New-issue activity picked up last week, in sessions of wintry holiday-shortened trading. While over $12.3 billion was announced or had been left over from the previous week, $6.51 billion had priced as of Thursday's close and the bulk of the remaining $5.79 billion was expected to price Friday. For the first time all year, the auto loan sector dominated, with three offerings totaling $4.4 billion making the rounds to strong demand.
Two foreign captives, American Honda Finance and Nissan Motor Credit, each saw extremely good demand with their respective offerings last week, striking while the iron was hot. Aside from the mid-January pricing of Onyx Acceptance Corp., auto supply had been non-existent since Ford Motor Credit and General Motors Acceptance Corp. started the year off with deals on consecutive weeks. The lack of high-quality, captive auto lenders this year, led to both Honda and Nissan being blowouts, sources said. Prior to this week, auto supply totaled just $6.4 billion on three transactions.
Traditionally the second-leading Japanese captive (behind Toyota Motor Credit), Honda completed its $1.5 billion 2003-1 deal at single-digit spreads to swaps across the board, with one-year A2 clearing at seven basis points over EDSF. Furthermore, two-year A3 noted priced to yield 6 basis points over swaps and three-year A4 notes priced one through the A3s. The all-fixed-rate offering was led jointly by Banc One Capital Markets and Deutsche Bank Securities.
While Honda usually prices inside of its competition, Nissan, led by Salomon Smith Barney, surprised many by pricing right on top on Honda in three of four tranches. With the exception of the three-year class, which priced just one basis point outside of Honda's A4 class, Nissan matched Honda for the first time ever. "I remember when Nissan priced at a couple basis point discount to a name like Honda," one trader said.
But, as previously reported (See ASR 9/3/01), Nissan set out long ago to erase any premium paid to its competitors in the ABS market. The strategy of announcing a deal just as investors are starting to get shut out of deals already in the market allowed them to capitalize. "You have to credit Nissan's timing; Nissan benefited from Honda going first," one banker said, adding that, as one of the few positive credit stories in recent years Nissan being firmly investment-grade helped as well.
The credit card sector continued at its recent pace, pricing $1.6 billion of supply, led by MBNA Bank America's first triple-A transaction of the year, as well as a pair of programmatic, but infrequent, names - Advanta Corp. and Fleet Bank N.A.
With a five-year, fixed-rate 2003-A1 deal via Barclays Capital MBNA priced at the tight end of price talk, yielding 3.334%, or 12 basis points over swaps. Fleet, with a three-year senior/sub offering via Credit Suisse First Boston and JPMorgan Securities, priced its senior tranche at 6 basis points over swaps, to yield 2.421%. Down in credit, Fleet offered floaters, pricing its three-year single-As at 35 basis points and its triple-Bs at 112 basis points, each over one-month Libor.
Formerly a programmatic issuer in numerous sectors of the consumer ABS markets, Advanta now only taps the market occasionally with corporate account-backed notes. Led by Barclays, the three-year triple-As were reportedly a fast sell at 40 basis points over one-month Libor. But the triple-Bs proved challenging, clearing at 350 basis points over one-month Libor, out from initial guidance in the mid-200 basis point area over Libor.
Student-loan ABS saw the leading name in the sector, Sallie Mae, as well as a first-timer, Collegiate Funding Services. Ironically, both were backed by consolidation loans and, as of press time Thursday, neither had priced. Sallie, with just its third-ever consolidation loan product planned on pricing $1.6 billion of 2003-2 notes Friday via CSFB and Salomon jointly. CFS, a first time issuer, is owned by Lightyear Capital and its loans are serviced a third-party servicer Suntech Inc.
Home equities had a rather lack luster week of supply, pricing just $3 billion, consisting primarily of a pair of billion-dollar-plus offerings.
The largest offering was a $1.25 billion deal from NovaStar Financial via RBS Greenwich, pricing before the snow melted on Wall Street. While the 2.91-year A1 class was placed privately and pricing levels could not be confirmed, NovaStar priced its three-year triple-A rated A2s at 39 basis points over one-month Libor.
Late in the already shortened week, Countrywide Home Loans brought $1.16 billion of home equity paper that included $760 million of Fannie Mae-guaranteed notes and $379.4 million of senior-subordinated notes. The transaction, expected to price Friday via Countrywide Securities, consisted of both fixed- and floating-rate supply.
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