Maintaining its recent spate of optimism, last week's asset-backed securities market brought low to moderate pricing with numerous roadshows, as spreads narrowed slightly, particularly in the longer maturities, sources said.
At press time, total issuance was $2.3 billion, with the credit card sector claiming $1.5 billion of the action.
"Deals are continuing to get priced, and investor demand is still fairly decent, actually quite positive, in light of this kind of mood or feeling that most people have that it's kind of shut down for the year," said Jeff Salmon, director of ABS research at Barclays Capital.
"And I think that [because] these deals are getting priced at good market spread levels, from an issuer perspective, it's a good sign that the investor community is still out there, still looking for relative value, and has cash to put to work," Salmon said.
The Steagall Repeal And ABS
The imminent repeal of the Glass-Steagall Act - which for the past 60 years has prevented banks from entering the securities business - prompted speculation as to what the effects might be on the asset-backed market place last week.
"What it means is that you have more of these banks, insurance companies, brokerage dealers merging with each other," said Dan Castro, head of research at Merrill Lynch & Co. He explained that as these mergers take place, the market might see more investment banks underwriting their own loan portfolios, as already happens when companies like Morgan Stanley Dean Witter underwrite a Discover Card transaction.
But perhaps more significant is that the repeal of the regulations could possibly decrease the need for issuance, Castro explained.
"If some of those guys that use [securitization] actively, merge with somebody that's much stronger financially, then maybe they won't need to securitize as much," said Castro. "Maybe they won't need the funding, or maybe they can get the funding cheaper in the unsecured market. That may mean a drop off for some issuers."
Done Deals Herald November Volume
MBNA priced the week's largest deal, a $693 million credit card-backed transaction structured in two parts. The 6.94-year, $56.25 million class B priced at 53 basis points over one-month Libor, hitting the low end of talk. Salomon Smith Barney managed the transaction.
In auto loans, WFS Financial priced a $500 million deal led by Banc of America Securities. The transaction was structured in four parts. The largest tranche, a 0.75-year, $224.1 million A-1 class priced 39 basis points over nine-month EDSF, at the high end of talk. However, a two-year, $150 million A-2 class priced at 99 basis points over Treasurys, tight compared with talk in the 100 area.
As it has been all quarter, the pipeline is filled with deals raring to go, including Metro, West Pennsylvania Power, Caryle High Yield Partners, General Motors Acceptance Corp. and Barclaycard (see story p. 11).
"The month's about to end," said Castro. "The next couple of days should be slow, month-end pricing and all that kind of stuff. It looks like November might be the busiest month of this quarter."
Castro predicts that some deals might even price in December. "I think there'll be a little bit of issuance, but not much, $5 billion or $7 billion," he said.