Despite enlisting Merrill Lynch to find it a buyer after misprojecting its earnings this quarter by as much as 50%, Oakwood Homes Corp. will continue securitizing full-steam. The Greensboro, N.C.-based manufactured housing issuer was about to distribute premarketing guidelines at press time on a $300 million deal for launch early in the week, and has added to a mammoth $2.5 billion shelf filing that looks to provide some funding for the firm through the remainder of the year.

Credit Suisse First Boston, the underwriter for Oakwood since it entered the market in 1994, will lead the upcoming deal, and Banc of America Securities will act as co-manager. Both will have a tough time getting smooth execution on this one, though, said a source, as the firm's admitted woes and the sector's relative ill health look to push spreads wide. Heavy participation by the agencies is the proof in the pudding, he said.

"There will be a significant amount of agency participation in this deal just as we've seen in most every [manufactured housing] deal out there, which I think evidences a thinness with respect to investors in that market right now," the source said. "That means your pricing's going to be a little wide."

The source said to expect at least one large triple-A tranche, which will make up the bulk of the deal, to be agency bound. Oakwood was still working out the structure of several tranches, he added.

The entire manufactured housing sector has suffered from a slowing rate of sales over the last year. Moho players IndyMac and Dynex have both announced they will sell off or discontinue lending operations in the arena.

Earnings at Oakwood have fallen since early last year as the firm's expansion plans pushed expenses higher. The situation worsened as poor winter weather caused shipments to slow, and leftover fallout from last fall's liquidity crisis produced diminutive gains on the firm's January securitization. The company was then hit with a $45 million earnings charge because of greater-than-expected defaults and refinancings on its mortgage loans. After retail sales slid 16% on a per-home basis through May, and total sales dipped 10% in overall dollar terms, the firm began a search for a cash-rich parent.

Valued at $600 million, the company's shares have dropped 52% in the past 12 months, leaving analysts to predict a buyout price for Oakwood ranging between $12 and $15 a share. Oakwood's stock was trading at 12 1/8 at press time. Moody's Investors Service has downgraded the junior tranches of some of the company's ABS ratings. Standard & Poor's has placed similar Oakwood bonds on ratings watch.

Expect some structural tinkering from the firm going forward, as its shelf filing allows it to treat a portion of the assets of the trust "as one or more REMICs."

- SK

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