An ABS investor called up a dealer and says: "I want $2.25 billion in thirteen-month credit card ABS in two different names. Can you arrange that, please?"
Although the exchange might not have gone that way verbatim, two investment banks still took the unusual step of arranging such a short-term transaction, all to accommodate an investor willing to put some liquidity into the market.
Those recherche deals were the Bank of America Credit Card Trust, Class A 2008-3 Notes, sized at $1.6 billion and the Citibank Credit Card Issuance Trust 2008-A3, sized at $1.8 billion.
The Bank of America deal, managed in house by Banc of America Securities, priced at one-month Libor plus 75 basis points. The Citibank deal, however, was not as rich, and its notes priced at one-month Libor plus 88 basis points. It also extended the deal by several months, so that the notes would mature after March, when the quarter typically ends and investors scarcely participate in the market, one buy-side source with knowledge of the deal said.
The transactions do not signal the makings of a trend, industry professionals said.
"It's more about issuers just trying to find where the liquidity is," one market source said. Beyond that, Treasury desks and banks are loathe to arrange entire transactions with one-year maturities because they incur fixed fees, which mean they are not as cost effective as longer-dated maturities.
No MBS deals came to market, at least ones that were public. One market source said that investors are waiting to see what lies ahead for housing prices before they begin to buy MBS paper again.
The auto ABS sector was represented, with a $1.1 billion deal from World Omni Auto Receivables Trust 2008-A. It was not spared, however, from the repriced market. Wachovia Securities and Credit Suisse acted as lead managers on that transaction, which saw its short-term piece price at nine basis points over the interpolated swap. The most junior tranche of the deal, carrying triple-A ratings with three-year durations, priced at 175 basis points over swaps.
Also, rating agencies and monolines drew attention to themselves with their ongoing dispute over who has more credibility in the market (See whispers). As their arguing spilled over into public view, an issuer seemed to weigh in on the matter.
At the issuers request, Moody's Investors Service and Standard & Poor's gave shadow ratings to Capital One for all outstanding securities issued from its Capital One Auto Finance Trust and Onyx Acceptance Owner Trust and which are enhanced by wraps from Ambac, MBIA, FGIC and XLCA, according to market sources.
Although the reasons for the request were unclear at press time, one possible explanation is that the issuer wants to know what the bonds are worth without the wrap, according to a market source.
That is because elevating a bond's rating from double-A to triple-A requires a lower charge than boosting a triple-B bond's rating with a wrap.
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