Despite the not so uncommon end-of-quarter lull, the ABS primary market appears poised for an active April calendar, according to bulge-bracket ABS heads.
"Investors are still looking for quality and short ABS is seen as a surrogate to Treasurys," said one ABS head. He also added that from an issuers perspective, funding in ABS is still very competitive to the unsecured corporate bond market, which historically has not always been the case.
On a less bullish note, the Wall Street Journal took a shot at the HLTV home-equity ABS sector, quoting increasing mortgage default rates and a squeeze on consumers. It is well known that different home-equity sectors take varying levels of risk with commensurate higher losses. "Having higher losses is not a bad thing if the risk is priced into the deals and the bankers, and if the rating agencies and investors do project the losses properly," commented one banker.
The ABS pipeline remained active: On deck last Thursday was the $106 million HEQ deal for Soundview, Long Beach's NIM issue. Also in the works is an Americredit fixed-rate $495 million senior/subordinate subprime auto-loan ABS via J.P. Morgan Chase. The deal has six tranches including the money market class. JPMC is also said to have a $150 million trade receivables ABS in the market.
Dain Rausher is in the offer period for a Wyoming Student Loan Corp's 2001A transaction, which is rated AAA/AAA (F/S&P) and is talked at 355/T. The bond resets every 35 days
An equipment leasing deal is in the offing for Golden Eagle, market sources said. Additionally, Lehman Brothers launched a Greenpoint HELOC in the market last Thursday, at press time, and a Friday print was slated. Class A1 was talked at +22/1ML (A/L 2.38) and class A2 was talked at +24/1ML (A/L 2.40). Both tranches have a FGIC wrap. Class A is conforming, while Class B is non- conforming.
Meanwhile, Lehman was joyous over the Connecticut Light & Power's distribution since the deal was about three times oversubscribed, on average. Total return investors put a strong bid on the longer-dated tranches with the Class A5, 8.89-year average life tranche five times oversubscribed. Investors said CL&P is close to the cleanest rate reduction deal in the market, due to a 15% mandatory power reserve, no rate caps, and sufficient forward contracts. Next up for rate reduction deals is New Hampshire, Western Massachusetts, and Connecticut, sources said.