of 1997's most active issuers were still around last year.
"Considering that since 1988 ABS issuance has achieved a compound annual growth rate of 23%, the market clearly is a very important and large part of business," Donovan added.
Concern for housing prices was expressed by Prudential Investment Management's Richard Rogers, since floating rates would be effected if interest rates rise, he said. On a positive note, Rogers elected to highlight the market's stability during rough seas.
"The most significant event [in 2002] related to the ability for Ford paper to be efficiently absorbed by the market," Rogers said.
"And new entrants into the market were welcomed," chimed Deborah Cunningham, Federated Investors.
Salle Mae's Guido Van der Ven highlighted his firm's achievements in the face of sour headlines. Salle Mae completed its first Euro Trance deal, a E500 million, seven-year deal, as well as its first auction rate transaction.
And Ford Motor Company's David Kimball said he has been encouraged by recent upgrades in ABS sub pieces. The firm has $12 billion to $15 billion of ABS issuance planned and will continue to structure subprime issuance through Triad.
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