Several CMBS, student loan ABS and esoteric deals have hit the market since Nov.1, and issuance totaled more than $11 billion. Still, market sources suggest that the asset securitization industry has a long way to go before real recovery begins to take hold.
In a move that some market sources found mildly interesting, Banc of America Securities priced a $1.4 billion transaction. At a time when most investors are avoiding subprime MBS paper altogether or giving such deals withering scrutiny, at least one investor was very even-toned, if not sanguine, about the development.
"Maybe they just need to get their deal done," the investor said. In the current climate, the investor added, bids are coming so low that it is a fight to maintain prices on certain types of triple-A-rated paper above 90 cents on the dollar. "August took us all by surprise, so you can count yourself lucky if you are still here. I can't wait to get my T-shirt: I survived the subprime meltdown of 2007.'"
In the meantime, the investor explained, the most desirable paper is short, with top-tier credit ratings from issuers such as Chase, Ford and GMAC. "Make it short, with spreads that will stay until the end of the year. And don't show me any off-the-run stuff," she said.
Market professionals on the other side of transactions, namely traders, were very pessimistic about the market. Those professionals who attended last week's ABS East 2007 conference in Orlando wryly referred to it as "ABS Deceased".
"Everyone is bearish, but they won't short," one market source said. At least a handful of issuers, though, were bullish enough to bring their deals to market.
By press time last week, Banc of America Commercial Mortgage Trust, 2007-4, came to market with a $2.2 billion transaction, as did the $2.5 billion Morgan Stanley Capital I Trust, 2007-IQ16.
The $550 million SLABS transaction called Indiana Secondary Market for Education Loans 2007, came via RBC Capital Markets, UBS Securities and First Southwest Co. Precise pricing data was not available at press time.
That transaction followed another SLABS deal, the $2 billion SLM Student Loan Trust 2007-7, which is secured by FFELP loans. Credit Suisse, Barclays Capital, Lehman Brothers, RBS Greenwich Capital and Wachovia Securities all acted as managers on that transaction.
The entire deal was priced against three-month Libor. The one-year tranche came in at Libor plus 14 basis points, while the 8.71-year piece was priced at 75 basis points over.
While the SLM deal priced its notes at par and the student loan ABS sector has attracted a lot of attention from investors looking for shelter from the subprime MBS storm, it did not appear to run away with extremely tight spreads. Also the investor source added: "this is not the time to learn anything new," indicating a preference to stick closely to high-quality credit card and auto ABS issuers.
Several other esoteric and insurance-linked transactions were waiting in the wings at press time. Applebee's Enterprises was planning a $1.8 billion transaction and IHOP Franchising was preparing to float a $175 million deal. Lehman Brothers was named as lead manager on both transactions.
Northwind Holdings will issue $800 million in insurance-linked notes to fund a newly formed reinsurance group called Northwind Re. That group is a wholly owned subsidiary of Unum Group and will fund individual disability insurance policies. The notes are rated AAA', thanks to a financial guaranty from MBIA Insurance Corp.
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