As if symbolic of the ABCP industry's woes over the past two years, the market's titan conduit, Edison Securitization Corp. - which peaked in size at nearly $40 billion - officially stopped funding new assets, according to GE Capital Corp.'s 2003 full-year filing with the Securities and Exchange Commission.
In fact, GE has added a new line to its balance sheet called "consolidated, liquidating securitization entities," which includes the assets of Edison. The consolidated entities amounted to $26.5 billion at the end of December, compared with $36.3 billion at July 1, 2003, when GE brought the assets of Edison onto its balance sheet in compliance with FIN 46, the accounting guidelines introduced last January by the Financial Accounting Standards Board.
GE most recently sold assets to Edison in June 2003, placing five amortizing equipment pools into an existing facility.
It is rumored that GE has been mulling a new ABCP conduit that satisfies the off-balance sheet criteria of FIN 46, or at least would be able to issue an expected loss tranche to transfer the ownership of the assets to a third-party investor.
Representatives at GE declined to comment beyond what is available in the 10-K.
In the filing the company states, "We continue to engage in securitization transactions with third-party conduits and through public market term securitizations."
GECC provides 100% of Edison's liquidity support, according to Moody's Investors Service's ABCP Query. The program, which until 2003 was practically growing by billions each month, was generally used to finance GECC's various commercial and consumer lending activities, with the largest concentrations typically in credit cards, equipment leases and equipment loans, including those originated in the franchise industry (see ASR 3/1).
GECC's private label credit card portfolio was originated in part by Monogram Credit Services, a subsidiary bank, formerly a joint venture between GECC and Bank One Corp.
Though it is currently in amortization (and has contracted by at least $10 billion over the past nine months), Edison is still the ABCP market's largest conduit. Sources familiar with Edison anticipate it could take a few years for the program to wind down naturally, assuming no assets are funded out.
According to Moody's, any reductions or termination to the facilities would not be credit- related.