Issuance was focused primarily on the home-equity sector, offering investors a clear view of the tiering that has developed in the post-attack market. The most interesting deal came from captive auto finance issuer Nissan, which sold its second-ever retail auto lease transaction to "astonishingly" strong demand, sources said.
Nissan priced $1.1 billion of auto lease-backed notes through Merrill Lynch, at levels wide enough to make the investor community froth at the mouth - but the deal still came in with absolute yields low enough to make an issuer giddy.
Following the August loan deal from Nissan, corporate manager Jennifer Kuritz said the company was tentatively planning a lease transaction for late this or early next year, depending on investor reception. At the time (pre-attack) she said: "Investors are apprehensive about lease deals and the residual value losses out the curve."
With this offering, however, Kuritz noted that the all-in rates were too attractive to pass up, even if offered spreads would be at historical wides. "The money-market tranche of this deal priced with a coupon under 2%," she pointed out.
The short, money-market tranche priced in line to where prime retail auto-loan paper prints, with the $196 million 0.31-year A1 class tightening to a yield two basis points over four-month Libor or 1.995%. Spreads become much more attractive moving out on the curve, however.
About $250 million of one-year A2 paper cleared at 40 basis points over EDSF and $500 million of 1.5-year A3 floaters priced at 32 basis points over one-month Libor. The long end, where residual risk assessment historically pressures spreads wider, saw $153 million of triple-A rated 1.89-year A4 paper widen to 55 basis points over EDSF, versus initial guidance of 45 to 50 over.
"The key to a lease offering is the structuring," added Kuritz. "Nissan's lease portfolio goes out on average, only 37 months with low exposure to (no interest) subvention leases." As a result the longest-dated piece of this deal was under two years.
While some initially showed trepidation over the viability of leasing as a finance option - with zero-interest auto loans prevalent - this offering is backed by seasoned collateral that has been warehoused in the loan/lease facility set up by JPMorgan this August.
The majority of supply last week, however, came from the home- equity loan sector, as four deals priced from various firms, allowing investors to witness the yield differentials issuers must offer to get deals done.
The sector benchmark of course is Fannie Mae, which saw the best execution for a $940 million deal due to the GSE's surety wrap on the offering. The FMW 2001-W4 deal, backed by collateral originated by lead manager Countrywide, was by far the tightest print of the week, coming in 10 to 15 rich to comparable deals.
New issues from Equity One, GreenPoint Credit and MSDW Capital offered similar maturities but, as expected, came in much wider than the Fannie deal. This occurred even though Equity One guaranteed its deal with an MBIA wrap and GreenPoint had conforming collateral in its deal.
The best example is to look at the floating-rate 2.5-year class included in most HEL deals and FMW 2001-W4 priced its floater at 14 basis points over one-month Libor. GreenPoint, which was actually HELOC collateral, came in at 28 over Libor for the conforming classes and 29 over for the non-conforming. Equity One priced its floater at 32 basis points over Libor. While, as of press time, MSDW Capital had yet to price its deal (backed by New Century-originated loans), it was talked in the 37 basis point area.
Looking ahead, many expect this holiday-shortened week to be fairly busy, with a plethora of auto-loan issuance hitting shortly after the market reopens from the Veteran's Day holiday. With the market winding down for the year, little is expected following next week's three-session week. As markets are closed next Thursday and Friday in observance of Thanksgiving, issuers have little time to bring deals and do not expect investors to even be around to notice.
