A $10 billion week of U.S new issue ABS supply was cut short last Thursday, as the eastern seaboard was rendered lifeless by a blackout. Many areas in New York were still without electricity as of Friday afternoon's close. The deals that did price experienced some widening, particularly fixed-rate home equity deals, as investors are starting to show their full up on mortgage product. Ironically, arguably the most successful transaction of last week came from electricity provider ONCOR Energy, which priced its stranded cost ABS at the tightest levels the sector has seen to date.
ONCOR's $500 million stranded cost securitization, led jointly by Morgan Stanley and Lehman Brothers, did what no other RRB had ever done - some classes pricing in-line with credit card ABS. It was the second RRB for the issuer, formerly called Reliant Energy, the first of which priced in October 2001.
The unprecedented spread levels for ONCOR 2003-1 came after two weeks of marketing, and it paid off for the issuer. Structured to investor demand, with average lives in the most liquid segments of the yield curve. Two-year A1 notes priced at seven basis points over swaps, with five-year A2s also pricing at seven over, levels only Bank One and Citibank have seen this year.
Out on the curve ONCOR did not disappoint either, with seven-year A3 notes pricing at 16 basis points over swaps and 11-year A4 paper clearing at 19 basis points over, which sources said interpolated to a level inside of top-tier 10-year card ABS.
By contrast, the credit card sector had just one deal in the market last week, a $1 billion offering from Household Finance.
Led jointly by Citigroup Capital Markets and Deutsche Bank Securities. Household also saw strong demand, pricing at six basis points over one-month Libor for its senior tranche, in line with initial guidance. Down in credit, spreads moved through indicative levels, pricing its three-year single-As at 29 basis points over one-month Libor and triple-B C class at 98 basis points over.
It was a rough week for the auto loans, as spreads in the sector exhibited the general widening seen since the historical tight levels seen in the second quarter. American Honda Finance, with arguably the top collateral among quarterly issuers, showed some softness and DaimlerChrysler's first auto loan ABS of the year priced outside of Honda.
Honda's 2003-3 offering, via Banc of America Securities and Citigroup priced its one-year fixed-rate notes to yield eight basis points over EDSF, versus guidance in the seven basis point area. Two and three-year A3 and A4 paper priced at 10 and eight basis
points over swaps, respectively, both at the wide end of guidance.
DCAT's first loan ABS of the year, via JPMorgan Securities and Morgan Stanley, priced one to two basis points behind Honda. Also, First Auto Receivables Trust priced $229 million of 2003-2 notes, backed by a full MBIA wrap, via RBS Greenwich and Wachovia Securities.
Home-equity ABS saw $5.5 billion of supply, roughly one-half of the market's total, led by a pair of offerings from GMAC-RFC, the leading issuer year-to-date. Morgan Stanley priced a $1.33 billion shelf deal, backed by New Century collateral, the eighth such deal from the MSAC shelf.
Australian mortgage lender, Macquarie Bank sold $1.2 billion of three-year Aussie MBS via Deutsche Bank, at 19 basis points over three-month Libor, bucking the trend for mortgage-related ABS.