Merrill Lynch Bank USA, a subsidiary of Merrill Lynch, is preparing to launch its first multiseller asset-backed commercial paper program called Zane Funding, a much more flexible program than the existing Deer Valley Funding.

Zane Funding has plenty of flexibility built in, according to people familiar with the deal, and is expected to exploit its varied financing options to fund residential real estate loans, as well as consumer and commercial finance assets, up to $5 billion. It can purchase non-dollar denominated assets, as well fixed and floating-rate assets. It can also issue several types of notes aside from ABCP, including callable and extendible notes. ABCP issued from Zane will have maturities of 270 days or less. The extendible notes have an expected maturity of about 90 days, but their final legal maturity cannot extend beyond 270 days, according to Fitch Ratings and Moody's Investors Service, which both rated the deal. The notes also benefit from a letter of credit, which provides coverage in inverse proportion to the outstanding face amount of the notes. Zane also has a swap counterparty agreement with Cheyne Structured Solutions. Under the swap, Cheyne will provide first-loss protection, pursuant to FIN 46, according to Fitch.

Zane Funding can purchase rated or unrated securities, but Fitch Ratings and Moody's must approve each purchase beforehand.

Fitch and Moody's gave Zane Funding F1 and P-1 ratings, respectively.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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