Securitization giant General Motors Acceptance Corp., the Minneapolis-based auto-lender, will float a $1 billion, Euro-denominated dealer floorplan auto-loan securitization for European investors in coming days, hoping to get a warmer reception from a segment of the investor community not facing a flood of issuance.
Because market experts have predicted that dollar-denominated deal volume will swell to $25 billion to $30 billion in September, GMAC is opting to do its deal in Euros to an audience across the pond, according to a source close to the situation. The deal would be the first Euro-denominated dealer floorplan transaction ever issued in Europe, said the source.
The source said that while most European asset-backed investors are accustomed to more vanilla, credit card-type collateral, the deal has garnered a good reception from potential buyers thus far.
"Maybe it's because it's GMAC, or it's just that they've explained what a floorplan deal is, but these guys seem comfortable with the collateral," the source said. "They expect the deal to go pretty well."
GMAC just completed a preliminary roadshow that spurred a positive reaction from European investors who attended, according to the source.
The strategy may be catching. One market expert said the swap spread side of the equation is attractive, and will probably garner GMAC better spreads than they could have gotten if they sold the deal in the U.S.
"First of all, the fixed-rate bonds are being swapped, so at the end of the day the investor essentially gets a floating-rate transaction," the source said.
The company also will avoid competing with the glut of supply currently causing sloppiness in the U.S. market. The source predicted more of these offerings to fall in the near term, with the trend developing strongest among well-backed issuers like GMAC.
Supply spilling in from issuers attempting to price deals before Y2K fears sap investor appetites and investors waiting for the bonds to get even cheaper has created a dicey pricing environment in the U.S. market, with deals across the spectrum of asset classes pricing wider.
The upcoming deal will issue from GMAC's Superior Wholesale Inventory Financing Trust (SWIFT). Morgan Stanley Dean Witter and Paribas will co-lead the offering, which marks a departure from GMAC's relationship with longtime underwriting partner Salomon Smith Barney. Sources speculated the change had to do with the distribution capabilities and European marketing expertise. Neither GMAC nor Morgan Stanley officials were immediately available for comment.
GMAC has issued four asset-backed deals from its SWIFT trust for a total of $3.78 billion, the last of which was completed in May.
