News
It was widely rumored last week that Moody's Investors Service was preparing a significant announcement concerning healthcare receivables securitizer National Century Financial Enterprises, possibly for a Friday release. Further details were unattainable as of press time Thursday. Officials at the rating agency declined to comment.
Chile's Securitizadora Bice is eyeing more globals to securitize in local currency, after having closed two transactions in this promising sector. "We have registered a Yankee bond program with regulators," said Rodrigo Valdivieso, CEO of the securitizer. The move is unprecedented and opens the door for Bice to securitize any Chilean global bond corporate or sovereign with relatively few hassles. "There's no limit to size," Valdivieso added. "Each issue will be at least US$15 million each." The denomination will be in local currency, thus requiring a currency swap. Bice has already issued two deals backed by 7.75% 2008 globals from Empresa Nacional de Electricidad. The last closed in early September. Worth US$17.1 million in inflation indexed units (UF), that deal priced at a real rate of 5.57%. Given that Endesa's spreads had flared out during that period, the transaction probably reaped Bice a healthy return. "It's a good business," Valdivieso said. Demand from pension funds for these deals will probably remain solid, especially since they are prohibited from buying dollar-denominated globals.
Pleased with the results of a deal backed by diversified rights on electronic payments generated in the U.S., Banco do Brasil is looking across the Atlantic. "From Europe we have a flow of about US$3.5 billion a year; from the U.S., it's US$5.5 billion a year," said Delcio Blajfeder, general manager of debt capital markets at the colossal Brazilian bank. These transactions, known as MT-100 deals, are among the few that have rolled out of the country in the currently dysfunctional market environment. Blajfeder is hoping to place a deal backed by European flows next year. As for currency, "We don't know yet," Blajeder said. "The demand will be the main driver for this decision." The European flows are in euros, pound sterling and dollars.
CDO briefs
Credit Suisse First Boston has finished up the inaugural arbitrage static cashflow structured finance CDO transaction for Vanderbilt Capital. The $301 million Bristol deal marks the first visible wrapped triple-A from CIFG according to IFR Markets. The $223.5 million A1 class, with a six-year average life, is priced at 53 basis points over Libor.. Note that the CIFG wrap was done outside of the primary documentation of the transaction; i.e. a secondary wrap, according to investors in the deal. The underwriter could not be reached for comment.
When the deal first appeared in the market this fall there was an 18% aircraft bucket, however, this has been slimmed down to approximately 10%. The transaction is fully funded and static, making Vanderbilt more of an asset selector than collateral manager. The equity investor reportedly took down the entire $15 million in preferred shares.
The 7.6-year triple-B's, being as hard a sell as ever, widened out from initial guidance in the 285 basis point over three-month Libor, out to 350 over, even with a turbo feature that shortens the life of the tranche.
Salomon Smith Barney has in the origination phase a collateralized fund obligation linked to an undisclosed hedge fund index. The transaction is expected to use market value and cash flow CBO triggers, cash-flow diversion triggers. Nevertheless, the deal will primarily use a market-value structure. The concept has appeal because it will provide liquidity and transparency to investors, which have been one of the largest hurdles for the asset class to take off.
Sources say that the half-dozen or more multi-tranche, hedge-fund CFOs that have limped around this summer have migrated into other forms, such as senior/junior principal-protected notes done privately.
Miscellaneous
Household Finance, the second largest consumer finance firm in the U.S., (behind Citigroup) is currently on the road explaining its position to investors, following the Oct. 11 announcement that it settled with regulators on predatory lending issues. The issuer reportedly has at least three more ABS transactions planned through year-end in the auto loan, credit card and home equity asset classes.
Conseco Inc. filed an 8-K announcing that its board of directors approved a plan to seek new investors for Conseco Finance's businesses. According to the company, it is pursuing various alternatives, "including securing new investors and/or selling the company's three business units: manufactured housing finance, mortgage services and consumer finance."
The Financial Accounting Standards Board meets again this Wednesday to revisit its discussion on the consolidation exposure draft. FASB plans to address criteria for evaluating consolidation based on voting interests, the provisions in paragraph 17 related to "silo" structures, SPEs that hold certain financial assets, and disclosures, industry sources said.
