Asset securitization professionals stuck ardently to their new routines last week, supporting credit card and auto loan securitizations to the exclusion of just about every other asset class.
Yet while credit card and auto ABS were the only asset classes to be represented last week, they did not exactly take command of the stage. In the auto sector, the Harley Davidson Motorcycle Trust, 2008-1, was marketing a $933 million transaction.
DaimlerChrysler Auto Trust, 2008-A, came to market with a $1.5 million deal, and Citigroup Global Markets, Goldman Sachs and JPMorgan Securities acted
as managers.
The Bank of America Credit Card Trust, classes B and C, kicked activity off last week with issuances on Feb. 11. The Class C notes, sized at $150 million and rated triple-B, priced at 400 basis points. The Class B notes, sized at $450 million and rated single-A, came in a bit tighter, at 300 basis points. Banc of America Securities was lead manager on both deals.
Glacier Credit Card Trust came out with its first deal of 2008, a $634 million transaction done via Scotia Capital and BMO Nesbitt Burns Corp.
Chase Issuance Trust, Class A, 2008-2 notes joined the lineup with a $1 billion transaction via JPMorgan Securities. The one-tranche deal, whose 6.9-year notes were rated triple-A by the rating agencies, came in at one-month Libor plus 90 basis points.
Things Fall Apart
Although the auction-rate market has traditionally played only a supporting role in the asset securitization market, it created lots of drama in the credit market last week. Several dealers, including Citigroup and UBS, refused to buy auction-rate securities that did not attract enough bidders, according to market sources and press reports.
As far as the ABS market was concerned, that tactic deprived the Michigan Higher Education Student Loan Authority, a reliable issuer, of the funding it needed to make new loans through its Michigan Alternative Student Loan Program.
"After considerable analysis and significant efforts to secure sufficient MI-LOAN capital to make new MI-LOANS, the difficult decision to temporarily suspend MI-LOANS had to be made," according to the authority's Web site.
Citigroup, which recently decided to consolidate about $49 billion in SIV assets back onto its balance sheet, could be left holding about $15 billion in auction-rate securities, according to people familiar with the bank. Another bank, Morgan Stanley, was said to be holding on to as much as $8 billion in auction-rate assets.
"At the end of the day all it means is that more investors will turn their backs on the asset-backed market completely or be on the margin. They will buy less," said one market source. "It is bad for liquidity and bad for the market."
Not all is lost for student loan issuers, a group that could still generate revenue by converting securities intended for the auction-rate market into term ABS deals. The next student loan ABS deal, if it is a converted auction rate, might offer an indication as to how investors would greet such a move, said one trader.
In any case, the volatility in the auction-rate market reminded professionals in the ABS sector that the business faces a long road to normalcy.
"I thought things might be turning around, but then you have the latest news of all the wrap companies," said one market source. He referred to the recent downgrades on the monoline bond insurers' corporate credit ratings and offers from Warren Buffet, CEO of Berkshire Hathaway, to provide reinsurance for their municipal bond wraps (see story, p. 14).
The coming trading sessions, though, might offer a change of pace in the form of real estate-backed notes. The REGER 2007-6, a trust that issues notes on behalf of R-Estate Germany, was in the pipeline with a $1.3 billion transaction led by Hypo Public Finance Bank.
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