This month's Term ABS Loan Facility (TALF) subscription saw fewer transactions versus last month.
According to a Bank of America Merrill Lynch report, the November TALF funding concluded with $5.7 billion of TALF deals compared with $6.6 billion in October. There were also $1.1 billion of gross TALF loans compared with $2.5 billion last month.
Autos dominated this round, as has been the theme throughout TALF's existence. Deals from this asset class led the way by making up 54% of this month's TALF new issue volume. The floor plan deals were the leading TALF loan collateral type, comprising 39% of November's TALF loan volume, according to the BofA/Merrill report.
Meanwhile, equipment loans/leases also were used as collateral for TALF deals and TALF loans. A few issuers that have not gone the ABS market route for several years re-entered the market, even though some of these issuers have used this type of financing for other product types.
With investors focused on the new-issue market, several firms used the chance to issue non-TALF deals. Cash investors were far more active than TALF investors, as spreads going into the funding resulted in returns inside the threshold required by most TALF investors, according to BofA/Merrill
The cash investors comprise those who are approved for TALF and those who are not. BofA/Merrilll analysts added that the number of cash investors that are part of the program continues to grow. They said that most of this month's TALF investors have participated in past fundings. TALF investors continue to focus on sectors and issuers that come to the market less frequently as well as longer-dated classes in the auto and equipment asset types.
A part of this month's TALF loans were used to finance secondary positions. As deals moved closer to pricing, fewer saw the considerable drops in spreads that the market has seen at past TALF fundings. Tiering was seen between sectors and issuers and this is why month-over-month comparisons were mixed.
Even though the TALF program still provides an important back-stop to wider spreads, the comparatively high level of interest by cash investors, the ability of several issuers to price non-TALF transactions near the program's levels, and the use of this month's loan proceeds to fund secondary rather than primary positions have pointed to the possibility of the ABS market being able to operate without TALF, BofA Merrill analysts said.
BofA/Merrill analysts think that more firms will look to issue non-TALF-eligible ABS and move the timing of their deals away from TALF subscription dates. Nonetheless, they believe that issuance volume will stay clustered around TALF subscription dates, the next date being 12/3/09.
The link below contains details of the November TALF transactions from the ASR Scorecard database.