Spreads held tight last week for the asset-backed market, and while it was anything but a frenzy in the secondary, demand remained healthy - home equity shined, sort of - and trading resembled a bidding game, paper for paper, said players on the desk.
At press time only three new issues came to market, with a combined total not quite reaching the $1 billion mark.
"The earlier part of the week was quite busy but today's been kind of quiet," said one trader. "There were a few corporate deals (Textron and Bombardier), so that may have taken the spotlight away from asset-backeds."
The fixed-rate spreads on the week were for the most part much unchanged, "maybe a beep wider," said a trader. "The floaters seem to be at least a basis point, maybe two basis point better on the week.
"Spreads are holding firm, it's not like a food fight or anything to get bonds, but I think here, and probably other dealers, are keeping offerings tight because we're prepared to bid paper to try to accumulate a position."
As for new issuance, the trader said, "There's some home equity out there, some auto, but nothing significant."
Though year-end trading is slight, most players agree that ABS should look healthy moving into the first quarter of next year.
"I think total growth has increased over the last couple of years," said an analyst. "I think in general, total volume will probably be up in 2000. Credit quality has been somewhat mixed. On the credit card side it's been pretty good. On autos, also fairly good. On manufactured housing and home equity ends, I think it's been pretty spotty."
Centex Home Equity Corp. came to market last week with a $305 million home equity deal structured in seven parts, pricing on the tight end of talk across the board. For example, a 0.96-year, $68 million A-1 class priced at 40 basis points over 12-month EDSF, well within the 40-45 guidance. And a three-year, $39 million A-3 class priced at 117 basis points over Treasurys, compared with a the 120 area guidance. The only tranche that did not price significantly tight was the 6.25-year $20 million A-6 class which, also benchmarked on Treasurys, priced just on the 125 area guidance. Salomon Smith Barney managed transaction.
Also in home equity, Oakwood Homes, after three weeks of marketing, completed a $270 million deal co-lead by Credit Suisse First Boston and Bank of America Securities. The largest chunk of the four-part deal was a 5.25-year, $224 million A-1 class that priced at 155 basis points over Treasurys.
Dreamworks In The 144A
In the midst of Hollywood's most profitable year to date, film producing powerhouse Dreamworks SKG was back in the Rule 144A market with a massive $525 million offering backed by a specific collection of future film and video receivables. Proceeds from the transaction will partially be used to refinance the issuer's 1997 foray into the private asset-backed arena in which it raised $325 million using a similar structure. Other revenues will go toward funding project production costs.
The deal is broken up into two tranches, each being marketed by its own broker-dealer. The lead segment contains $375 million class-A senior notes managed by Bear Stearns & Co. The B-class tranche is made up of $150 million of subordinated debentures and is being managed by Chase Securities with a reinsurance firm providing a protective wrap. While both sets of securities are structured with final and average maturities, the latter tranche is reported to have has a longer term.
Said one source who had seen the deal, "The idea is that the transaction will not live or die by the outcome of one film because what is being securitized is a portfolio of films that are being cross-collateralized."
Founded in 1994 by media moguls David Geffen, Jefferey Katzenberg and Stephen Spielberg, Dreamworks is a private entertainment company. Its current roster includes the film American Beauty and recordings from Chris Rock and Randy Travis.