New issue activity picked up last week, as the winter conference season came to a close. Just over $9 billion in ABS product was marketed, $6.05 billion of which priced as of press time and the remainder scheduled to wrap Friday. While the majority of supply came from the home-equity sector, a trio of credit card deals made the rounds. After a strong start to the year, auto-loan ABS continued to lag, absent from the market since mid-January.
After spreads blew through a tailspin in the fourth quarter, the home-equity sector is showing signs of improvement, as anticipated. Whether it is due to a lack of supply last December, improved sentiment with the subprime mortgage borrower or the "January effect," spreads for mortgage-related ABS from top-tier issuers have reverted inward and triple-B classes are now routinely pricing inside of 400 basis points over one-month Libor.
For example, the triple-B class of last week's Master ABS Trust 2003-OP1 transaction, led by UBSWarburg, saw its triple-Bs price at par, with a 390 basis point coupon over one-month Libor. Master priced its triple-As at 42 basis points over Libor, also in a touch from late last year, when spreads to Libor for 2.5-year seniors approached 50 basis points. The collateral backing Master 2003-OP1 was originated by Option One Mortgage.
New Century Home Equity Trust 2003-1, a $494 million home-equity deal led jointly by Morgan Stanley and Salomon Smith Barney, also cleared its triple-Bs inside of 400 basis points. The M3 tranche of New Century's first offering of the year priced with a coupon of 350 basis points over one-month Libor, at a discount, with a margin of 385 basis points to Libor. The triple-A seniors, sold directly to an unspecified GSE, also priced just inside of 50 basis points over Libor, although a specific level could not be confirmed.
Impac Mortgage Holdings launched, but had yet to price, a $300 million 2003-3 home-equity offering through lead manager Countrywide Securities Corp. The target level for the triple-Bs, which were set to price at a discount, was 385 basis points over one-month Libor, with the triple-As, soft circled at 38 basis points over Libor, also at a discount.
Also as of press time, Wachovia Securities was leading a pair of transactions in the mortgage sector. NovaStar Financial hit late in the week with a $1.25 billion 2003-1 deal, featuring a $293 million triple-A offered at 39 to 40 basis points over one-month Libor and the triple-Bs in the 375 basis point area. Equity One Mortgage had a smaller, $510 million 2003-1 offering, for which price guidance could not be confirmed.
A pair of hybrid ARM securitizations priced last week, $1.5 billion from Washington Mutual, which has sold three such deals already in 2003, and Bank of America Mortgage Securities, with its first of the year.
Chase Funding and AmeriQuest Mortgage each followed earlier transactions with net-interest-margin securitizations, neither of which had priced as of press time.
In credit cards, the week kicked off with American Express bringing a $832 million 2003-1 deal backed by its Optima card credit card portfolio, as opposed to the higher payment rate "charge, not credit" green card portfolio, which typically prices inside of any credit card ABS.
Led by Deutsche Bank Securities, American Express Credit Account Trust priced its five-year triple-A class at 11 basis points over one-month Libor and its single-As at 40 basis points over Libor, each at par.
Late in the week, MBNA Bank America completed its first single-A rated subordinated tranche this year from the MBNASeries trust. Also led by Deutsche Bank, the $200 million deal priced outside of Am Ex, with a coupon of 44 basis points over one-month Libor, although the final level was inside of initial guidance in the 45 basis point area versus Libor.
Once a frequent issuer in numerous sectors of securitization markets, Advanta Corp., was in the market with a $400 million credit card offering, backed by business-issued corporate cards, with the obligation to pay ultimately falling on the cardholder. Led by Barclays Capital, the three-year triple-A class was reportedly closed out at 40 basis points over one-month Libor, although the triple-Bs were still available, sources said, at levels in the mid 200 basis point area over Libor, as of press time.
Arizona Education Loan Marketing Corp. made an infrequent trip to the term ABS market, successfully pricing $99 million of FFELP-guaranteed student loan collateral via RBC Dain Rauscher. The 3.5-year triple-A A1A class priced at 11 basis points over three-month Libor and the five-year triple-A A1B class priced at 17 basis points over three-month Libor.
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