New-issue supply rebounded in the week following Thanksgiving, pricing $6.5 billion of paper as the official year-end push took effect. Despite a few notable exceptions, off-the-run issuers loaded the pipeline, leading to increased activity in secondary markets as investors sought benchmark names out on the curve, traders noted.
After more than three weeks of hibernation, the credit card sector awoke from its slumber and priced four deals, for a total of $1.6 billion, led by $1.35 billion of Citibank supply.
Utilizing its "Block & Trap" issuance vehicle, the benchmark issuer brought a small $350 million piece of a five-year single-A-rated floating-rate B2 paper Wednesday, pricing at 47 basis points over three-month Libor. The following day, Citi brought an even $1 billion of three-year fixed notes at an offered spread of 10 to 11 basis points over swaps. The senior tranche was scheduled to price Friday.
The only other issuer currently with a de-linked issuance vehicle, MBNA, readied itself to hit the ground running when 2002 begins with the sale of $150 million of triple-B-rated subs through Deutsche Banc. As of press time the five-year C5 class floater was also set for a Friday pricing at a level of 122 basis points over one-month Libor.
This will likely be the final deal of the year for MBNA, which unveiled its "MBNAseries" vehicle in May. "We aim to maintain subordination levels sufficient to opportunistically tap the market for senior offerings," said securitization guru Vernon Wright. Subordination levels for MBNA are currently at 15% for triple-A paper.
Catalog-based hunting and outdoor supply retailer Cabela's sold its second credit card deal of the year in the Rule 144A market via Wachovia Securities. The single-tranche MBIA-wrapped five-year offering, backed by revolving Visa card receivables, came one basis point tight to initial guidance at 34 basis points over one-month Libor.
The asset class with the heaviest representation last week was the home-equity sector, which saw four deals circulate for a total of $2.3 billion. Collateral from AmeriQuest, Principal Residential Mortgage, Aames Financial and C-BASS were all announced, but as of press time late Thursday, none had priced. However, sources close to the deals affirmed each deal was on track to price Friday.
With issuance in the student loan sector down approximately 50% this year, it was expected that the market would see some supply before year-end. Last week Sallie Mae and North Carolina State Education Assistance Authority each brought FFELP-guaranteed collateral to investors.
Sallie Mae priced $1.5 billion of notes through JPMorgan and Morgan Stanley jointly, backed by an entire pool of loans based off 90-day commercial paper rates instead of T-Bills. This first for the sector was inevitable, sources noted, as it is only a matter of time before T-Bill collateral becomes extinct. With no T-bill collateral in the pool, and a limited CP investor base, the entire offering was indexed to Libor.
"This continued refinement is reflective of the industry," said Anthony Hermann, who handles the sector for JPMorgan, noting any basis risk was negligible. "The Libor to CP rate differential averaged only 13 basis points compared to 44 for the Treasury-to-Eurodollar (TED) spread over 10 years."
The $200 million North Carolina deal, led by Wachovia, followed Sallie, coming in with spreads of 15 basis points over three-month Libor and 28 basis points over CP for the twin $100 million classes. Also, $60 million of collateral was set to hit the auction-rate market.
Meanwhile, the auto-loan sector had but one new issue pricing, a Salomon-led $300 million "mostly prime" retail loan-backed offering from Franklin Auto, a unit single-A credit Franklin Resources (which also owns the Franklin Templeton group of Funds)
Although each class came in line to tight versus initial guidance (two year A3 class came in 2 basis points prior to pricing), the presence of some non- and subprime collateral in the pool led the yields wider than recent comparable auto deals. Pricing two to four basis points cheap to the Nov. 14, prime used car loan deal from CarMax, one investor commented the yields were more in line with the recent equipment loan offering from John Deere Capital.
Additionally, Textron Financial priced $375 million of aircraft through Deutsche Banc, an offering initially set for the week of the terrorist attacks (see story p. 4).
The floating-rate offering, backed by high-net-worth individuals and corporate loans and leases, rather than commercial aircraft, did well, buttressed by the issuer's first-ever surety wrap from MBIA. As a result, final spreads to one-month Libor were up to five basis points inside of guidance out on the curve.