While top-tier issuers can still tap the ABS market with little difficulty, off-the-run issuers are having increasing difficulty completing transactions, as evidenced by last week's new issue activity. While $9.2 billion priced in last week's primary, many of the deals needed work in order to price.
Exhibiting the difficulties facing off-the-run issuers, World Financial Network, a former unit of clothing retailer Limited Brands Inc. sold $593 million of notes backed by credit cards from the various chains operated by The Limited, including Express, Lerner New York, Henri Bendel, and Victoria's Secret. JPMorgan Securities and Wachovia Securities acted as joint-lead managers.
While these may be household names for most suburban mall shoppers, the fact that this is only the fourth-ever securitization from WFN made it more difficult for investors to recognize. Senior levels for the five-year offering came in at 43 basis points over one-month Libor, out from guidance in the high 30 to 40 basis point range. Triple-B rate C paper priced at 295 basis points over one-month Libor, out from guidance of 225 to 250 basis points over.
With two separate trades in the market last week, Bank One N.A. showed how easy it is for some issuers. Its five-year triple-A rated credit card 2002-A5 priced the same day it was announced, following an increase in size to $850 million from the initial $750 million. The floating-rate offering priced via Banc One Capital Markets at 12 basis points over one-month Libor. Late in the week, BOIT came out with an additional $500 million seven-year floater that was set to price Friday at 19 basis points over one-month Libor.
Supported by a FSA wrap, WFS Financial priced $1.35 billion of non-prime auto loan collateral via Credit Suisse First Boston. The 2002-4 transaction offered both fixed- and floating-rate classes, with the one- and two-year A2 and A3B classes moving in one basis point from initial price guidance to price at 11 and 17 basis points over three-month Libor, respectively. The largest tranche, $350 million of two-year fixed-rate A3A paper, priced at 31 basis points over swaps.
The spate of self-led home equity-backed deals continued, albeit at a slower pace than in recent weeks. Morgan Stanley's MSDW Capital, and CSFB's Home Equity Asset Trust each priced trades after slightly tweaking the senior classes to suit investor demand. More notably, spreads for triple-B classes are approaching the 300 basis point area over one-month Libor and below triple-Bs wider.
To map the curve, HEAT triple-B plus B1 class priced at 275 basis points over, MSDW Capital triple-B B1 priced at 300 basis points over, HEAT triple-B minus B2 priced at 350 basis points over and MSDW Capital B2, also rated triple-B minus, priced at 375 basis points over one-month Libor.
The largest deal last week, a $4 billion (equivalent) U.K. RMBS from Abbey National's Holmes Financing No. 6, priced through Barclays Capital and JPMorgan. After some widening in the double-A and triple-B tranches, the multi-currency, global offering priced late in the week. Triple-As, however, priced in line with the previous foreign RMBS the U.S. market has seen this year.
