Primary issuance and secondary trading remained light last week as Fannie Mae and Freddie Mac uncertainties continued to weigh on the ABS market's mood. This is despite U.S. Treasury Secretary Henry Paulson's rescue plan that will, in essence, guarantee the GSE bonds by buying equity stakes in these companies and boosting the lines of credit available to them.
However, several consumer ABS deals did manage to get through, including a $1.03 billion auto securitization - USAA Auto Owner Trust 2008-3. Barclays Capital and JPMorgan Securities lead the deal, along with co-managers Deutsche Bank Securities, HSBC Securities, Wachovia Securities and Credit Suisse Securities.
Merrill Lynch was shopping a $350 million auto deal, Merrill Auto Trust Securitization 2008-1, backed by a pool of retail installment loan contracts originated by Mitsubishi Motor Credit of America, and secured by new automobiles, light-duty trucks, and sports-utility vehicles according to a presale report from Fitch Ratings. Pricing information was not available at press time.
However, Fitch noted its concern about the high concentrations of vehicle makes and models in the deal. Indeed, almost all of the vehicles securing the transaction are manufactured by Mitsubishi Motors Corp., with five model types totaling more than 99% of the current pool loan balance, the rating agency said.
In credit cards, a $423 million credit card securitization, Golden Credit Card Trust 2008-3 also hit the market last week led by JPMorgan and RBC Dominion Securities. Three-year triple-A paper priced at 100 basis points over one month Libor.
The Louisiana Utilities Restoration Corp. also issued a two part securitization of storm recovery bonds, totaling almost $1 billion, split between two deals under servicers Entergy Louisiana and Entergy Gulf States Louisiana (see story page 9). The deal will be used to cover costs associated with hurricane damages to the utility companies.
With the lack of new deal volume, the ABS market has ramped up its efforts at bringing liquidity back to the industry.
Securitization professionals attended the American Securitization Forum's Sunset Seminar to discuss Project RESTART, an industry-led plan to bring confidence back to the securitization market by creating "market-based solutions" including the development of standards and common practices for collecting and distributing data.
Last week's gathering focused on how RMBS data should be disclosed when it is in securitized pools, and how data should be improved to make it more reliable and consistent, as well as easily understood and widely available to the market. "We want to put investors in the originators' shoes," said Ralph Daloisio, managing director at Natixis, who was a panelist at the meeting. Participants also said they are working to increase surveillance data.
Standard & Poor's announced a request for comment on a proposal to incorporate credit stability as an "important factor in its ratings." The rating agency said that it will be considering whether periods of moderate stress would have a negative impact on an issuer or a security. This additional reporting, which is expected to be implemented over a six-year period, would be retroactive, S&P said.
"This proposal is a step in the right direction," said S&P's Chief Credit Officer Mark Adelson. "Where there is a visible instability issue, it would not get ignored."
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