ABS

BARCELONA - For every good party, there are swarms of uninvited just waiting to crash it. And as one participant at Information Management Network's ninth annual Global ABS Conference' held here said last week, "the party has been crashed."

In a research report last week, Morgan Stanley's ABS research team examined the relative value of combining a double-A/double-B plus trade, versus a standalone triple-B minus trade in the home equity sector, showing that on both a credit adjusted and option adjusted spread basis, the double-A/double-B plus combination enhances yield and improves the default risk profile compared to buying triple-B minus bonds alone.

MBNA Corp. announced a $370 million fixed-rate deal backed by equipment loans to dental practices through its subsidiary MBNA Practice Solutions, Inc., formerly Sky Financial Solutions, Inc. Sky Financial had been a regular issuer of such deals before it was acquired by MBNA last April, and this is the first securitization from the entity since.

Navistar Financial Corp. was back was in the market last week with $600 million in a truck loan- and lease-backed private placement. The deal represents a refinancing of the $500 million series 2000-1 deal out of Navistar's Truck Retail Installment Paper trust. Navistar Vice President and Treasurer, A.J. Cederoth, said the company does not have plans to enter with another TRIP offering until its 2005-1 deal nears maturity. "Our plans will be to refinance in five years," he said.

Not even the Global ABS Conference' could stop the heady U.S. ABS primary market from pricing and marketing nearly $15 billion in yet another strong spring week ahead of the end of the second quarter. As the conference raged in Barcelona last week, the auto, credit card and real estate sectors all saw healthy amounts of issuance and a student loan deal snuck its way into the market, but had not priced as of press time.

Merrill Lynch priced a $1.8 billion deal backed largely by prime retail auto loans purchased wholesale from Capital One Financial, Ford Motor Credit Co., E-Loan Inc. and Onyx Acceptance Corp. The deal represents the first auto loan securitization issued by the Merrill Auto Trust Securitization, named MATS 2005-1 and is also Merrill's first auto whole loan deal issued on its own behalf.

BARCELONA - Alas, a multinational residential mortgage securitizations still only exists in the dreams of nail-biting-real-estate-bubble-phobes in search of the ultimate in geographically diverse loan pools. Such a concept may only be a pipe dream, despite anticipated growth in pan-European lenders, as the concept of cross-jurisdictional securitization is "fraught with difficulty," primarily because of numerous legal and regulatory hurdles that stretch from borrower, to issuer, to investor and back again several times over, according to panelists at this year's Global ABS Conference' held here last week.

BARCELONA - A number of conference participants last week said they anticipate the asset-backed commercial paper market, particularly in the single-seller and extendible paper arenas, to experience growth this year as companies look to diversify funding sources.

BARCELONA - Market players are coordinating to create both in-house and publicly available ABS credit default swap indices - a much needed reference point for the rapidly growing market, they said. A pricing index for CMBS could be available by September, and a more encompassing ABS CDS index may be rolled out by the second half of the year.

Year to date as of 06/16 Term (days) 06/10 06/13 06/14 06/15 06/16 1-week

Full Credit to Book (Equal if Joint) U.S. Public ABS Market/144A Market Managers Proceeds (mils) Rank Mkt. Share # of Issues Citigroup 6,499.6 1 15.0 11 JP Morgan 6,391.9 2 14.7 9 Deutsche Bank AG 5,641.7 3 13.0 10 Barclays Capital 4,302.5 4 9.9 8 Merrill Lynch & Co Inc 4,114.9 5 9.5 7 Credit Suisse First Boston 4,111.9 6 9.5 8 Banc of America Securities LLC 3,433.1 7 7.9 7 Wachovia Corp 3,362.5 8 7.7 7 Goldman Sachs & Co 1,841.0 9 4.2 2 Lehman Brothers 1,504.9 10 3.5 2 Industry Total 43,478.6 - 100.0 41 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 Merrill Lynch & Co Inc 12,174.2 1 22.7 17 Citigroup 6,085.2 2 11.3 15 Lehman Brothers 4,168.9 3 7.8 12 Morgan Stanley 4,049.6 4 7.5 17 UBS 3,802.6 5 7.1 10 Bear Stearns & Co Inc 2,715.2 6 5.1 7 Goldman Sachs & Co 2,607.0 7 4.9 3 Wachovia Corp 2,359.9 8 4.4 6 Credit Suisse First Boston 2,239.0 9 4.2 5 Deutsche Bank AG 2,052.1 10 3.8 7 Industry Total 53,742.1 - 100.0 135 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 4,974.9 1 29.0 11 Citigroup 3,474.8 2 20.3 10 Barclays Capital 2,649.0 3 15.5 10 Morgan Stanley 1,966.5 4 11.5 3 Deutsche Bank AG 1,001.4 5 5.8 9 Credit Suisse First Boston 779.9 6 4.6 5 ABN AMRO 600.0 7 3.5 4 Banc of America Securities LLC 586.2 8 3.4 5 Merrill Lynch & Co Inc 512.2 9 3.0 3 Lehman Brothers 416.7 10 2.4 2 Industry Total 17,136.7 - 100.0 39 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 Barclays Capital 1,492.5 1 17.3 2 Morgan Stanley 1,191.7 2 13.8 2 Deutsche Bank AG 1,191.7 2 13.8 2 Credit Suisse First Boston 766.7 4 8.9 1 ABN AMRO 766.7 4 8.9 1 Banc of America Securities LLC 750.0 6 8.7 1 Lehman Brothers 725.8 7 8.4 1 JP Morgan 725.8 7 8.4 1 HSBC Holdings PLC 566.7 9 6.6 1 Citigroup 212.0 10 2.5 1 Industry Total 8,619.5 - 100.0 7 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 Bear Stearns & Co Inc 30,988.0 1 10.3 55 Lehman Brothers 27,484.5 2 9.1 64 Countrywide Securities Corp 27,356.2 3 9.1 32 Morgan Stanley 26,793.0 4 8.9 34 Royal Bank of Scotland Group 25,328.4 5 8.4 42 Deutsche Bank AG 24,584.7 6 8.2 41 Credit Suisse First Boston 24,352.0 7 8.1 52 Citigroup 17,971.3 8 6.0 34 Merrill Lynch & Co Inc 16,890.1 9 5.6 23 Banc of America Securities LLC 16,284.0 10 5.4 32 Industry Total 301,442.9 - 100.0 496 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 5,066.7 1 20.9 7 Banc of America Securities LLC 3,134.2 2 12.9 4 Deutsche Bank AG 3,042.0 3 12.5 5 Morgan Stanley 2,757.6 4 11.4 3 Credit Suisse First Boston 2,696.2 5 11.1 4 Merrill Lynch & Co Inc 1,839.8 6 7.6 2 UBS 1,827.7 7 7.5 4 JP Morgan 1,158.5 8 4.8 3 Lehman Brothers 1,012.4 9 4.2 1 Goldman Sachs & Co 980.9 10 4.0 3 Industry Total 24,265.8 - 100.0 20 Source: Thomson Financial

auto ABS 20% credit card ABS 6% global MBS 5% real estate ABS 58% student loan ABS 8% other 3%

After proving that it has access to funding with its successful wholesale dealer floorplan transaction last week, Ford Motor Credit is unlikely to tap the U.S. floorplan sector for the foreseeable future, sources said. Despite the strong investor demand that led to an increase in size, Ford's master trust is approaching fully funded status and the issuer currently plans to wait until its series 2001-2 transaction matures next July before tapping the sector again.

NEW YORK - At its Auto Securitization Briefing held here last week, Moody's Investors Service discussed servicer risk as it relates to different types of auto securitizations. Annika Sandback, vice president in the asset finance group, isolated the risk to each asset type, covering retail loans, wholesale floorplan loans and rental deals. Moody's also gave a brief rundown of how it ranks auto-loan servicers.

At least half-smiles must be creeping across the faces of home equity ABS investors, as even the most notoriously bearish participants collectively shift their outlook on rising long-term interest rates. While Treasurys are expected to rally on anticipation of lower-than-expected long-term interest rates, adjustable-rate assets should also enjoy fewer defaults and delinquencies in that scenario, analysts say.