On the prowl for liquidity, Conseco Finance introduced last week a $60 million liquidation expense securitization, which allows the company to finance the reimbursements owed Conseco for the costs associated with liquidating repossessed collateral. The deal is called CLEAR 2002-B, standing for Conseco Liquidation Expense Advance Receivables backed notes or CLEAR 2002-B
Conseco brought a similar securitization via Credit Suisse First Boston in March, where the company monetized servicer principal and interest (P&I) advances associated with home-equity and recreational vehicle deals.
Unlike the servicer advance-backed deal, where the advances are reimbursed at the top of the waterfall, the liquidation reimbursements take place outside the securitization waterfall.
CSFB is also lead manager on CLEAR, which is expected to price this week, according to buyside sources. This transaction monetizes the reimbursements due to Conseco associated with several tens of outstanding Conseco Finance and Green Tree manufactured housing securitizations.
According to market sources, issuers, such as Oakwood Homes, have established similar programs, generally in the form of warehouse lines secured by advance receivables; however, Conseco's two transactions are believed to be the first actual securitizations of servicer advance and liquidation advance receivables.
Also in MH land, in its latest ManuFacts research publication, CSFB makes the observation that ratings on certain Bombardier Capital manufactured housing deals do not accurately reflect the risk.
Standard & Poor's downgraded the only two deals it has rated, 1998-C and 1999-A, following a rise in delinquencies materially higher than other MH issuers. Both of S&P's deals benefited from a letter of credit from Bombardier. The subsequent 1999-A offerings do not benefit from the LOC, though neither Moody's Investors Service nor Fitch, which have ratings on those deals, have taken action.
An analyst at Moody's said, "We are looking at the change in performance since Bombardier has exited the industry, but we have not taken any action at this time."
In the March ManuFacts, CSFB also takes a close look at Oakwood's Loan Assumption Program, where the issuer avoids the typical repossession by offering a distressed borrowers the option to essentially assign their mortgage (and residence) to a new borrower, who assumes the contract. Generally, this could help improve trust performance, CSFB says.