Despite an effective boycott of the name from European investors, AIG Credit came back into the asset-backed market last week with a revamped version of the insurance premium loan securitization that had been shelved earlier this month (See ASR 7/25). While the tenor was shortened, spreads remained the same as for the five-year, offering investors a pick up of five basis points, sources said.

In order to complete the deal, lead manager Salomon Smith Barney shortened the average life of the offering to roughly three years from the initial five-year structure to target U.S. investors. The domestic buyers primarily securities lenders - did not hold a grudge against parent company American International Group Inc., as the Europeans did. Also, the size of the offering was reduced slightly to $466 million from the initial $518.6 million.

The new $450 million triple-A rated senior class priced at par with a 20 basis point spread to one-month Libor, while the single-A rated sub class priced at 55 basis points over one-month Libor, 10 basis points wider than initial levels.

Jerry Vitkauskas, president of AIG Credit, said he "felt good about the 20 basis point spread, particularly in light of external market volatility this week" as well as the levels seen for recent insurance premium securitizations.

Earlier this month, first-time ABS issuer Flatiron Insurance was able to complete a $150 million insurance premium ABS via Credit Suisse First Boston. The single-tranche MBIA-wrapped offering, with a five-year average life, priced with a 37 basis point spread to Libor.

As for the reduction in size, Vitkauskas indicated it was more a function of investor demand than anything else, with the initial $500 million class almost all sold at 20 basis points over when the company decided to just wrap-up the transaction.

With confirmation that AIG Credit is capable of pricing an ABS after seeing last year's deal pulled outright, Vitkauskas indicated AIG Credit would likely be an annual issuer of insurance premium ABS and would stick with the three-year structure, although tenor would once again be based upon investor demand.

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