Spreads for The Metris Companies series 2004-1 credit card ABS tightened on last week's news that it had finalized terms on a $300 million three-year unsecured Libor floater via Goldman Sachs. This completes a funding plan that injects $500 million into the company's coffers and allows it access to a previously announced $800 million conduit facility.
Although published reports said the deal had priced, the company refused comment on the issue, which had yet to close as of press time, though officials anticipated a late week press release. Regardless, news of the most recent transaction had ABS investors feeling secure that the company's turnaround plan was indeed working.
"[Any] additional liquidity will be used for general corporate purposes," said Senior Vice President and Treasurer Scott Fjellman, commenting on the turnaround but declining to discuss the specific transaction, which wire reports had pricing at 950 basis points over one-month Libor. Fjellman only confirmed that any financing secured "would be used for the retirement of debt coming due this year and the funding of future receivables."
Currently Metris is on track to originate 300,000 to 400,000 new accounts in 2004. In 2003, Metris originated approximately 250,000 new accounts, sources said.
With this round of funding, Metris is seemingly out of the woods in the near term. The most recently reported facility is callable at premiums of 105 in the first year, 104 in months 12 through 24, 102 in months 24 through 30 and at and at par after the 31st month.
The two transactions allow Metris to retire its debt maturing this year and qualify its recently announced $800 million conduit financing facility. The completion of the most recent transaction would "make or break Metris' ability to fund operations through 2005," Standard & Poor's said in a report. "Metris' operating performance has improved and its funding through 2005 will be locked in if its upcoming corporate debt issue is successful," the agency added.
Metris had two options from which to choose, according to sources. In addition to the floater, Metris had announced intentions to sell $250 million of five-year fixed-rate notes that would have been callable after three years. The company seems to have chosen the larger but potentially higher interest floating-rate option.
"We are considering both transactions and will make the best decision for the company," said Fjellman prior to the floater's closing, expected last Friday. "That decision will be based on terms, duration and size, among other factors."
And while Metris currently has "no scheduled time for our next [ABS] issuance from the Metris Master Trust," the middle-market credit card issuer "could be back in the [capital] markets in either the second or third quarter of 2004." Many expect a 2Q04 offering from Metris.
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