Despite the year's end falling upon the market, issuance did happen last week in the asset-backed securities market, and though a fair number of asset-classes were represented, it was by no means a flood. At press time, volume neared $1.5 billion, however most of that belonged to a $790 million Discover Card deal.
One trader said that about the most he was doing last week was cleaning out his desk for the year.
"If you thought spreads were going to widen, you would sell here," said the trader. "But most people think benign to positive' on spreads, so there's no need to really sell. And with no supply to speak of, there is some excess cash around."
Apparently, the month of December is said to bring in something like $8 billion, roughly one-third the volume seen in December 1998, according to published reports.
As for the new year, analysts at Merrill Lynch & Co. project that the market should go back to the typical supply pattern, where the heaviest issuance comes in the third month of every quarter. They anticipate that most supply will come in February or March of next year.
Good Deals In A Vacuum
As stated, Discover Financial Services, a subsidiary of Morgan Stanley Dean Witter, came with a $790 million deal, structured in two parts. A five-year, $750 million A-class priced within guidance, at 83 basis points over Treasurys.
A 5.17-year, $40 million B-class priced at 106 basis points over Treasurys, just tight of the 108 talk. Because of demand, the Discover transaction was increased in size from $526 million.
In home equity loans, Irwin Home Equity Corp. priced a $250 million deal managed by Bear, Stearns & Co. The transaction was structured in three parts. A four-year, $130 million A-1 class priced at 140 basis points over Treasurys. The 3.7-year, $70 million, A-2 class, which priced at 155 basis points over Treasurys, was backed by high-loan-to-volume loans. Backed by the same collateral was a four-year, $50 million A-3 class priced at 37 basis point over one-month Libor.
Heller Financial Corp. priced a $350 million deal backed by equipment leases. The transaction was structured six parts. A 0.36-year, $93 million A-1 class priced at 2 basis points over four month Libor. A one-year, $75 million A-2 class priced at 27 basis points over one-year EDSF.
The largest tranche, a two-year, $105 million A-3 class, priced at 77 basis points over Treasurys, within the 76 to 78 talk. The 3.5-year, $67 million A-4 class priced at 86 basis points over Treasurys. Two 1.8-year, B and C class legs, worth $4.5 million a piece, priced at 100 and 115 over Treasurys, respectively.
First Union Capital Markets was lead manager, with co-managers Credit Suisse First Boston and Morgan Stanley Dean Witter.
And for the auto sector, Long Beach Acceptance Corp. priced a $90 million deal via Greenwich Capital Markets, according to published reports. The two part transaction consisted of a 1.6-year, $80 million A-1 class and a four-year, $10 million A-2 class, pricing at 52 basis points over 19-month EDSF and 130 basis points over Treasurys, respectively.
Toward the end of last week, Residential Funding Corp. had a some-odd $250 million home equity deal going on, with the senior $67 million, 3.8-year tranche talked at 140 over Treasurys. Prudential Securities is managing the deal.