First-time issuer Universal Compression, Inc. was set to price the first deal backed by leases on natural gas compressors the ABS market has seen to date. The $200 million, 144A deal, Universal Funding 2005-1, was being led by Wachovia Securities but had yet to price as of press time.

The single-tranche, Ambac-wrapped deal has a fourteen-year average life and was rated triple-A by Moody's Investors Service and Standard & Poor's. Wachovia Officials declined to comment, as the deal is private and had not yet priced. As of last Thursday, the 7.2-year A class notes were offered at 33 to 35 basis points over one-month Libor.

The deal is Universal's first term ABS issuance, however the company has a $200 million ABS conduit facility. It is unclear whether the current term issuance is being used to refinance that facility, or other company debt. Universal senior vice president and CFO Michael Anderson also declined to comment on the timing or specific financing purpose of the deal.

Houston-based Universal offers a variety of natural gas compression services including sales, operations, maintenance and fabrication of products to the domestic and international natural gas industries, according to information from filings with the Securities & Exchange Commission. As of June 30, the company had a fleet of around 7,000 natural gas compressor units comprising approximately 2.5 million horsepower.

The fabrication unit of the business designs, engineers and assembles natural gas compressors for sale to third parties and for use in its contract compression fleet. Its customers consist primarily of domestic and international oil and gas companies, international state-owned oil and gas companies, large and small independent producers and natural gas processors, gatherers and pipelines.

Natural gas compressors are mainly used to compress gas so that it can be more easily delivered from the wells to the consumers. As wells age and as gas is depleted from them, the pressure in the wells declines, and it becomes difficult to extract the gas. Compressors make it possible to extract the gas and move it to processing stations, and from there, through systems of pipelines to storage facilities and, finally, to end users.

As of the close of 2Q05, Universal had approximately $848.8 million in outstanding long-term debt obligations consisting of $399 million outstanding in a seven-year term loan, $173.4 million in 7.25% senior notes, $200 million outstanding under its ABS facility and $76.4 million outstanding under the revolving credit facility.

A source familiar with the deal said that while the company has not specified its future issuance plans, it is likely Universal would be back into the ABS market.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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