Maryville, Tenn.-based Clayton Homes Inc. will weather what has been a stiff market wind in the ever-competitive manufactured housing sector and launch an asset-backed deal in a few weeks in the $250 million range.

Prudential Securities, the company's traditional underwriter, will most likely lead the deal, sources said.

Clayton is a quarterly manufactured housing issuer that produces, sells, finances and insures low- to medium-priced manufactured homes. Installment financing is offered to consumers across 28 states. The company has been securitizing since August 1992.

Clayton priced its last deal in May for $518 million, significantly larger in size than the typical $250 million Clayton offering. Carl Koella, Clayton's director of investor relations, said the spike in size was caused by an acquisition made in May 1998, in which the company was forced to warehouse loans for a year. The company had purchased $247 million worth of paper from Access Financial.

Koella described the structure of Clayton deals as being unique from other issuers. The lowest rated B tranche, which is usually less than 6% of the deal, comes equipped with a corporate guaranty. Typically, Clayton deals have 10 or more tranches.

Also, about one-third of each deal is floating-rate paper while the balance is fixed-rate.

"We don't have any teaser rates built into the paper, it's fully indexed," Koella said.

Despite the mounting competition in the manufactured housing sector recently, Koella said the company remains undaunted by the asset-backed market.

"It's always been competitive in this market, it's nothing new to us," he said. "We had the largest gross spread ever on the variable portion of our last deal. Our cost of funds was north of 400 basis points." - SK

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