By Ron Johnson, director, and C. Eric Hedman, associate, Standard & Poor's Ratings Group
The asset-backed commercial paper market continued to grow during the second quarter of 1999, with average commercial paper outstanding for partially enhanced programs increasing from $330.6 billion in the first quarter of 1999, to $347.3 billion in the second quarter of 1999.
Additionally, aggregate commercial paper outstanding experienced a 6% quarter-to-quarter growth rate, increasing from $343.5 billion in March 1999 to $364.7 billion in June 1999. On a year-to-year basis, aggregate commercial paper outstanding as of June 1999 has experienced a 35% growth rate from the June 1998 aggregate commercial paper outstanding of $270.4 billion. Standard & Poor's itself rates 96.6% - or 321 of 329 outstanding ABCP programs - of those programs in Asset Sales Report's database published in the August 2 issue.
During the second quarter of 1999, Standard & Poor's assigned ratings to five new commercial paper programs including two multi-seller programs, two single-seller programs and one loan-backed program. During the same time period, the number of new sellers entering existing conduits was significantly higher, at 326, as compared to the 250 new sellers added during the first quarter of 1999. Additionally, as of the end of June 1999, there were 55 programs with commercial paper outstanding in excess of $2 billion and 25 programs with outstandings ranging between $1 billion and $2 billion.
Market Innovations
Securities arbitrage vehicles are asset-backed commercial paper conduits which purchase highly rated asset-backed securities through the issuance of asset backed commercial paper. Traditionally, asset-backed commercial paper conduits have provided off balance sheet financing for corporate entities. Securities arbitrage conduits have diversified portfolios of rated securities from a variety of issuers in the asset-backed and both the resident and commercial mortgage-backed markets. Standard & Poor's has rated seventeen securities arbitrage commercial paper conduits, and there are several more issuers planning to come to market by year end. Commercial paper outstanding for these conduits increased by 7% from $24.4 billion in April of 1999 to $30.9 billion at the end of June 1999.
Quarterly Review
In the second quarter of 1999, commercial paper issuance backed by auto loans and credit card receivables top the collateral sector at 32% of total financing limits. Trade receivables top out at 28% of the total financing limits. The securities sector of the asset-backed commercial paper market remains unchanged from the first quarter of 1999 at 14% of total financing limits. Total financing limits by originator ratings increased by 3% for AA' rated issuers from 9% in the first quarter of 1999 to 12% at the end of the second quarter.
In the second quarter of 1999, Standard & Poor's rated five new asset-backed commercial paper conduits including two multi-seller programs - Rabobank Nederland-administered Aquinas Funding LLC, rated A-1+, and Liberty Hampshire's Belford Funding Co. LLC, rated A-1 - as well as two single-seller programs - Pareto Partners-administered Exelsior Finance Ltd. and KBC Bank N.V.'s KBC Commercial Paper Trust, both rated A-1+ - and one loan-backed program, Banque Nationale de Paris SA-administered Fidex PLC, rated A-1.
Largest Programs in 1999
The top 10 programs, all of which were multi-seller conduits, had $102.4 billion in aggregate CP outstanding at the end of the second quarter 1999 versus $96.3 billion at the end of the first quarter 1999. Comparatively, the top 10 single-seller programs had $32.9 billion in aggregate CP outstanding at the end of the second quarter 1999 versus $29.9 billion at the end of the first quarter 1999. Finally, the top 10 loan-backed conduits had $25 billion in aggregate CP outstanding at the end of the second quarter 1999 versus $ 24 billion at the end of the first quarter of 1999.
Asset Securitization Cooperative Corp., rated A-1+, a multi-seller program administered by Canadian Imperial Bank of Commerce, eclipsed Windmill Funding as the largest conduit with $11.9 billion in CP outstanding as of the end of June 1999. The largest single-seller program was Grand Funding Corp., rated A-1+, administered by ABN Amro Bank, with $6.24 billion in CP outstanding. The top loan-backed program was Centric Capital Corp., rated A-1+, administered by Wachovia Bank, which had $5.28 billion in CP outstanding.
The total amount of A-1+' commercial paper outstanding as of the end of June 1999 was $232.8 billion, representing 63.8% of the entire partially-enhanced CP market. Additionally, A-1' commercial paper outstanding totaled $130 billion, representing 35.7% of the entire partially-enhanced CP market and A-2' commercial paper outstanding was $1.85 billion, comprising 0.5% of the entire partially-enhanced CP market.
