Though paltry in comparison to previous quarters, credit cards continued to dominate new issuance in the consumer ABS market, as it has for the past year.
However, the numbers don't show a bright future for the sector, with only $9.86 billion in issuance in 3Q08, according to the ASR Scorecards Database, a nosedive from the $20.7 billion in issuance in 2Q08 and 29.7 billion in 1Q08.
Those lucky enough to get deals through the market included, Bank of America, Chase, American Express and World Financial Network.
Spread widening also continued to stunt growth in the sector. An unusually large credit card bid list that circulated toward the end of September only further contributed to the widening, according to Deutsche Bank Securities' October Securitization Monthly. Spreads on triple-A cards widened between 100 and 110 basis points mid-month, then by another 90 to 105 basis points by month-end, analysts said.
Fixed- and floating-rate triple-A spreads widened by 190 to 205 basis points by the end of September, and three-year fixed-rate triple-A cards were trading at 325 to swaps. At the end of last month, spreads on five-year single-A and triple-B credit card ABS were 325 basis points to 500 basis points wider than in August, Deutsche said.
The other consumer ABS sectors also took a turn for the worse this quarter. Year-over-year, auto ABS supply is down by 40%, student loan ABS by 36%, and equipment ABS has dropped 76%, according to Deutsche's Securitization Monthly.
Student loan issuance, which came in at $5.84 billion, according to the ASR Scorecards Database, was almost one third of its $14.6 billion 2Q08 volume.
Sallie Mae managed to come to market with a $982.2 million and a $4.086 billion transaction, SLM Student Loan Trust 2008-8 and SLM Student Loan Trust 2008-9, respectively, which accounted for the majority of new issuance. All deals that priced this quarter were FFELP - a signal that the market for private student loan deals is growing increasingly slim.
In September, Fitch Ratings downgraded approximately $2.8 billion of First Marblehead student loan ABS bonds issued out of the National Collegiate Student Loan Trust in series 2005-1, 2005-2, 2005-3, 2006-1, 2006-2 and 2007-1. The reasons for the downgrade included higher than expected defaults, operational uncertainties related to the The Education Resource Institute (TERI bankruptcy proceedings), and concerns about the level of recoveries on defaulted loans, Securitization Monthly reported. The collateral in these deals were private student loans guaranteed by TERI.
On the auto side, issuance plummeted the most - to $2.19 billion, down from $19.22 billion in 2Q08. Deal flow this quarter primarily came from a $348.9 million Merrill Lynch Auto Securitization and a $1.03 billion deal from USAA Auto Owner Trust 2008-3. Supply in the auto ABS market is expected to remain constrained until market conditions improve, Deutsche analysts said, citing weak sales, high gas prices and liquidity issues.
However, President George W. Bush's plan, approved last month, which provides a $25 billion low-interest loan package for the auto industry, aimed at helping automakers produce more fuel-efficient cars and trucks, should provide at least some relief to auto companies in need of capital, the analysts said.
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