Asset-backed new-issue supply picked up last week with $10 billion making the rounds in a slow-to-develop primary market that exploded Thursday. While top-tier names are having little difficulty completing transactions, investors have been slow to accept any off-the-run issues as just $8.5 billion of the potential supply was wrapped up as of press time.
Buyers snatched up offerings from familiar issuers such as AmeriCredit Corp., Centex Corp., Harley-Davidson, GMAC-RFC, Nissan Motor Credit and WFS Financial. Meanwhile one-off and infrequent issuers have languished in the primary.
The auto loan sector was hot last week, with a foreign captive and a pair of regional independent lenders competing for investor attention while a motorcycle loan deal came and went in a flash. Nissan, AmeriCredit and WFS Financial brought price discovery to a market that had seen two weeks of marginal widening. Luckily, between the three, investors had the choice of prime (Nissan), wrapped (AmeriCredit) and senior/sub (WFS Financial) supply to set the market.
Nissan proved that current spreads are yieldy enough for high-quality auto paper and showed only limited impact from the recent uneasiness with the quick pricing of its $1.1 billion deal. Spreads for money market 2a7 and one-year notes priced in line with the April trade, while two-year and three-year paper cleared four and three basis points outside of comparable tranches of 2002-B. Lead manager Morgan Stanley was quick to point out that the 3.31-year A4 tranche, which priced at 12 basis points over comparable swaps, came in on top of the recent GMAC CARAT trade.
AmeriCredit, in the market with a 1.3 billion 2002-C offering via Barclays Capital and Credit Suisse First Boston jointly, brought the wrapped auto deal. WFS Financial, by contrast, ditched the wrap it usually uses for its offerings and saw strong demand for lower-rated tranches that were marketed extensively by Salomon Smith Barney prior to the seniors hitting the market.
Based solely on spread performance, AmeriCredit came off looking better than WFS, pricing the comparably rated tranches of its offering inside WFS across the yield curve 11 basis points inside of WFS for two-year, A3 paper. But WFS tapped a new investor base with the offering of its lower-rated subs and saw oversubscription rates top 500% for triple-B rated paper, which priced at 175 basis points over swaps.
Meanwhile, the AmeriCredit transaction was credited by some at CSFB for boosting the company's stock price after it lost 25% last Wednesday following its second-quarter earnings, which reported higher delinquencies and had equity analysts predicting increased chargeoffs in the second half of the year. AmeriCredit stock was down 25% Wednesday and rebounded slightly Thursday, gaining 2.17% during a 255 point rally in the DJIA.
Harley-Davidson, with a loyal investor following, is the only issuer that seems to be unfazed by the current economic woes. Despite bringing its largest-ever offering, $600 million, and the three auto loan deals in the market, the JPMorgan Securities-led deal was a total blowout that saw a diverse book of investors. Spreads for 2002-2 were in line with its April transaction, the 2.87-year A2 tranche actually tightened three basis points from initial guidance, and the single-A rated B tranche priced at 60 basis points over swaps nine basis points inside of 2002-1.
Home equities saw $3.2 billion of supply, with GMAC-RFC bringing a pair of deals from its RAMP and RASC issuance vehicles. The larger of the two, $1.7 billion of RASC 2002-KS5 subprime RMBS came via CSFB, while Bear Stearns brought the $580 million RAMP 2002-RZ3 high loan-to-value first liens. Some widening hit the RAMP offering, with widening particularly at the front end, the RASC offering came right in line with guidance.
Centex, which brought $580 million of senior/sub home equity loan-backed notes via Salomon, did not have much difficulty in pricing its deal, with the exception of the $263 million 1.72-year AV tranche that widened three basis points from guidance in the 27 basis point area over one-month Libor.
Even an insurance premium loan ABS priced last week from PFS Premium Finance the third of the year for the asset class prompting quips of "that might just become its own asset class," from one researcher away from the deal. The $100 million MBIA-wrapped offering priced via Banc One Capital Markets in the Rule 144A market at par with a 31 basis point spread to three-month Libor.
Fleet Commercial Loan Master LLC, the $1 billion ABS/CLO hybrid that offers ABS-like bullet pay bonds and a revolving pool of assets in a master trust structure but also has no CDO-like equity interest continues to market via Morgan Stanley.