ABS

Large offerings in the auto loan, home equity and aircraft lease sectors pushed the US ABS primary market over the $10 billion mark for the first time since mid June. AmeriQuest Mortgage, Chase Manhattan Bank, and aircraft leasing firm Aviation Capital Group all combined for $6 billion of the $10.7 billion that priced throughout the week, joined by a smattering of deals coming in at a billion or less.

Amid a slowdown in the auto sector of the ABS market, at least five somewhat programmatic, but off-the-run auto lenders are prepping transactions for the near term. The group of issuers, which have recently filed with the Securities and Exchange Commission to bring deals, includes two midsized regional banks, two small non-prime lenders and one large independent non-prime issuer.

Synthetic CDOs, those funny-sounding transactions that ride the roller coaster credit derivatives market, have found an increasing number of friends in the U.S. While the volume of synthetic transactions has risen globally, the real story lies closer to home, as U.S. investors turned toward these transactions in large number this year.

Reports from abroad show that while funded note issuance and unfunded credit default swap volume is down, the European CDO market has maintained a strong level of growth. According to Standard & Poor's, continued support of these CDOs is due mostly to more flexible structures and managed transactions.

Year to date as of Jul 23 Term (days) 07/10 07/11 07/14 07/15 07/16 1-week

2003 2002 2001 ABS (Public and 144A) 298,130 246,202 212,939 ABS (Public and 144A excluding CDOs) 278,518 217,103 184,827 ABS (Public Only) 245,955 193,465 156,313 ABS (144A Only) 52,176 52,737 56,626 Non-Agency MBS 176,176 114,752 95,622 Agency MBS 325,511 286,711 154,398 CMBS 37,647 27,030 33,121 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues JP Morgan 4,632.8 1 13.9 7 Deutsche Bank AG 4,434.1 2 13.3 8 BANK ONE Corp 4,011.7 3 12.1 7 Citigroup 3,705.3 4 11.1 5 Credit Suisse First Boston 3,129.1 5 9.4 7 Morgan Stanley 2,815.2 6 8.5 5 Banc of America Securities LLC 2,447.8 7 7.4 5 Barclays Capital 2,400.8 8 7.2 5 Merrill Lynch & Co Inc 1,635.4 9 4.9 3 Goldman Sachs & Co 1,289.4 10 3.9 3 Industry Total 33,298.9 - 100.0 44 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Credit Suisse First Boston 3,726.7 1 19.0 11 Deutsche Bank AG 2,703.6 2 13.8 6 Wachovia Corp 2,534.4 3 12.9 8 Citigroup 1,727.6 4 8.8 5 Bear Stearns & Co Inc 1,673.2 5 8.5 6 Morgan Stanley 1,511.3 6 7.7 5 Goldman Sachs & Co 1,178.5 7 6.0 4 UBS 900.0 8 4.6 2 Banc of America Securities LLC 884.6 9 4.5 4 Merrill Lynch & Co Inc 700.8 10 3.6 2 Industry Total 19,612.8 - 100.0 60 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Deutsche Bank AG 1,375.0 1 39.7 5 JP Morgan 875.0 2 25.3 4 Citigroup 500.0 3* 14.4 1 BANK ONE Corp 500.0 3* 14.4 1 Banc of America Securities LLC 212.0 5 6.1 1 Industry Total 3,462.1 - 100.0 6 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 10,421.7 1 25.6 16 BANK ONE Corp 7,826.8 2 19.3 14 JP Morgan 6,078.6 3 15.0 11 Barclays Capital 3,834.7 4 9.4 7 Morgan Stanley 3,579.5 5 8.8 4 Banc of America Securities LLC 2,537.3 6 6.2 8 Deutsche Bank AG 2,209.6 7 5.4 8 Credit Suisse First Boston 1,294.2 8 3.2 4 Merrill Lynch & Co Inc 1,245.0 9 3.1 5 Lehman Brothers 948.1 10 2.3 4 Industry Total 40,648.4 - 100.0 67 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Lehman Brothers 23,668.0 1 14.5 56 Countrywide Securities Corp 15,707.2 2 9.7 26 Morgan Stanley 13,359.4 3 8.2 31 Royal Bank of Scotland Group 13,292.6 4 8.2 30 Citigroup 12,977.4 5 8.0 33 Credit Suisse First Boston 11,252.1 6 6.9 27 Banc of America Securities LLC 11,106.2 7 6.8 31 JP Morgan 10,978.0 8 6.7 16 Deutsche Bank AG 10,549.9 9 6.5 26 Bear Stearns & Co Inc 8,603.8 10 5.3 18 Industry Total 162,839.6 - 100.0 306 Source: Thomson Financial

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 3,746.1 1 20.0 7 Morgan Stanley 3,483.9 2 18.6 7 Deutsche Bank AG 2,740.7 3 14.6 5 Credit Suisse First Boston 2,437.7 4 13.0 5 Merrill Lynch & Co Inc 2,238.3 5 11.9 4 JP Morgan 1,398.0 6 7.5 4 Banc of America Securities LLC 1,186.3 7 6.3 3 BANK ONE Corp 507.6 8* 2.7 1 Lehman Brothers 507.6 8* 2.7 1 UBS 503.0 10 2.7 2 Industry Total 18,749.1 - 100.0 18 Source: Thomson Financial

Year to date as of Jul 23 Coupon Type Market Average Life Buckets Asset Class Volume Pub/144A Fixed Rate Floating Rate Public 144A 0.0 to 0.9 1.0 to 2.9 3.0 to 5.9 6.0 to 7.9 8.0 to 11.0 Aircraft Leases 1,365 1,365 1,365 1,365 Asset-Back Certs Auto Loans/Recs 39,218 31,250 7,968 36,946 2,272 10,572 20,855 7,608 125 35 Cash Catastrophe Bond Commercial Loans 311 188 123 311 311 Corp Bond/Note 2,246 419 1,794 2,246 1,300 348 598 Corporate Loans 4,734 422 4,277 4,734 1,392 774 161 906 1,501 Credit Card Rec 40,648 10,833 29,816 39,797 851 9,087 3,909 26,003 750 900 Debentures 1,681 1,681 1,681 1,681 Equip Loans Equip. Leases 6,288 4,318 1,970 4,591 1,697 2,016 3,530 668 75 FHLMC 2,231 2,231 2,231 2,231 FNMA 4,756 2,757 1,999 4,756 3,390 1,002 221 144 Floorplan Recs 3,462 3,462 3,436 26 750 2,712 Franchisee Loans 228 228 228 109 Health Care Rec Insurance Recs 622 622 622 622 Junk Bonds 2,293 233 2,060 2,293 734 490 1,069 Legal Fees Loans 3,175 3,175 3,175 3,175 Mnfrd Housing Ct 714 593 121 575 139 103 186 11 359 Motorcycle Loans 975 975 975 975 Mutual Fund Fees 342 116 226 342 342 Non-Jumbo Mtg Ln 37,356 11,587 25,429 32,539 4,816 14,167 6,899 14,763 1,173 203 Non-Perf Loans Oil Contracts Preferred Sec 1,034 204 805 1,034 108 108 177 640 Prv Issued Sec 1,455 823 507 87 1,368 1,455 Rental Car Rec. 1,775 1,050 725 1,775 650 1,125 Retail Contracts Rev Cred/Home Eq 128,596 54,642 72,641 117,345 11,251 59,874 36,846 29,153 2,004 575 Sm Business Loan 645 645 645 391 254 Stranded Costs Struc Fin Credit 14,160 2,704 11,420 14,160 7,204 352 2,077 2,642 1,805 Student Loans 20,215 816 16,647 18,479 1,736 3,864 3,955 6,530 4,937 218 Swap Agreement Tax Liens Timeshare Loans 303 245 58 303 303 Tobacco Receives 154 154 154 154 Trade Recs 225 105 120 225 225 Truck Loans Leases 450 450 450 Note: Figures are preliminary and subject to change. Data includes U.S. deals and dollar Euro 144As.Source: Thomson Financial

Rev Cred/Home Eq 41% Credit Card Rec 13% Auto Loans/Recs 13% Non-Jumbo Mtg Ln 12% Student Loans 6% Other 15%

CenterPoint Energy, which hopes to bring the largest ever stranded cost offering next year, has taken steps,at the request of regulators to increase transparency in its deals, hopefully leading to a sector-wide trend. Interestingly, several past issuers have de-registered, or suspended filings, on their outstanding transactions. Using programmatic ABS issuers such as Sallie Mae as a benchmark, CenterPoint voluntarily committed to expand the data reported in quarterly filings and begin reporting additional performance and collections data on its Web site, sources said.

Two insurance policies and a backstop guaranty have been structured into the Susquehanna Bancshares auto lease transaction, to quell investor concerns over vicarious liability laws currently in effect in New York, which accounts for 66% of the Susquehanna lease portfolio. As a result, the transaction has seen healthy investor interest and is on track to price early this week at or through price guidance, syndicate sources said.

The U.S. ABS primary market wrapped up last week with nearly $8 billion priced in a wide variety of asset classes and a full pipeline for the week ahead. While home equity ABS continues to dominate supply, last week saw equipment loan collateral, student loans and a NIM, in addition to a high-quality auto loan and credit card subordinate tranche.

Spreads for outstanding DVI Inc. medical equipment ABS resembled an accordion last week, widening 200 to 300 basis points after word spread that it was in technical default on its unsecured debt obligations. Levels rebounded, however, after the default notice was rescinded the following day, and DVI announced it had hired accounting firm BDO Seidman as its new independent auditor.

With a bit of lag time built into the moderately paced summer market, rating agencies have issued their own version of summer reading material. Though not exactly the page-turner that Harry Potter proves to be, recent rating agency methodology pieces - targeting synthetic CDOs and CFOs of private equity funds - can accompany any professional's poolside lounge chair.

On active trading last week, spreads for Sears Roebuck & Co. credit card ABS tightened 10 to 20 basis points on the news that its operations would be purchased by Citigroup. Boosting momentum was the news that, in addition to the portfolio sale, Sears had successfully established a strategic alliance with Citi, which the market saw as creating competitive synergies for the largest credit card issuer in the U.S.