It was a rather slow, uninteresting week of trading in the U.S. ABS primary market, with a pair of auto deals highlighting the new issuance. Total volume came in just over $6.3 billion, with home equity issuance accounting for $2.1 billion of the week's supply. The largest asset class representation was in the student loan sector, which priced one, albeit large, transaction.
Sallie Mae's $2.5 billion 2003-7 offering, its ninth of the year brings its year-to-date volume to almost $17 billion (SLMA also has sold two private student loan deals for $2.4 billion). Led jointly by Credit Suisse First Boston, JPMorgan Securities and Morgan Stanley, the deal offered European investors their first opportunity to purchase fixed-rate student loan paper.
Spreads came in line with guidance, though a touch outside Sallie's last FFLEPs deal in some classes, which priced in late May. Spreads for 2003-7 came in at three basis points over three-month Libor for three-year paper and 20 basis points over Libor for seven-year seniors - both in line with 2003-6. The five-year A3 class, however, priced at 11 basis points over three-month Libor, versus nine over for 2003-6 and the double-A rated subordinated class priced at 57 basis points over Libor, four behind 2003-6.
Pricing late in the week after being shopped around the week prior was the auto loan principal finance deal from Morgan Stanley, backed by a pool of loans made by Huntington National Bank. The $550 million MSALT series 2003-HB1 deal is actually the second time this year that Huntington auto loan collateral has hit the term ABS market via the whole loan market, following the April pricing of the $534 million GSALT 2003-1 deal, which priced via Goldman Sachs.
MSALT, however, priced outside of the Goldman trade, by three basis points for three-year seniors and 10 on single-A rated subs - something that was expected prior to guidance being disseminated due to the underlying swap rate rally in the second quarter, a syndicate official said. The 2.94-year senior A2 class priced to yield 20 basis points over swaps, outside of guidance in the high teen basis point area. Single-A rated B paper, with a 1.89-year average life, cleared at 75 basis points over EDSF, 10 wider than initial guidance.
Announced late in the week was the second-ever auto lease securitization from Susquehanna Bancshares, totaling $233 million from Barclays Capital as lead manager. The Rule 144A offering had yet to see price guidance released, which was expected on Friday. The last deal from Susquehanna priced in December 2000 through CSFB as lead manager.
Susquehanna is a triple-B rated holding company that operates primarily out of the Northeast. While Moody's Investors Service cited geographic concentration as a concern in the now two-and-a half-year old new-issue report, with over 60% of the leasing portfolio located in New York, the strong financial ratings of the manufacturers was
a mitigating factor. Pricing for Susquehanna was expected this week.
Sticking with autos, Drive Financial priced a $250 million 2003-2 deal via Wachovia Securities. Backed by a full MBIA wrap, Drive priced inside of guidance across the board. The one-year seniors priced at 28 basis points over EDSF, versus talk in the 30 basis point area. The 2.0-year and 2.8-year A3 and A4 notes priced at 48 and 55 basis points over comparable swaps, respectively.
CNL Funding continued marketing a $175 million ABS/CLO hybrid, backed by conventional business loans also via Wachovia. The loans backing the deal were described as multi-purpose, owner-occupied commercial real estate, with the largest three industry concentrations being investors, not elsewhere classified (4.1%), metals service centers and offices (2.7%) and special trade contractors (2.6%). The $149 million A1 class, with a 6.4-year average life, was talked in the 50-55 basis point area. By contrast, the G.E. Business Loan Trust 2003-1, with a 5.6-year average life, priced June 19 at 43 basis points over Libor.
Finally, the $195 million Terrapin fleet lease subordinated offering, via Lehman Brothers is seen as this week's business.