Boosted by a mammoth, multi-currency, global U.K. MBS, the U.S. ABS market priced $14.8 billion of domestic supply last week, assuming the $2.2 billion set to price Friday. Autos, credit cards and home equities were all fairly represented and the student loan sector saw a first-time issuer price a deal. With two months down in 2003, total issuance for the year tops $49 billion, almost 27% ahead of last year's pace, according to Banc One Capital Markets.
Due to the $5.7 billion in foreign MBS supply, the mortgage sector saw the most activity last week, pricing $6.2 billion total. Aside from the $7.5 billion (U.S. dollar equivalent) from Permanent Financing HBos No. 2 shelf, consisting of U.S. dollar, British Pound and Eurodollar tranches. The second transaction of the year was led by the four-way joint-leads of Credit Suisse First Boston, Deutsche Bank Securities, Lehman Brothers and JPMorgan Securities, with Lehman and JPMorgan splitting the additional responsibilities of leading the roughly $300 million in subordinates.
The sheer size of the transaction, combined with the number of underwriters and cross-Atlantic coordination, explains why issuance was slow to heat up last week as well as the downtick in more traditional mortgage supply.
Additionally, Australian mortgage broker InterStar Millennium Trust sold $1 billion of Aussie MBS paper to U.S. investors via Barclays Capital. In the market since its Feb. 10 announcement, the 3.8-year senior class priced at 27 basis points over three-month Libor. The double-A rated B paper, also with a 3.8-year average life, priced at par, with a coupon of 85 basis points over three-month Libor.
Home-equity volume leader, GMAC-RFC completed a $216 million high loan-to-value deal via Bear Stearns. The RFMS II deal came with a senior-sub, all fixed-rate structure, pricing the two-year triple-As at 48 basis points over swaps, out from initial guidance in the 40 basis point area. The triple-B class, with a 6.92-year average life, priced to yield a respectable 290 basis points over swaps, evidence of continued tightening in subordinated home-equity supply. It was noted, however, the relatively small size of this particular deal. GMAC-RFC was expected to announce a new issue from its RAMP shelf, to price this week.
Still in the market, as of press time, The CIT Group was marketing its first home equity deal of the year, a $940 million deal via Salomon Smith Barney. Also Irwin Financial had its second offering of the year, via Bear.
Auto ABS supply remained strong for the second week in a row, led by the $1.5 billion floorplan offering from DaimlerChrysler N.A. Holdings, the first wholesale offering of the year. The three-year, single-tranche offering, with a three-year average life, priced via Salomon at par with a five basis point spread to one-month Libor.
A $1.35 billion non-prime offering from WFS Financial priced $1.1 billion of its senior notes the Friday before last, and the remaining subordinate supply last Monday. Led by Salomon, the senior classes all priced within or inside of price guidance, while the subordinates widened 20 to 25 basis points prior to pricing.
JM Family Enterprises unit World Omni Financial, the nation's largest independent Toyota Motor Co. distributor, priced $785 million of fixed-rate, senior-sub, supply via CSFB. At the front-end, spreads came in the sub-Libor and single-digit spread levels, while out on the curve, spreads were barely in the double-digit margins versus the respective indexes.
Rounding out the auto issuance for last week, Drive Financial priced a small, $178 million, MBIA-wrapped fixed-rate offering via Wachovia Securities. Scheduled to price Friday, Avis was marketing $500 million of fixed- and floating-rate fleet lease paper from its AESOP trust, also wrapped by MBIA.
Bank One N.A. contributed the lion's share of the credit card supply, pricing $1.5 billion of three-year seniors, which quickly priced at five basis points over one-month Libor. The only other supply seen in the sector was $500 million of single-A and triple-B rated subs from the Citibank N.A. CCCIT shelf. Single-As were talked at 30 to 32 basis points over three-month Libor, while triple-Bs were being marketed at 110 to 115 basis points over Libor.
Collegiate Funding Services priced its inaugural term ABS last Tuesday through Salomon and UBSPaineWebber, a $838 million offering consisting of both term and auction rate securities. Of the total, $486 million was priced in the term market, with $125 million of two-year triple-A rated A1s pricing at six basis points over three-month Libor and $319 million of 6.8-year triple-As pricing at 30 basis points over one-month Libor.
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