Since mid-January, Oncor Electric has been in the planning stages for its second-ever stranded cost ABS, following its successful series 2003-1 transaction that priced last August. But despite its previous transaction setting the benchmark for reporting standards, underwriting fees, yield spreads and distribution/allocation, it has taken longer than anticipated to line up the selling group and bring the deal to market.
The holdup seems to be the issuer's new request regarding communication of investor demand and initial price guidance levels before the book has been opened and the transaction launches.
"[Underwriters] are being required to sign agreements preventing them from discussing spread levels with each other," one banker who looked at the transaction reported. One unidentified underwriter has already been hired, then subsequently removed as lead manager.
While Oncor Electric Delivery Transition Bond Series 2003-1 featured numerous innovations, including variable underwriting fees and enhanced reporting standards for investors, underwriters are reportedly wary of changing the way they do business. The longer this deal takes to come to market, the greater opportunity an opportunistic underwriter has to nab the lead mandate.
Last year's offering was led by Lehman Brothers and Morgan Stanley, with Goldman Sachs and Merrill Lynch as co-managers.
Spurred by input from independent advisor Sarber Partners, as mandated by the Texas Public Utilities Commission, last year's transaction led to the tightest-ever RRB print and began sector-wide tightening. Since August, stranded cost spreads have tightened five basis points at the front end and up to 10 basis points out on the curve, according to records maintained by ASR.
"My goal is a fairly broad distribution, improved liquidity and tight
pricing, further advancing the market," said Saber Partners CEO Joseph Fichera. The restriction on communication would be "prior to pricing, prior to launch. We don't want collusion," Fichera added.