In the recent past, two instances of negative news from the subprime mortgage market might have rocked pricing on HEL issuances. That was not the case last week, even after NovaStar Financial wrapped up a $1.3 billion issuance just ahead of an announcement that it was exploring strategic alternatives for the company, and Accredited Home Lenders agreed to a major buyout.
Two home equity loan deals opened the week last Monday, abreast of news that Accredited agreed to a $400 million buyout from Lone Star Fund and that NovaStar saw its equity ratings downgraded. By press time, at least $3.9 billion of asset-backed securities priced, out of at least $8 billion in announced deals for the week.
Countrywide Asset-Backed Certificates priced a $1.1 billion transaction on Monday, and by all appearances it ran off with the spoils of pricing victory. If the market harbored any apprehensions about the subprime MBS market, investors did not show it, judging by securitization professionals' comments, by the lack of wide pricing throughout the structure and by its more favorable pricing in comparison to subsequent HEL deals.
The transaction had a one-year, triple-A piece that came in at six basis points over the one-month Libor, reminiscent of last year's levels. It did have a single-B, 4.9-year portion that priced at 850 basis points over, but its other triple-B tranches appeared to achieve disciplined pricing, too.
Although the collateral comprised subprime mortgages, market participants said pools seemed tidier in comparison to previous issuances. Overall, loans had been originated under stricter underwriting standards, the pool had virtually no AD 20s and there were fewer heavily leveraged borrowers.
"There was some tiering in the market," one market participant said. Referring to the Countrywide transaction, he added: "No one was asking for [securities at] two ticks wider."
Perhaps investors aimed their requests at Lehman Brothers' LABS $392 million HEL transaction, instead. Its one-year, triple-A-rated piece priced at nine basis points over, compared to Countrywide's six. Also, the LABS' two-year, triple-A piece priced at 20 basis points over the one-month Libor, noticeably wider than Countrywide's similar security, which came in at 13 basis points over the benchmark.
Barclays Capital's Securitized Asset-Backed Receivables Trust, however, came to within striking distance of Countrywide's pricing, at least among the securities with shorter durations. Its one-year, triple-A rated piece priced at seven basis points over the one-month Libor, while the triple-B, 4.30-year portion came in at 225 basis points over.
Further into the week, UPFC Auto Receivables Trust was marketing a $250 million auto deal. Initial price talk put the money market portion at two points under the three-month Libor, but the security actually priced at three basis points over. The issuer redeemed itself somewhat, as its 1.1-year piece priced at eight basis points over the EDSF, which was expected to price one basis point wider.
Among credit cards, the single-tranched, $1 billion Chase Issuance Trust 2007-A9 led by JPMorgan Securities priced at three basis points over the one-month Libor.
A mixed bag of consumer-driven ABS deals queued up for pricing last week. A couple of student loan ABS, totaling $1.16 billion, were said to be under way and under management from Deutsche Bank Securities, although the company did not confirm that. Both the National Collegiate Student Loan Trust's $1 billion transaction and the $122 million National Collegiate Trust were in the pipeline as of press time.
Meanwhile, as issuance in the auto sector continues its mere trickle, a couple of auto deals rolled out of the pit. They included the $772 million Merrill Auto Trust Securitization and the DT Auto Owner Trust, sized at $320 million.
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