With the recent announcement made by Citigroup that it had reached an agreement with Copelco Capital, Inc., a leader in small-ticket vendor leasing, to purchase all of its outstanding shares, the asset-backed market saw Copelco bonds bidding at four to five basis points tighter, leaving players wondering how it will affect other aspects of its ABS business.
"Securititization is an effective means to finance the business and we will continue to include it among our finance options" said Sal Maglietta, head of Citicorp Global Equipment Finance. "The decision to do this type of transaction would be based upon an evaluation of market conditions, as well as present and future business needs. There are so many factors that would drive the amount and when, but it would certainly be a basic part of the business profile."
With the acquisition, Citigroups' equipment finance division, Citicorp Global Equipment Finance, is expected to become the largest U.S. bank-owned leasing company, with an increase in leased assets by 50%.
Although the transaction is relatively premature and remains subject to various regulatory approvals, market sources feel that there will be few negative effects on the ratings of Copelco's bonds outstanding.
"It certainly won't affect it to a negative side as far as in the early read," said Drew Nugent, an associate director at Fitch IBCA. "One of the pluses is that they now have a bigger, larger financial institution, with bigger pockets to go to. It should have positive benefits from that."