Calyon New York plans to roll out its first credit arbitrage ABCP program this week, a conduit designed to support its growing asset- and mortgage-backed securities endeavors, specifically its non-multiseller ABS CDO business.
Called Classic, the program currently has enough liquidity to support about $10 billion
in outstanding ABCP. When it launches, the program will probably invest in about $2 billion in assets, according to people familiar with the situation.
"It's just a complement of what we do," Sam Pilcer, a director at Calyon said. "We need Treasury funding for some of the positions we have, particularly super seniors."
Calyon will invest about half of Classic's ABCP in MBS, including triple-A-rated subprime MBS issued from super-senior tranches of CDOs, a vote of confidence for the beleaguered market. Although there is no programwide credit enhancement on Classic, according to Fitch Ratings, investors are protected from downgrades by a full liquidity program comprising a cost-of-funds swap and a liquidity asset purchase agreement. Commercial paper may be issued with expected maturity dates of up to 270 days from issuance, and extendible notes can be issued with expected maturity dates of up to 90 days, with the option to extend the maturity for about 180 days.
Classic comes along at a time when Calyon, a unit of Paris-based Credit Agricole, has seen significant growth in its multiseller business. The bank started off 2005 with about $7 billion in business, and by the end of April that had grown to about $16 billion, Pilcer said.
A swing-line facility also is available to Classic as a form of liquidity. Calyon provides the swing-line facility on an uncommitted basis, and can make advances to Classic to enable it to repay maturing commercial paper and extendible notes, according to Fitch. Initially sized at $3 billion, the swing-line facility is intended to equal about 30% of outstanding commercial paper and extendible notes.
Fitch, Moody's In-vestors Service and Standard & Poor's have assigned their respective ratings of F1+', P-1', and A-1+' to Classic.
Sponsoring asset-backed securities vehicles is familiar territory for Calyon New York, which has a couple of partially supported, multiseller programs under its belt. It currently sponsors the Atlantic Asset Securitization and La Fayette
Asset Securitization, according to Moody's. Calyon also sponsors Paris-based LMA.
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