Issuers from mature asset classes as well as the small business sector gave the securitization market a fledgling start to the new business year. At least $4 billion in deals were expected to price by around Jan. 11.
There is a lone mortgage deal in the works, for which Lehman Brothers is acting as lead manager. The BNC Mortgage Loan Trust will issue $510 million in notes when it prices.
Among credit card deals, Citigroup Global Markets priced a whopping $3.4 billion in notes from its Citibank Omni Master Trust 2007-A9 and the Citibank Credit Card Issuance, 2007-A11. The Omni Master notes, with 1.9-year duration, achieved spreads of one-month Libor plus 110 basis points, while notes from the Credit Card Issuance trust came in at 55 basis points over the same benchmark. Those notes had an average life of seven years.
Wachovia Securities was lining up an $890 million transaction on behalf of the Cabela's Master Credit Card Trust. Price talk put the issue's triple-A notes, with durations just shy of three years, at 85 basis points over swaps. Also, the Discover Master Card Trust priced a $500 million deal, for which Banc of America Securities acted as lead manager. The one-tranche deal saw its triple-A-rated notes come in at one-month Libor plus 55 basis points.
Auto ABS was another asset class with a solid pipeline of deals. This was in line with market expectations. CarMax Auto Owner Trust, a regular issuer, was circulating a $917 million transaction that was expected to price by Thursday last week. Banc of America Securities is managing the deal. The investment bank did not release price talk on the notes, but market sources familiar with it said the short-term notes, rated P-1'/A1+' were being talked at Libor plus eight to 10 basis points. The one-year, triple-A-rated notes were estimated to fetch as much as Libor plus 75 basis points from investors, while the 3.73-year notes were expected to come in at a range
of between 200 to 225 basis points
Other auto issuers included the USAA auto owner trust. With Credit Suisse and Wachovia Securities as its lead managers, some $750 million in notes were issued from that trust, and pricing was generally in line with expectations. Its one-year, triple-A-rated class was being talked at as much as 70 basis points over the EDSF and came in tighter, at 65 basis points over. Co-managers included Banc of America Securities and Deutsche Bank Securities.
The student loan sector came up with one deal, the SLM Student Loan Trust, a $1.5 billion deal with triple-A and double-A notes secured by FFELP loans. That asset class, so promising in 2007, has sputtered along with Sallie Mae's fortunes.
Issuance of private student loans might decline in 2008, say sources. Most FFELP deals are expected to be done off of the Sallie Mae shelf, but issuance is not expected to be very heavy, given recent upheavals at the company (see Whispers). At any rate, the one-year, senior tranche of the 2008-1 series was priced at the three-month Libor plus 25 basis points, while the 8.53-year, double-A tranche priced at 115 basis points over the three-month Libor, in line with pricing talk.
Small business owners got a boost in funding from the Small Business Administrative Participation Certificates, which is planning a $430 million deal.
All in all, the initial trickle of deals from mature asset classes was in line with market expectations.
"I think you'll see more autos, cards [at first] and then the more non-vanilla deals," one trader said. More ABS deals secured by real estate assets will come down the line as issuers and dealers become more comfortable with market conditions and as investors get back into the buying habit.
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