IndyMac expects to revisit the asset-backed securities market as soon as this quarter under a new strategy that will ramp up its subprime home-equity loan business and establish a pattern of regular issuance for the company.
"I'm 50-50 about doing it in '99 at this point," said Jim Banks, executive vice president at IndyMac, referring to issuing a deal before year-end. "It's getting too tight to do something at the end of November, although I'm still considering that. December would not be a good time, unless we did it early in December."
If the company does not issue this quarter, a transaction will most likely be launched in first quarter 2000, Banks said, probably in the $200 million range. Merrill Lynch & Co. and Banc of America Securities are likely leads on the upcoming offering as both have led IndyMac deals in the past.
After completing a securitization in the first quarter of this year, IndyMac had embarked on a whole-loan strategy in the second and third quarters to avoid securitizing so close to Y2K. But, as the hype died down, Banks said the idea of issuing in the fourth quarter became more and more attractive.
"The primary reason we sold whole loan as opposed to aggregating in a way to do securitization was because I was kind of running from the fourth quarter, this whole Y2K issue, and all the doom and gloom that everybody had presented early on in the year," he said. "Now, it looks like it's totally unrealistic and people are getting ready to issue freely in the fourth quarter, and there's really no issue. Spreads have tightened even."
Banks said IndyMac intends to increase its subprime loan production and implement a securitization strategy that calls for two deals per year to occur "maybe first and third quarter."