ABS issuance slowed to a crawl since the last press time, yielding just a $1 billion Sallie Mae deal on Feb. 22, and a $180 million ratepayer-backed ABS last Thursday.
Those investors who did not abstain from buying the SLM Student Loan Trust 2008-3 altogether either made the issuer pay up or they vented dissatisfactions about inadequate deal transparency.
Banc of America Securities, Barclays Capital, Deutsche Bank Securities and JPMorgan Securities all co-managed the deal.
In its third deal this year, Sallie Mae priced its 1.25-year, triple-A-rated securities at the three-month Libor plus 50 basis points. That was a full 20 basis points wider than what it paid investors for similar securities in its 2008-2 transaction, according to the ASR Scorecard database.
"I just don't like student loans," one buy-side source said. Laying aside the implicit government guarantee of many SLABS, which are secured by FFELP loans, the options that get valued into the deals are disadvantageous to investors, he said. "In essence, you are shorting an option."
Another market source highlighted what he felt was one pestiferous aspect of SLABS. They are simply too opaque, he said, and that erases some of the justification for pricing premiums. That is an issue that carries over into the secondary market, he said.
"If you had transparency in the secondary market, then you would have trading," one source said.
The market did see a ratepayer-backed ABS, the $180 million Cleco Katrina/Rita Hurricane Recovery Funding LLC. Even that deal, however, was subject to withering investor choosiness. (see story p. 9)
Noticeably, there were fewer credit card and auto transactions, especially after the initial January rush of transactions.
One investor said that the secondary market for ABS paper, including credit card and auto deals, has dried up because dealers are already overloaded with paper, and buying is the very opposite of they want to do.
Another important factor in wide pricing, say buy-side sources, is the viscosity of certain assets.
"One of the reasons the market had to reset itself was because it priced in a liquid asset premium, and [now] it is no longer liquid," said that investor.
Otherwise, the market awaited a string of small mortgage-related deals form the Morgan Stanley ACES Trust. Altogether, the ACES series 2008-2A, 2008-3A and 2008-4A are expected to price $29 million in securities.
STARTS 2008-1, another issuer of mortgage-related bonds, is planning to come to market with a $425 million deal via HSBC.
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