Last week saw roughly $5.7 billion of asset-backed supply, on par with the $5.5 billion the week before. April closed with roughly $22 billion of public supply, according to Banc One, with continued spread tightening in all of the major sectors, combined with declining underlying benchmark rates, leading to lower yields across the board.
A pair of credit card deals and student loan deals were the highlights of last week's trading, as a lack of top-tier auto loan and home equity offerings continued for the second straight week. Capital One and Sears Roebuck Acceptance squared off in the credit card sector, while Sallie Mae and Nelnet vied for investor attention in the student loan sector.
Capital One continued the trend of pricing surprisingly cheap, as it priced $1.35 billion of three-year senior/sub notes through Deutsche Bank Securities. This is the second offering in a month from the issuer that has raised eyebrows for pricing greater than one basis point behind levels at which monoline rival MBNA is currently trading in the secondary.
Capital One did have strong demand for the 2002-3 transaction, spurring an increase in the deal's size from the initial $985 million, sources noted. The $1.097 billion three-year senior class priced at eight basis points over 1ML, versus the six basis points over bid reported for 2001-A4 MBNA notes, which priced last September. Cap One priced its single-A-rated subs at a fixed 40 basis points over Swaps.
Sears, one of the few retailers not reeling from the effects of the economic slowdown, priced a $750 million single-tranche seven-year floater through bookrunner Deutsche Bank, which was joined by two more joint leads, Lehman Brothers and West LB. Sears also increased the size of its offering, from $500 million, and tightened from initial guidance, pricing at 22 basis points over one-month Libor, versus talk in the 23 area.
By contrast, Circuit City's recent three-year offering priced its seniors at 19 over and Nordstrom's senior tranche priced at 27 over for five-year notes.
Sallie Mae's third offering of the year went smoothly, pricing $1.5 billion of supply to bring the company's year-to-date volume to $6.5 billion. This time around, however, Sallie deviated slightly from its modus operandi, offering four senior tranches, adding one- and five-year supply to the usual three and seven-year seniors it has offered in the majority of previous transactions. Morgan Stanley and Salomon led the deal jointly
"We went with four senior classes this time, looking for new pockets of investors," according to Guido van der Ven, managing director of corporate finance for Sallie. "And we wanted to give our current investor base more choices, which we achieved."
Spreads were firm throughout the marketing period and the offering priced through the rival $1.036 billion Nelnet offering, led by Banc of America and JPMorgan (see story p.10).
Both saw weakness in the sub tranches, with each B class pricing wide to initial talk. Most credited the softness to the tough sell for single-As right now, particularly out on the curve. "Sallie was at least helped out by the split rating on its sub class (Moody's Aa3), according to an investor who bought senior but not sub notes.
Also making the rounds was a mixed-bag mortgage offering from Bayview Financial, backed by traditional home-equity loans, as well as subprime and Alt-A RMBS collateral. DVI Inc. sold $438.3 million of medical equipment receivables-backed notes.