The crystal ball into the asset-backed market for the fourth quarter and the year 2000 has revealed larger than expected volumes, a continued globalization of the asset-backed market, and a heightened focus on corporate risk, say experts.
Market sources are now saying that ABS volume is expected to surpass expectations in the fourth quarter, as investors have done a lot to dissipate the Y2K fears of issuers by expressing the need for a place to put their money. Student loan issuers such as Mellon Bank, Education Loans Inc. and Union Financial Services are expected to bring added volume to the student loan sector, and, according to sources, equipment lease players intend to be out before the millenium in full force.
From a macro perspective, the globalization of the market continues, said Brian Clarkson, managing director of the structured finance group at Moody's Investors Service. Clarkson says that U.S. and international ABS product will merge, particularly between U.S. and European concerns, where buying and selling within one another's markets, both in euros and in dollars, will be the trend going forward.
Evidence of the trend began this September when securitization giant General Motors Acceptance Corp. floated a $1 billion, Euro-denominated dealer floorplan auto loan securitization to European investors, and has continued with Puerto Rico-based Banco Popular issuing a dollar-denominated $195 million home-equity securitization to an international audience from its mortgage arm Equity One.
In terms of credit risk, the word "bankruptcy remote" is sounding thinner and thinner, say insiders, as most feel the legal protection offered to bond investors from an issuing company's credit troubles has been oversold.