The asset securitization market juggled three significant market events last week. The Federal Reserve tightened credit by raising its federal funds rate to 5.25% on Thursday, but ABS professionals noted that the increase had already been priced into several deals; interest rate increases on higher education loans were slated to take effect on July 1; and Standard & Poor's new LEVELs credit enhancement requirements (see story on p. 11) on certain home equity loans, including so-called piggy-back loans, also went into effect on the first of July.
Driven in part by the encroaching deadlines, issuers managed to price and begin marketing at least $15 billion by press time.
"It's been a quiet week, because of it being prior to a holiday week," according to one trader.
Goldman Sachs' GSAMP Trust 2006-HE4 came to market with a $973.1 million deal. Its nearly one-year tranche came in at seven basis points over the one-month Libor, in line with some slightly wider spreads that the sector has seen since last week. The BBB-rated 4.25-year tranche came in at 200 basis points over the same benchmark. The GMACM 2006-HE2 transaction, managed by RBS Greenwich Capital, priced against swaps, and its one-year tranche priced at 18 basis points over, while its 4.95-average life piece came in at 70 basis points over the same benchmark.
Not all home equity loan deals gave up seven basis points or more on the one-year tranche. The Asset Backed Securities Corp. Home Equity 2006-HE5, which came to market via Credit Suisse, came in at six points over the one-month Libor. It had a BB-' piece, which offered much bigger spread pickup, at 550 basis points over the same benchmark.
The dealer floorplan asset class splashed onto the scene, as the GE Dealer Floorplan Master Note Trust came to market with a $1.5 billion transaction via Banc of America and RBS Greenwich Capital. Marketed as two pricings, the 2.81-year 2006-1 series priced its triple-A bonds at one basis point over the one-month Libor. On the 2006-2 series, which has an average life of 4.81 years, the triple-A-rated piece came in at seven points over the benchmark, and the BBB'rated piece offered 43 basis points over.
Sierra Receivables Funding Co. came to market with a rare securitization backed by timeshares, via Credit Suisse. The triple-A rated deal priced against swaps and the one-month Libor, but it was the latter benchmark that achieved tighter pricing, at 15 basis points over.
An old adage says familiarity breeds contempt, but the opposite appears to be happening for Regulation XXX securitizations. Timberlake Financial came to market with an $850 million transaction via Wachovia Securities. Featuring an Ambac wrap, the single-tranche, triple-A-rated deal came in at 29 basis points over Libor, when guidance was at about 30 basis points over, said ABS professional. Timberlake Financial has leeway to offer as much as $150 million of additional notes in the future.
"People have gotten familiar with the regulation, and we probably had some new, crossover investors to the space," said one professional familiar with the pricing.
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