At $182.4 million, the Jersey Central Power & Light stranded cost transaction was not expected to make an enormous splash on the ABS primary issuance market last week. Still, it attracted attention from some traders simply because of the diminishing presence of stranded cost ABS issuances in the lineup of deals.
Portions of the JCP&L Transition Funding II priced slightly wide of market expectations, particularly the 10-year piece. That portion of the deal came in at 10 basis points over swaps, which was wide over the prevailing five basis point spread for 10-year credit cards over swaps. The last time that the issuer came to market, its 10-year piece priced at seven basis points over, said a market player familiar with the situation.
One market player noted that the stranded cost deal might have had to compete with several large commodity offerings last week, including a $1 billion dealer floorplan deal, and the $833 million Goldman Sachs Auto Loan Trust transaction. Yet others said the deal might not have been marketed aggressively.
"People [sometimes] don't pay attention and they just blow it out to get it done," said someone familiar with the situation.
Ultimately, the Jersey Central Power & Light transaction might have suffered from a lack of demand, because of the usual summer slowdown. A lot of the real money players, who normally buy the long-dated maturities of 10 years and longer, were away from the office last week.
"To us, this was a screaming buy," said one market professional who saw the deal, on which Goldman Sachs acted as lead manager and sole bookrunner. "Most investors agreed that it was at an attractive level, but some of them might not have been asked to buy a lot of fixed-rate ABS right at this moment."
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