The new-issue malaise in the U.S. ABS primary market continued last week, with just $8.5 billion marketing, $7.1 billion of which had priced as of press time. For the first time this year, however, the auto sector led the way, with $3.9 billion of supply, edging the $3.8 billion seen in the mortgage ABS sector.
Moreover, the market saw the most successful auto ABS of the year, as BMW Motor Credit priced at the inner limits for triple-A auto paper and set a new threshold for single-A rated subordinates. Large transactions were also seen from non-prime lender WFS Financial and Morgan Stanley's auto loan acquisition vehicle. Also, a small offering priced from subprime lender CPS Auto.
But BMW, with its only scheduled auto loan ABS of 2004, came and went quickly at what were considered aggressive levels upon announcement, given the current spread environment. BMW Auto Owner Trust 2004-A, via Banc of America Securities and JPMorgan Securities, priced its one-, two- and three- year triple A classes at two basis points over EDSF and swaps, respectively, on par with both DaimlerChrysler N.A. Holdings and USAA, which each priced one-, two- and three-year triple-As at two over.
The single-A rated B class, with a 3.3-year average life, priced to yield 14 basis points over swaps one basis point through the previous tight level, set by Chase Manhattan's 2004-A deal, and a new 2004 tight level. This occurred despite receiving a rating from Fitch Ratings and Standard & Poor's but not Moody's Investors Service.
Performance on the other two large transactions was not as noteworthy as BMW, as spread performance was mixed, with some classes longer than two years widening from price guidance prior to pricing.
The Morgan Stanley Auto Loan Trust 2004-HB1 offering, just the second-ever auto loan deal from Morgan Stanley, widened one to two basis points for one-, 1.8- and 2.92-year triple-As. The deal, backed by prime loans originated by The Huntington National Bank, which is also the servicer, was offered cheaply despite the prime loan status, due to a relatively high percentage of used car exposure, investors said.
Also, WFS Financial brought its second senior/subordinated transaction of the year, a $1.47 billion series 2004-2 fixed-rate offering via Citigroup Global Markets. With spreads coming in at six and nine basis points over EDSF and swaps for one- and two-year notes, WFS came just one basis point back of MSALT. But 3.12-year A2 notes came in five basis points outside of the slightly shorter-dated MSALT A4 class.
Bank One N.A. quickly priced the only credit card ABS seen last week, its third triple-A senior offering of the year. The $675 million 10-year series 2003-A3 offering priced in line with guidance at 17 basis points over one-month Libor.
AIG Credit Corp. priced just its third insurance premium ABS ever, selling $591 million of bonds backed by loans made to commercial clients who borrow to pay the large initial down payment of a policy. The annual offering from AIG, led by BofA, was increased in size from the initial $529 million and saw its triple-A seniors price two basis points inside of price guidance.
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