In what proved to be the most robust quarter for the asset-backed market, monoline penetration, or insured proceeds over total proceeds, dropped to roughly 14%, which is at least few percentage points below the typical industry penetration.*
In fact, between 1999 and 2000, the surety penetration averaged in the low 20th percentile. Still, at close to $12 billion in combined insured proceeds - up 10% compared to 4Q2000, and 20% over 3Q2000 - the monolines had few complaints about the asset-backed business in the first quarter.
Interestingly, the same driver of volume in the primary market last quarter, namely strong bid and attractive pricing, contributed to the increase in the sen/sub structure, industry pros said. Further, collateralized debt obligations of ABS continued to create a larger market for sub bonds.
"Especially on the consumer finance side, you're finding those businesses are attracting capital more quickly than they used to," said Mark Castiglione, managing director of consumer finance at Financial Security Assurance (FSA). "You're seeing some of the traditional independent finance companies, like AmeriCredit [Corp.], that we have guaranteed in the past, alternative between insured and senior/sub transactions."
FSA still managed to wrap close to $3 billion in the non-CDO ABS market, not a bad run, Castiglione said.
"The first quarter was one of the biggest quarters we've had in the asset-backed market in the company's history, and given that it's the first quarter, which is typically slower for us, we're very optimistic," he said. "Second quarter looks strong for us as well. We're budgeted internally to do more business in the asset-backed market this year than we ever have before."
Despite a shift in overall penetration, MBIA had an exceptional quarter, insuring close to $5 billion of the market, with a 35% market share. The surety scored in the non-prime auto market, wrapping deals for CarMax, Franklin Auto, Onyx Acceptance Corp. and Avis Rent-A-Car. MBIA also took part in the novel SLIMs deal, which was a student loan net interest margin NIMs transaction for The Nelnet Group.
Ambac followed MBIA for the No. 2 spot, with $3.2 billion in insured proceeds, scoring several mandates on home-equity deals managed by Bear Stearns. Ambac wrapped Residential Funding Corp.'s first quarter Residential Asset Mortgage Product (RAMP), which the issuer's mixed bag product line.
Beyond the usual suspects, Asset Guaranty Insurance made an appearance in the market, wrapping TFC Enterprises' $60 million non-prime auto deal, which is 70% backed by loans to military clientele.