Onyx Acceptance Corp., through newly formed investment banking boutique Woodcliff Co., privately placed the largest-ever, $59 million automotive residuals securitization, backed by the combined residual interests of Onyx's previous 15, triple-A-rated non-prime auto transactions.

With structural enhancements, the transaction was able to receive a BBB-rating from Standards & Poor's Ratings Services. The bonds were placed with three large insurance companies.

"I would say it's a testament to our portfolio performance that we were able to get an investment grade rating from the rating agency," said Don Duffy, chief financial officer at Onyx. "We're happy with the distribution."

The deal was structured in two parts: $49 million in A-class notes, and $10 million in B-class notes, which were retained.

"It allows us to pay down our residual financing lines, and increases Onyx's liquidity," Duffy said.

The transaction was based on a financial model which showed the expected cash flow of Onyx's previously completed securitizations, explained Russ Salisbury, co-founder of Woodcliff.

Similar to those put together by ratings agencies, the Onyx model showed the cash flow under a wide variety of stress scenarios, including those in which surety triggers were hit, causing cash to be retained in spread accounts.

The model also accounted for the effect of reinsurance contracts that replaced a portion of spread-account requirements, the effects of overcollateralization and the impact of an interest-only strip in one of the underlying securitizations.

"The deal included several unique structural features, which served to strengthen the transaction," Salisbury added.

Using 15 separate pools exposes the transaction to greater risk diversity than any one of the underlying securitizations. Further, each of the underlying securitizations were seasoned - some more than three years.

Also interesting, the amortization was structured so that, while the average life of the notes is less than the average life of the underlying assets, Onyx will still be able to receive quarterly cash distributions from the underlying securitizations.

Woodcliff Company

The Onyx transaction was just the second deal Woodcliff has landed since its inception.

Separate from Onyx, last summer Woodcliff placed a $50 million financing to fund the marketing of consumer-credit products. It was structured to maximize accounting benefits to the consumer-credit issuer and generate significant tax savings to the third-party marketing company.

Woodcliff, which was formed last July, is the brainchild of longtime securitization veteran Salisbury, and co-founder Walter Hess.

Salisbury left State Street Bank last July, where he was running the asset-backed finance group, which he founded in 1989.

At State Street, Salisbury established one of the industry's first multi-seller, multi-bank commercial paper conduit.

Hess, who until 1992 was the chief financial officer at Kessler Financial Services, had been the CFO of Winthrop Financial Associates since 1983. Prior to Woodcliff, Hess was an independent consultant.

Woodcliff is targeting the single-A and below markets, generally first-time or relatively new issuers, to assist those companies in constructing efficient securitizations, or efficient solutions to their capital raising efforts, Salisbury said.

"We are not going to compete with Goldman Sachs or Merrill Lynch to do $1 billion, triple-A rated credit-card deals, but we would like to help companies that have more complex problems than selling triple-A rated paper," he added.

Currently, Woodcliff is looking to add two experienced analysts to its team.

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