Some ABS new asset classes appear to be stalled at the moment, according to an unscientific poll conducted by ASR staff following Standard and Poor's fourth annual New Assets Hot Topics Conference held in New York last week.
The conference covered timeshares, intellectual property, whole and small business, and insurance related transactions. Aside from some buzz over regulation triple X securitizations (see ASR 11/1/04) there was little in the way of new deals in the pipeline to discuss, one source said.
"It is slow now," an investor added. "I'm not sure when it's going to pick up."
However, S&P Managing Director Ellen Welsher noted that the exceptionally high volume in certain asset classes in prior years, such as the surge in stranded cost securitizations in 2001, makes the total volume in 2004 appear more depressed than it actually is.
Broadly speaking, volume in new assets was down in 2004, according to S&P analysts. As of Oct. 4, the rating agency had rated just over 40 deals, compared with close to 60 during 2003, and more than 60 throughout 2002. Dollar volume fell to roughly $9 billion so far this year after holding steady at roughly $18 billion during the preceding three years. The average deal size has also fallen to just over $200 million in 2004 compared with over $300 million in 2003 and just under the $300 million mark in 2002.
However, the proportion of triple-A rated transactions is increasing, S&P analysts found. As of Oct. 4, 61% of rated transactions came to market with a triple-A rating, as opposed to 50% that could boast the same last year. In 2002, that figure was 40%. The percentage of speculative bonds has been relatively steady, with double-B rated transactions making up about 2% of the total volume in new assets both this year and last.
Also of note, the public volume in new assets has steadily declined since hitting a high point of over $12 billion in 2001. That figure dropped to just under $10 billion in 2002, less than $6 billion in 2003, and was at roughly $1 billion as of Oct. 4 this year. For 2004, about $6 billion was in the rule 144A market, while about $2 billion was strictly private.
Meanwhile, an overwhelming majority of rated transactions are placed or distributed in the term market, although deal flow in the ABCP/warehouse market is growing, S&P analysts found.
Currently, one of the more lively sectors is the small business securitization arena, which has seen steady growth since 2001. The insurance sector is also showing solid growth. The timeshare sector has shown growth in 2004 as well. Meanwhile, tobacco-related securitization issuance fell precipitously in 2004.
The intellectual property sector has been relatively quiet, however, S&P analysts expect to see a pharmaceutical patent backed transaction from a new issuer in the near future.
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