The U.S. ABS primary market hit the first week of August like a wall, generating only $7 billion in new issue supply. The market had been cruising along at a pace in the $13 to $14 billion range for most of July, but the summer doldrums just kicked in.

In major financial news, there was more acquisition activity in the credit card market as HSBC Finance Corp. agreed to purchase monoline credit card company The Metris Companies, continuing a trend that is expected to shrink the credit card ABS sector.

Most major sectors were represented on the week, with a tobacco settlement deal sprinkled in for variety. That deal was a $69.47 million offering with a 23-year maturity and expected to price to Treasuries. Standard & Poor's is the only rating agency to rate the deal, slapping it with a triple-B rating. The deal is being led by Merrill Lynch and had yet to price as of press time.

Sallie Mae priced a $1.56 billion student loan deal by Banc of America Securities and Deutsche Bank Securities. The three-year tranche of the deal priced flat to three month Libor, while the seven-year tranche priced at nine basis points over three-month Libor - flat to guidance. The 2.75-year fixed-rate tranche priced at one basis point under swaps, also flat to guidance. "Sallie Mae is still the dominant issuer in the sector," said one market observer.

The auto sector saw an $850 million dealer floorplan deal by Volkswagen Credit drive its way into the market, that was warmly received by the market, pricing its three-year tranche at two basis points over one-month Libor, one basis point inside guidance. The deal was led by Morgan Stanley and SG Corporate & Investment Banking and was upsized from the original $750 million size. The auto sector was sparse otherwise.

The credit card ABS sector hosted deals from two issuers. Chase Manhattan Bank, N.A. priced a $500 million deal that priced a 5.43-year deal at one basis point over swaps to yield 4.601%.

Providian Financial Corp. also priced a series of deals totaling $915 million out of its new de-linked credit card issuance trust. The largest deal, a $643.6 million, three-year tranche priced at six basis points over one-month Libor, on the tight end of guidance. The $90.4 million, double-A-rated 2005-M1 offering priced at 17 basis points over one-month Libor, with the $87.3 million single-A-rated 2005-B1 at 30 basis points over, and the $93.1 million triple-B-rated 2005-C1 at 55 basis points over Libor.

All tranches were upsized via lead manager Deutsche Bank Securities. The deal marked Providian's first entrance into the sector since it was announced the company would be acquired by Washington Mutual, and the pricing of its three-year tranche, seven basis points tighter than Providian's most recent comparable transaction, reflects the improved pricing the company will get with WaMu as corporate parent.

The remaining offerings that actually priced by press time were real estate-related deals. The largest of the crop was a $1.1 billion home equity deal from Friedman Billings Ramsey, backed by Accredited Home Lenders-originated collateral. That deal priced two, two-year tranches that were nearly identical in size and backed by a full FSA wrap. The triple-A 1.98-year paper priced at 25 basis points and 24 basis points over Libor respectively.

In the midst of its credit card industry-rocking acquisition announcement, HSBC Securities found time to price a $649 million senior-subordinated home equity deal, its first from a new dealer shelf. The one-year tranche priced at 13 basis points over one-month Libor, two basis points wide of guidance. The three-year tranche of the deal priced in-line with guidance, coming in at 25 basis points over one-month Libor. The 5.67-year tranche priced at 36 basis points over one-month Libor, and tight to guidance.

Cendant Corp. priced a $525 million deal backed by timeshare loans via led by Credit Suisse First Boston and RBS Greenwich. Both tranches were 2.31-years and rated triple-A thanks to a FGIC wrap. The fixed-rate tranche priced at 28 basis points over swaps, and the floating rate tranche priced 18 basis points over one-month Libor.

Long Beach Mortgage was in the market with a $183.6 million subprime MBS deal led by RBS Greenwich and WaMu Capital. The deal priced wide to guidance all the way down the capital structure. The one-year tranche priced at 14 basis points over one-month Libor, four basis points wide of guidance, while the three-year tranche priced at 30 basis points over one-month Libor - six basis points over guidance. The 6.52-year tranche priced at 40 basis points over one-month Libor, four basis points wide of guidance.

Additionally, Carrington Mortgage completed a $656 million series 2005-NC4 offering via Citigroup Global Markets and Morgan Stanley wrapped up its series 2005-HE4 offering from the Morgan Stanley ABS Capital trust.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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