Asset-backed supply came at a moderate pace last week, pricing $10.8 billion, with a good balance between auto, credit card and home equity. Top-tier names continue to have little difficulty accessing the market in on-the-run sectors. Esoteric collateral types, however, continue to need overtime to wrap up.
The lone exception last week was an auto lease-backed deal from Volkswagen Credit Inc., which priced $1.5 billion to strong demand despite the general investor bearishness on lease paper and the relative obscurity of the issuer in the U.S. ABS market. JPMorgan Securities and Salomon Smith Barney were joint lead managers for the 2002-A, fixed-rate offering.
While the last auto ABS from VW came in 1987, the public status of the paper and the strong credit of the parent had all classes 1.5- to two-times oversold. Spreads offered to investors offered significant yield pick up versus Big-Three auto loan ABS, with 2.5-year triple-A, fixed-rate A4s yielding 30 basis points over Swaps.
JPMorgan managing director Brad Dansker called this a benchmark for the lease sector going forward, as the last public auto lease ABS came two years ago (BMWLT 2000-A). "Volkswagen's A1/A senior unsecured ratings are the second highest captive auto issuer rated by more than one rating agency behind Toyota," Dansker added.
This was just the second auto lease ABS of the year, following the $790 million that Mitsubishi Motor Credit sold Sept. 25 via Merrill Lynch in the Rule 144A market. There is talk of another foreign captive auto lender bringing a lease transaction this month, although no details have been confirmed.
After taking October off, General Motors Acceptance Corp. priced a $3.5 billion 2002-5 deal through the four-way lead of Banc of America Securities, Banc One Capital Markets, JPMorgan and Salomon. The fixed-and floating-rate transaction had its class size determined by investor demand, which leaned heavily toward the one- and two-year floaters, although the fixed-rate classes did price at or inside initial price guidance.
Two high-quality credit card trades hit last week, each wrapping up within a day of being announced. Tuesday MBNA Bank America sold $1.5 billion of three-year floating-rate notes through Banc of America and Lehman Brothers. The twelfth senior note from the MBNASeries issuance vehicle priced at 6 basis points over one-month Libor following an increase in size from the initial $1 billion.
Later in the week, Chase Manhattan Bank offered $750 million of five-year senior/sub credit card paper through JPMorgan. The seventh credit card securitization from Chase had its senior class price at 12 basis points over one-month Libor and its single-As price at 43 basis points over.
Three home equity deals priced, totaling just $2.7 billion. None of the acquired-collateral transactions which have dominated recently surfaced last week.
AmeriQuest Mortgage, which has seen plenty of its collateral hit of late, brought a deal off its own shelf through Morgan Stanley and UBS Warburg, jointly. As a result, 2.5-year triple-A floaters priced at 43 basis points over one-month Libor.
After wrapping up a recent roadshow explaining to investors the impact of its predatory lending settlement, Household Finance brought a home equity deal via Bank of America (which ran the roadshow) and Morgan Stanley. After an upsizing to $850 million from $500 million, and despite a full Ambac wrap, the 2.35-year triple-As priced at 55 basis points over one-month Libor.
Chase Funding priced a $605.5 million 2002-4 deal via JPMorgan. The thirteen-tranche offering with fixed and floating tranches priced quickly in late-week trading. The $304.5 million 2.5-year triple-As priced at an undisclosed spread to Libor.
In off-the-run assets, DVI Inc. priced a $444 million XVIII trust medical equipment lease ABS through Merrill. Most of the collateral (30.3%) was for the leasing of MRI Equipment, according to Fitch Ratings. After a slight restructuring that saw $83 million carved into a new fixed-rate class, $199 million of 2.83-year A3A notes priced at 65 basis points over one-month Libor.
Navistar International, manufacturer of the International line of heavy trucks, finished an $850 million 2002-B deal, which offered a fixed- or floating-rate option in the two-year tranche only. Backed by class 6 and class 8 truck cabs, it offered investors a discount to auto ABS, despite the much longer shelf life and reduced residual value of the collateral.
As of press time Thursday, equipment concern Case New Holland was in the market but had not priced its second securitization of the year via Salomon and S.G. Cowan. Pricing was set for last Friday.
With just over a month left in 2002, it was an exceptionally strong week of underwriting business for JPMorgan. The bank acted as lead or joint lead manager on five of the week's offerings, including two that were self-led, further clouding the tight race for top underwriter.
