Spirits were high in the ABS market last week, as banks continued to receive funding by way of the Federal Reserve's Term Securities Lending Facility (TSLF), market participants said.
Banks have also recapitalized with a "surprising swiftness," said JPMorgan Securities analysts, which has created a "stable environment for credit risk-taking."
Indeed, riskier deals made their way through the pipeline last week as traders saw deal flow from a previously dry sector - subprime auto loans.
"We will continue to see issuance for auto deals, and more supply will come back from the subprime sector as the market gets comfortable with the risk," a trader said.
Subprime auto lender AmeriCredit came to market last Tuesday with its $750 million offering AmeriCredit Automobile Receivables Trust 2008-A-F. Deutsche Bank Securities and Credit Suisse led the transaction with Barclays Capital, Lehman Brothers and Wachovia Securities as co-managers on the deal.
The offering was upped from an original $500 million, traders said. They added that the deal priced within guidance. Short-term paper priced 10 basis points over interpolated Libor while one-year triple-A paper priced at 175 basis points over one- month Libor. Two-year triple-A paper priced 265 basis points over swaps and three-year triple-A paper priced 365 basis points over swaps.
The deal was wrapped by Financial Security Assurance, a nod to the insurer's strong hold on the market, considering the troubles plaguing the other monolines.
Following steady issuance over the past few weeks, the auto ABS market continues to show signs of improvement. New issue volume in the sector is now at approximately $21.5 billion, just under the $22.1 billion in issuance through May 15, 2007, according to a recent report from Wachovia Securities analysts.
The bank said that new deals are aplenty. "Our expectation is that there is substantial pent-up supply, particularly from subprime lenders, that could be issued once the market recovers fully," analysts wrote in the report.
A $5.757 billion Ford Credit Auto Owner Trust 2008-C also priced early last week via BNP Paribas, Citigroup Global Markets, Lehman Brothers, Merrill Lynch and RBS Greenwich Capital. Calyon Securities and Scotia Capital were co-managers on the transaction.
Short-term paper priced five basis points over interpolated Libor while triple-A paper with a one-year duration, priced 90 basis points over one-month Libor. Three-year triple-A paper priced 175 basis points over swaps.
These levels are significantly tighter than prior 2008 deals from the trust, confirming market optimism, and fueling new issuance, another ABS trader said.
Ford Credit Auto Owner Trust 2008-B, a $1.6 billion deal that came to market just a month ago, priced one-year paper at 120 basis points over one month Libor and three-year paper at 200 basis points over swaps. However, short-term paper remained stable at five basis points over interpolated Libor.
Aside from autos, deal pace was a bit slower in the beginning of the week, as some market participants were awaiting further news on the Federal Housing Administration plan to set up a loan guarantee program for troubled borrowers and to provide stricter regulation on Fannie Mae and Freddie Mac.
Last Tuesday, the Senate Banking Committee voted 19-2 in favor of the bill, which will now move to the floor of the Senate for approval.
This action will likely come after Memorial Day, sources said, although the market is still awaiting an indication that President George W. Bush will actually sign the plan into action. The President had threatened to veto a previous incarnation of the bill, citing its threat to taxpayers.
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