With November fast approaching December and the end of 2008, ABS market participants have all but written off new issuance activity until at least January.
While secondary market activity remains robust, with bid lists from every ABS sector coming in a flood, half the deals being shopped around in the secondary won't find bidders, according to one ABS trader. Mostly, market participants are trying to test different spread levels, he said.
In what has been a series of loan sale announcements from the firm, Mission Capital Advisors said last week that it is currently accepting bids for a portfolio of distressed commercial real estate mortgage loans. The portfolio is secured by a variety of collateral types in Florida, Georgia, Nevada, Arizona and California, with a balance of more than $260 million.
The portfolio is divided into 27 asset pools and includes multifamily, condo-conversion, retail, office, single-family residential, commercial and residential development land, marinas, a restaurant and an auto dealership, among other asset types.
Reports on housing showed some upside last week. Citigroup Global Markets' Housing Monitor for November reported signs of improvement in the sector, with pickup in the pace of clearing the inventory pipeline, and also a small reduction in the pace of the deterioration of home prices. The analysts noted that the sustainability of this improvement will depend on the impact of the uptick in unemployment.
Merrill Lynch also cited a positive housing trend in a report last week. Analysts noted that the increase in delinquencies within the most distressed sectors seems to be slowing somewhat, with 2004 and 2005 subprime ARMs holding essentially flat.
On the primary issuance side, the market remains eerily silent, despite the potential liquidity boost presented by the Troubled Asset Relief Program (TARP). However, at least two deals came to market over the last two weeks. These provide at least a slight glimmer of hope that the financial markets are heading toward stability.
Banc of America Securities issued $105 million for the North Carolina State Education Assistance Authority to fund a student loan revenue bond issue under Series 2008-3. The deal priced at 100 basis points over its benchmark and pledged FFELP loans as collateral.
Barclays Capital also launched a $700 million auto loan securitization deal for Volkswagen, labeled Volkswagen Auto Loan Enhanced Trust 2008-2. The deal is slated to close on Tuesday.
Charming Shoppes, a specialty apparel retailer specializing in women's plus-size clothing, announced the completion of its misses catalog credit receivables sale on Nov. 14, and an increase in its funding capacity for its credit securitization program. The catalog credit card receivables were sold for $43.3 million in cash to World Financial Network National Bank, a unit of Alliance Data Systems Corp. Net cash proceeds for the company were $12.5 million.
Charming Shoppes also prepaid its 2005 Receivables Purchase Agreement, the conduit series that funded these receivables and increased the company's conduit capacity by $55 million through an increase in the existing Series 2004-VFC facility. Total conduit capacity in the trust was $155 million as of Nov. 14. Of that total, $117 million is unused and available to fund future credit card receivables.
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