The U.S. ABS market's first full trading week of 2004 was, while slow, eventful nonetheless. Although just four new issues had priced as of Thursday's market close, for a total of $3.08 billion, market clearing spread levels showed the impact of pent-up demand, resulting from more than two weeks of relative inactivity. Activity is expected to pick up in the next two weeks - particularly on the home equity front - ahead of the winter conferences.
The year started off on a very positive note with the first transaction of 2004 pricing extremely tight down the credit curve. The $950 million series 2004-A home equity offering from Centex Corp., led by Credit Suisse First Boston, priced five to 10 basis points inside of comparable late 2003 deals for triple-A paper and 100 basis points tighter for triple-B rated paper.
Centex's two-year fixed-rate A2 class priced to yield 43 basis points over swaps, versus top-tier HEL issuers pricing between 50 to 60 basis points over swaps throughout December. Centex's 6.4-year floating-rate triple-Bs priced at 200 basis points over one-month Libor, 10 basis points inside of initial guidance.
Option One Mortgage's first offering of the year that priced last Thursday through joint lead managers Banc of America Securities and RBS Greenwich Capital also saw tight spreads, although structure and average life make for an apples to oranges comparison with Centex.
Option One's $786 million series 2003-1 offering priced its 2.8-year A2 floater with a coupon of 29 basis points over Libor, roughly two through initial guidance. Subordinate paper, fueled by continued CDO bidding, came in at 190 basis points over Libor for 4.86-year triple-B rated notes and 450 basis points over for triple-B minus paper, 10 and 25 to 50 basis points inside of guidance respectively.
Demand is not expected to remain insatiable for much longer, as by late last week there was also a $760 million home equity ABS from Goldman Sachs' GSAMP principal finance vehicle in the U.S. market, $5 billion (US$ equivalent) making the rounds globally from Northern Rock plc's Granite Mortgage trust - offering $2.9 billion in U.S. dollar denominated, E930 million in Euro paper and GBP550 million sterling. Additionally, there was talk throughout last week of Long Beach Mortgage bringing $4.5 billion of supply, the issuer's first term securitization since last July.
Two dealer floorplan loan securitizations solely represented the auto sector last week, one of which came almost under the radar.
World Omni Financial, the largest independent Toyota Motor Co. dealership in the U.S., completed its $350 million 2.9-year floating-rate offering via CSFB at seven basis points over one-month Libor, at the tight end of price guidance in the range of seven-to-eight basis points over.
As World Omni was marketing, however, DaimlerChrysler N.A. Holdings put $1 billion of three-year floaters out to the Street for bids, which Citigroup Global Markets won. Citigroup then offered the bonds to investors with a 2.5 basis point coupon over one-month Libor, discounted to a four basis point margin over one-month Libor.
DaimlerChrysler took this route with its series 2002-B dealer floorplan ABS, which priced in November 2002. Bought out by then Salomon Smith Barney, that transaction priced with a 3.5 basis point coupon and a 6 basis point discount versus one-month Libor.
While DaimlerChrysler is roughly an annual floorplan ABS issuer, having sold four deals since setting up its shelf in 2002, this was World Omni's first dealer floorplan ABS since February 2001. World Omni's third, and only other term floorplan ABS priced in May 2000. Both of which have since paid down.