The month of November began with a deluge of issuance from auto companies, including the first-ever lease-backed deal from BMW Financial Services.
The $1.5 billion offering from BMW priced last Thursday and was quickly absorbed into the market. The fact that the deal was from a first-time issuer with a prominent name helped create appetite for it, market observers said.
"The pricing of that reflects the fact that people have a pretty good perception of that particular issuer and the product," said Jeff Salmon, head of ABS research at Barclay's Capital. "I do understand the shorter tranche went particularly well. It's a name that is new to the ABS market, and I think investors get excited by that, when they see a new name. It's really a powerful name, a pristine name."
Other auto deals that priced included a $500 million transaction from AmeriCredit, which was upsized from $395.4 million to meet demand for the issue. The one-year tranche priced one basis point tight of talk at EDSF+13. Onyx Acceptance Corp. also priced its $400 million transaction with all tranches tight or in line with talk.
Further, DaimlerChrysler priced its $1.5 billion transaction one basis point tight of talk.
"Deals that have come to market have been met with very strong demand, particularly in the short end such as the two- year tranches of Onyx and [DaimlerChrysler]," said Russell Hurst, a director at First Union Securities.
In other sectors, FleetBoston Financial priced a $900 million floating-rate credit card deal last week in line with price guidance. That deal was also upsized from $750 million to meet investor demand.
Secondary trading was light, as investors were focused in the new issue market.
However, the home-equity sector took a beating this week, following the announcement that Prudential Securities is exiting the business (see page 1). "The HEL market is still in disarray by the Prudential exit from the business," Hurst said. "The inventory however has been moved in an orderly fashion."
And HEL deals are still getting done. Option One/New Century is expected to price $1 billion in floating-rate home equity notes this week.
But overall, the asset-backed market is in pretty good shape heading into the end of 2000. "While others are concerned about corporate bond spread, and others are concerned about what's happening in the equity markets, that cannot be said for the asset-backed market," Salmon said, adding that this year's market is vastly different from last year's.
"This year, at least in asset-backed land, there's nothing really out there that's rattled the market. You're probably going to see good healthy issuance until at least the second week of December," he noted
Hurst is expecting to see a good amount of collateralized debt obligations and collateralized bond obligations in the upcoming pipeline. "We're seeing a healthy pent-up demand for CDOs and CLOs, also in terms of supply," he said. "We're going to see a lot of those in the fourth quarter. I think there's going to be a lot of activity, most of it will take place in November, and then after that I think it's going to be pretty quiet."