Last week's asset-backed securities market opened slow in the shadow of Green Tree Financial Corp.'s record $2 billion manufactured housing-backed securitization and interest-rate worries, but managed to pick up as the pre-holiday week wore on, with the manufactured housing and home-equity sectors stealing much of the spotlight.
However, the volume did come at a price, as several issuers saw their deals hit the tape at prices wider than initially expected.
The bigger deals fell by mid-week, with Case Credit Corp. leading the game with a $682 million equipment loan-backed offering. Led by Merrill Lynch & Co., Case's five-part issue was the first deal of the month, and the first for Case since a $775 million pricing in March. Merrill Lynch & Co. managed the deal, which sold two basis points to five basis points wider than talk. For example, the two-year $100 million Class A-3 tranche priced at 103 points over Treasurys, three basis points wider than talk.
"It's normal to have a price discovery period in a transaction," said Ralph Than, vice president and treasurer of Case. "I think we all know that the market today is not the same market that it was in the second quarter. I was very pleased with the execution given the market environment."
The manufactured housing sector likewise saw some action, pricing a combined $601 million by day's end on Thursday. Dynex Capital Inc. sold $341 million in manufactured housing-backed bonds through a seven-part transaction, co-managed by Lehman Brothers and NatWest Greenwich Capital Markets.
Yet like Case, Dynex's offering priced wider than anticipated (see story on page 3). "It executed about where we expected," said Hance West, executive vice president of portfolio management at Dynex, which will be in the market later this month with a $350 million single-family mortgage deal, also to be led by Lehman
In the HEL arena, American Businesses Financial Services priced a $186 million bond, the company's third HEL offering this year.
Indeed, it's likely to get tougher going forward. One source predicts that spreads will widen over the next few weeks, particularly as credit card banks issue heavily through September, and auto lenders make their entrance in the coming weeks. "It's going to be a buyer's market," he said, talking up a flood of paper.
As for Wall Street, senior management is having dealers keep positions lean, mean and tight, according to a source close to the market. "Investors smell blood," he said, adding that there'll be a lot of "hot air closing the books" near the month's end, "because they just can't ride out the quarter and do nothing."
As for the year 2000, heavy for stranded costs, he said.
Get in Line
Looking ahead, Delta Funding Corp. could be coming out with an HEL transaction as early as next week, said one trader. Hugh Miller, Delta's president and CEO, said, "We most assuredly will come in September, but we really don't know when." Though unwilling to put a number on it, Miller called an upcoming offering "similar to all our deals." Delta's last deal, priced on Jun. 15, was $420 million.
Fellow HEL company Headlands Mortgage Co. will also step up to the plate within a few weeks, sources say. According to published reports, Headlines was premarketing a $300 million transaction backed by home-equity lines of credit.