Credit card supply dominated a fairly active week of new ABS issuance, as $5.516 billion priced, more than half of which backed by card collateral.
This amount is down from the roughly $9.5 billion that priced the week prior, which was bolstered by larger auto loan-backed offerings.
Performance was mixed among the deals being circulated last week, with strong demand and spread tightening seen for credit card offerings from Bank One - which returned to the market with a new issuance vehicle after an 11-month absence from the primary market - as well as Fleet, Nordstrom and Circuit City. Some weakness was seen in the home equity sector, as spreads had to widen down in credit, in order to clear.
Bank One, back in the market with its version of the de-linked issuance vehicle developed by Citibank (see story p. 8), unveiled the inaugural offering from Bank One Issuance Trust's ONEseries program. Initially scheduled for late first quarter, one investor commented that the issuer was "ten months pregnant with that deal."
When it did finally hit mid week with $500 million of notes, split equally between five-year single-A and triple-B-rated pre-enhancing subs, buyers lined up, driving spreads to year-to-date tight levels for five-year floating-rate cards. When the dust settled, the single-A-rated B1 class priced with a coupon of 38 basis points over one-month Libor and the triple-Bs priced at 96 over Libor.
These levels are one and two inside of the previous new issue sector tights for five-year notes, set with the March 6 pricing from Chase. This strong performance comes when credit card ABS spreads are softening a touch, particularly among floaters.
The execution did not surprise Banc One research head Alex Roever, who noted "the issuer had been out, talking to investors, since last fall."
The subordinates give the issuer the ability to price $3 billion of pre-enhanced seniors, sources said. Banc One Capital Markets led the offering jointly with Lehman Brothers.
Staying in cards, Fleet priced $788 million of three-year floaters through Lehman and Merrill Lynch. In a deal that performed more like a corporate unsecured bond - pricing in just one session - senior notes tightened one basis point from guidance to price at five basis points over one-month Libor for triple-A-rated notes. Single-As priced at 34 over and triple-B-rated C paper priced at 90 over one-month Libor.
Retailers Circuit City and Nordstrom each priced floating-rate offerings, after a notable lack of off-the-run names tapping the primary. Circuit City brought a $297 million Saks-like (see ASR 7/2/01 p. 3) deal through Banc of America, that saw the triple-Bs marketed first, with the seniors hitting later in the week. Nordstrom sold $200 million five-year notes via Banc One, for those looking for slightly more yieldy stuff than Bank One would offer.
Circuit City offered investors floating-rate senior/sub notes that went through triple-Bs, in somewhat of a de-linked fashion. Marketing the subs early in the week, it did not take long to bring the seniors and polish off the entire offering.
"The strategy was to take our time marketing subs, feel the market out, price the subs, then follow up with seniors in one-to-two weeks," said Luis Araneda, managing director in the BofA asset securitization group. "But because of very strong subordinate reception and quick filling out of the book, we accelerated both the senior and subordinate timing. The subs went so much faster than we expected, when we started cutting sub investors back on their orders because we were so oversubscribed, they started asking for the seniors."
Spreads for Circuit City's three-year came at the tight end of guidance, with the seniors pricing at 19 over one-month Libor, single-As at 90 and triple-Bs at 170 over one-month Libor. Nordstrom sold its five-year deal at 27 over for triple-A-rated seniors and 70 over one-month Libor for single-A-rated B notes.
The home-equity sector was also fairly represented last week, as Credit Suisse First Boston vehicle ABSC, MSDW Capital and C-BASS each priced offerings. Each of the offerings saw widening in certain classes, however, as the recent run-in of home equity spreads seems to have reached its limits.
In an interesting trend, floating-rate dominance continues in the home-equity sector, as all three deals priced entirely over one-month Libor. This shift was credited with the strong supply in the sector towards the tail end of the first quarter and it seems to now be the standard.
CSFB's self-led offering, backed by collateral originated by New Century Financial, also priced last week. While spreads for most classes came within initial guidance, the single-A and triple-B classes came a touch wide. Oddly, the $45.4 million single-A-rated N2 class priced with a coupon of 113 basis points over, inside of guidance of 120-125 over one-month Libor but at a discount, to give investors a meatier margin of 133 basis points over Libor.
MSDW Capital, also with a New Century-collateral-backed deal, priced $576.314 million of 2002-NC2 notes through Morgan Stanley. The triple-, double- and single-As all came in at their marketed levels, but 5.31-year triple-B notes widened slightly to 245 basis points over Libor, versus initial guidance in the 235-240 range.
C-BASS priced $270.7 million of its standard mixed bag of collateral via Greenwich Capital, at levels right on the screws to initial talk.