It has been an unusually quiet year for credit card securities issuance, with two major players - Citigroup and Bank One Corp. - seemingly absent from the market. However, market participants are anxiously awaiting Citigroup's first issuance of the year, which is structured like no other credit card deal to hit the ABS market.
The $850 million Citibank Credit Card Issuance Trust 2000 C1 could price early this week, according to Peter DiMartino, head of asset-backed research at Salomon Smith Barney. What makes this deal unique is that the securities will all be subordinate classes, with about $350 million rated A and the remaining $500 million rated triple-B.
Citi took the deal on a roadshow to explain to investors exactly how the structure works and to spark investor interest. "It is very different than anything that Citi has done before and it's still unique to what the rest of the credit card market has been doing," DiMartino said. "They see the positive attributes for the structure, not only as it relates to the issuer, but what the positives are for the investor as well. There didn't seem to be any major stumbling blocks with regard to education and understanding the structure."
The absence of Citigroup in the market for the first eight months of year coupled with the absence of issuance from companies under the Bank One Corp. umbrella (Bank One, First USA and First Chicago) has left the sector far behind levels market observers expected it to be.
However, the prime credit card market is also maturing, and while credit card volume is up, balances are not as high. Higher salaries brought about by the strong economy are enabling consumers to pay off their debt faster than they would have previously.
But it still is an attractive market. "The credit card arena continues to be an attractive form of financing for players who do have credit card portfolios," said Mark DiRienz, a vice president and analyst at Moody's Investors Service. He noted that many companies are moving from the private securitization market to the public market, as demonstrated earlier this year by retailer Dillard's and Associates First Capital Corp.
Dillard's entrance, along with that of Neiman Marcus, also demonstrates the trend of private-label card issuers looking to the public market.
"It just demonstrates the arena is still a very popular and efficient form of financing for credit card issuers," DiRienz added. "On balance, it's still an attractive market; receivables growth is not as high as it was earlier in the decade. On top of that, you have two players who haven't been in the market this year."
However, Citibank is planning on issuing $6 billion in credit-card securities this year. With the $850 million in subordinates already under way, DiMartino said that the deal is clearing the way for the remaining issuance to be triple-A rated pieces.
"This is the subordination, and the remaining issuance between this and the $6 billion is likely to be triple-A," DiMartino said. "And this is the credit enhancement that will now be in place for those triple-As to be issued. This is being put in place now to do the triple-As in the future, probably not-too-distant future."
