Through First Union Capital Markets, NextCard Inc. launched its third asset-backed commercial paper facility last week, a $220 million conduit that inches the company one step nearer a possible term deal. The groundwork is set.

"We are thinking about perusing the term market in the year 2000," said a spokesman at NextCard. "We will continue to evaluate the competitiveness of it, and base our decision upon cost effectiveness, in comparison with other financing opportunities."

Currently in talks with various institutions, NextCard is looking for the most efficient way to access the term market. The first deal would likely be larger than $200 million, the spokesman said.

There are factors, other than deal size, however, that have kept NextCard and other companies in the CP market, explained a source at First Union.

"There is some element of cost consideration," the source said. "There's also the element of the likelihood of actually consummating a transaction when they're a brand new company with their brand new portfolio, and typically ratings agencies would require some level of history."

The source said that an issuer, "can be a little bit more creative in the commercial paper conduit market."

At present, NextCard is securitizing the majority of their loans, and showing steady growth in terms of origination, the source said. At the close of the 1999 third quarter, total assets under management were $268 million, compared with just $66 million in 1998.

According to published reports, the company has taken over 25% of the online origination market share in the credit-card sector. NextCard was the first company to offer online credit card approval, a process that currently takes approximately eight seconds, and since then other consumer-finance companies have followed suit.

Internet Deals Fall From Sky: A Trend

"With the Net, it's like, once one firm figures it out, another says, okay, we've go to do it too,'" said an analyst who has worked on more than one Internet-related securitization.

Indeed, Web-based asset-backed transactions appear positioned to grab a bigger part of the spotlight as finance companies use the Web with greater frequency.

Along those lines, PeoplesFirst Finance came to market last week with the debut public deal backed by loans originated 100% online. The $116 million transaction was broken into three parts with averages lives ranging 0.7-years to 2.88-years. The largest tranche was a $56 million, 0.7-year leg priced at 42 basis points over EDSF.

The deal was said to price successfully, five basis points or six basis points below original levels. "It was a total blow out," said one trader. "I was surprised. It's a new name and a new concept."

"These guys at PeopleFirst have a great niche, and they've got a good 18 months to a year to really cultivate this business even further, because they've really figured out a way to really keep good credit quality, collateral accounts in place, and it's worked today," said source who worked on the transaction.

"These guys are first, they're obviously a major lender, this is a great phenomenon, and I think it's going to be a good store for a while," the source said. "But at some point in time, other lenders are going to catch up to them."

As for the frontrunners: watch for Paragon Acceptance (see story p.3), Providian Financial Corp., Capital One, all "high-techie companies," one source phrased it.

"I would imagine First USA and their account additions have dropped in a number of balances," said a source who worked on NextCard. "CompuCredit as well, they have a strong online presence."

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