With its strong presence in the auto sector, MBIA was the leading financial guarantor in the first quarter, having wrapped roughly $5.9 billion of primary ABS supply in the first three months of the year. Overall wrapped volume was up from the same period last year, accounting for 12.1% of total supply - led by the auto sector, which was bolstered by numerous auto rental fleet lease transactions - up from the 6.62% of wrapped volume in 1Q04.
With MBIA practically running away with the majority of the quarter's business, rivals FGIC and AMBAC were the next most active guarantors in the quarter, with $3.2 billion and $2.7 billion, respectively, in business throughout the quarter. By contrast, the remaining two guarantors seen in the first quarter, FSA and XLCA, each backed just one deal each.
Since leading the guaranty market in the first quarter, MBIA has come under scrutiny relating to a reinsurance transaction agreement unrelated to its ABS activity. It is currently unclear as to what impact the news will have on MBIA's business in the remainder of 2005, but MBIA-wrapped transactions have widened in secondary trading and no longer price at the same premium to its competitors that they had prior to the negative headlines having broke.
The 12.1% in wrapped business represents a minor decline from the previous quarter, which saw 13.8% of total wrapped supply, but a major increase compared to the same period one year ago. In 1Q04, the primary ABS market saw just 6.62% of its deals backed by a financial guaranty.
As mentioned, the auto sector saw the most volume in 1Q05, with $7.7 billion of wrapped paper placed in the quarter, up significantly from the previous quarter, which saw just $1.5 billion in wrapped auto paper. The rental car fleet lease subsector contributed just over $4 billion of the auto sector's total, on three transactions. Vanguard Car Rental USA, formerly ANC Rental, contributed two deals - one wrapped by Ambac and one wrapped by MBIA - in 1Q05, totaling $3.3 billion. Auto ABS also saw the more programmatic issuers in with wrapped deals, as AmeriCredit Corp., Bay View Acceptance Corp., Capital One Financial, DriveTime Auto, Drive Financial Services and Onyx Acceptance Corp all tapped the market in 1Q05.
Furthermore, the real estate sector experienced a volume decline in the first quarter, thanks primarily to the paltry HELOC supply in the quarter. Throughout the quarter, there were only three wrapped HELOC transactions, as well as the emergence of a disturbing trend for the sureties: unwrapped HELOC ABS.
Since the Patriot act took effect this year, the inclusion of HELOC collateral into a REMIC structure set the stage for the first-ever unwrapped HELOC by GreenPoint Financial Corp. on March 23. The other HELOCs in the quarter were issued by Countrywide Home Loans Inc. and GMAC Mortgage.
In what proved to be a slow quarter for the sector in general, just one credit card ABS priced with a wrap in 1Q05. 1st Financial Bank's student credit card-backed ABS, which priced On St. Patrick's day via SG Corporate & Investment Banking, is the lone wrapped credit card transaction of the quarter.
Wrapped transactions in the international markets included a U.K. CMBS from White City Property, wrapped by MBIA and a FGIC-wrapped whole business securitization from Premier Transmission Ltd.
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