BOCA RATON, FLA. - Issuance out of single-seller ABCP conduits is expected to continue to rise this year, in large part due to the increase in extendible note issuance out of single-seller conduits. There was $15.9 billion in U.S. ABCP outstanding in single-seller programs as of the first quarter, and $17.6 billion as of last year.
Extendible notes give an issuer the ability to suspend payments to investors under certain circumstances - good for issuers in the face of a market downturn, but perhaps not so good for investors, who have previously expressed concern of one extension leading to a ripple of others. The total number of extendible notes outstanding rose above $100 billion in March from some $60 billion in the same month last year, according to Lehman Brothers. And as of June, the notes currently constitute 12.5% of total U.S. ABCP outstandings. The notes made up 10% of the market last year.
Meanwhile, the total amount of global U.S. ABCP outstanding from multi-seller conduits has decreased from $450.8 billion in 2003 to $418.3 billion in 2004; as of the first quarter, total outstandings were $413.3 billion, according to Standard & Poor's.
But despite the recent popularity of single-seller conduits, market participants said the need for diversified funding sources will maintain volume in multi-seller conduits. Countrywide Home Loans, for example, maintains two single-seller conduits with some $32 billion in outstanding between them, as well as two $15 billion multi-seller conduits. Also, multi-seller, multi-asset extendible note programs have emerged. Why would the mortgage mega-lender choose to spend the extra money on the multi-seller funding option? The multi is backed by a pure bank liquidity line and in a market disruption that could affect investor appetite for Countrywide paper, this gives the bank the assurance of liquidity.
"We pay up for it, definitely, but we think it is an important insurance policy to keep ourselves protected," said Ellen Coleman, a senior vice president at Countrywide.
Gary M. Miller, managing director and manager for origination in Calyon's conduits and securitization team, said initial jitters around the increasing interest in single-seller conduits have worn off as issuers have honored the need for diversification. "Single-seller is not the end-game. You still need diversity - we're no longer threatened," he said.
Scaldis Capital had the largest outstanding multi-seller program as of March 31, according to S&P, with $20.5 billion, followed by Amstel Funding at $17.4 billion and Sheffield Receivables at $16.7 billion. For single-seller programs, Atlantis One Funding had $13.2 billion outstanding, followed by FCAR Owner Trust at $12.4 billion, and Park Granada at $8.2 billion.
Mortgage lenders constituted the largest portion of entering sellers to the U.S. commercial paper outstanding by collateral type in the first quarter, at 29%, significantly leading the second-largest seller - credit cards - at 17%, according to S&P. Securities sellers made up a quarter of all exiting sellers.
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