Vanderbilt Mortgage, one of the manufactured housing sector's favorite issuers, was seen in the market last week with a $760 million MH ABS via Credit Suisse First Boston. Although Vanderbilt will service the entire pool, the portfolio backing deal was originated by Texas-based Associates Housing Finance, now a unit of Citigroup.
Associates had not been an issuer in the MH market since 1999, last gracing investors with a whopping $2.5 billion deal, also managed by CSFB. At the time, the company was the third-largest servicer of manufactured housing contracts in the U.S.
The average FICO score in the Vanderbilt/Associates pool is roughly 620, and credit enhancement levels are said to be comparable to those seen in Oakwood Homes transactions.
Vanderbilt is a sector favorite largely because its parent, Clayton Homes (CMH), typically buys back defaulted loans in Vanderbilt's deals resulting in near zero losses. In this transaction, Clayton will provide a corporate guarantee on the triple-B rated first loss class for principal and interest. Clayton has a Baa2' shadow rating from Moody's Investors Service.
The Conseco factor
From a macro perspective, Moody's is reportedly requiring higher credit enhancement on all MH deals levels due to fears of a flood of Conseco Finance inventory hitting the market if the company goes bankrupt. Excess inventories drive down the repossession and recovery rates industry-wide.
On Tuesday last week, Moody's lowered the corporate rating of Conseco Inc. and all of its subsidiaries to Caa1' from B2' in lieu of a planned debt exchange offer which will make the outstanding old notes' structurally subordinated to the new notes'. The downgrade was one notch lower than anticipated, according to Street commentary.
