PARADISE ISLAND, Bahamas - The Metris Companies was the one name just about every analyst and trader remained bearish on during the ABS researcher and trader roundtable discussions at last week's Information Management Network's ABS East gathering.
Lehman Brothers analyst David Heike cited the restricted growth potential for the portfolio, thin excess spread of the trust and the omnipresence of the Federal Deposit Insurance Corp. when posed with the question of what issuer would be the next to blow up. Deutsche Bank's Karen Weaver said, "Metris is at a critical time in terms of losses."
Those negative vibes were not helped when Metris's Senior Vice President and Treasurer Ralph Than was a no-show at the Retail and Bank Credit Card Issuer Roundtable held Thursday morning. "Metris claims to have a good story to tell," said JPMorgan Securities researcher Chris Flanagan. "They have to get out and tell it."
Also coming out of the roundtable was the consensus that the lagging economy would have a continued negative effect on consumer ABS product, particularly in the subprime sector.
However, discussions also pointed out the positive. Aside from the headline risk associated with non-prime issuers, structures remain sound and with a few not-too-surprising exceptions, blowups should remain limited in the near term.
Traders at Thursday's roundtable discussion concurred that it would be wise to stay away from anything subprime-related, barring a surety. Merrill Lynch director Brian Kane said "stressed credits have now become distressed credits."
But, for the traders, such distress breeds opportunity. With certain sectors having experienced a massive re-pricing, according to Credit Suisse First Boston Managing Director Greg Richter, "price migrations are currently where nobody would have thought. Spreads will move out to where investors take notice."