There was no significant widening seen in the $682 million MSDW Capital 2003-NC3 home equity ABS marketing last week, despite that fact that Provident Bank parent company, Provident Financial Corp., restated earnings by $70 million Wednesday due to securitization-related accounting misstatements. Provident Bank is acting as servicer for the New Century Financial collateral-backed offering as well as on six outstanding Provident Auto Lease ABS Trust auto-lease securitizations, totaling roughly $1.44 billion.
Specifically, Provident said it would restate its operating results for the years 1997 through 2002, because it had erred in the accounting for nine auto-lease securitizations issued between 1997 and 1999. Subsequently, Standard & Poor's lowered its unsecured debt rating on Provident Financial Group Inc. to double-B-plus from triple-B-minus and the bank operating company's debt to triple-B-minus from triple-B. Moody's Investors Service, on the other hand, placed the senior unsecured debt rating, currently at Baa3' for the parent and Baa2' for the bank, both on watch for a possible downgrade.
But sources said the revision did not affected spreads on the MSDW Capital deal, because the market could view the situation as solved, a source said, adding there was no visible push back in spreads of any kind, thus far.
Analysts at Credit Suisse First Boston point out that, as per the auto-lease ABS documentation only, an early-amortization event would occur should the bank, as servicer, be downgraded to below-investment-grade by both rating agencies. Additionally, should the bank's senior unsecured rating be cut to one notch from speculative status from both rating agencies, a backup servicer is required to be put into place. A bank's senior unsecured debt rating is typically one notch higher than its holding company parent.
The rating agencies did not take any action with respect to the company's ABS, and analysts at CSFB said that they believe, due to the aforementioned protections, there should be no direct impact on the issuer's auto-lease ABS or third-party serviced home-equity ABS whatsoever.
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