Securitization

ABS analysts at Citigroup Global Markets are reclassifying all 2004 and later vintage deals from Paramus, N.J.-based auto lender Long Beach Acceptance Corp. into the bank's Near Prime index. Those vintages had previously resided in Citigroup's subprime index, but, Long Beach has "significantly elevated the credit quality of its underwriting profile," according to Citigroup. Analysts now expect that elevation in underwriting profile will result in much improved losses, consistent with other near-prime lenders.

As the aftershock from this spring's auto-sector implosion continues to roil the market, questions are starting to swirl about the stability of rental-fleet securitizations. The deals most in question are those in which General Motors and Ford Motor Co. have promised to buy back vehicles from the rental companies, as the financial strength of those manufacturers will dictate whether they have the buying power to honor their repurchase agreements. While that strength seems to be deteriorating rapidly, rating agency officials said there is little to worry about - for now.

JPMorganChase announced last week its intention to wind down its $4.3 billion dollar Delaware Funding ABCP conduit. The firm will transfer the assets from Delaware Funding to its Park Avenue Funding, or Parko, conduit, according to Deborah Toennies, managing director at JPMorgan. Delaware Funding's outstanding obligations are expected to be fully paid down by the end of May.

The U.S. ABS primary market saw a solid amount of issuance last week with over $10 billion priced, including a $1 billion auto loan deal from American Honda Finance Corp. that sources say stabilized the sector and eased fears with its pricing.

General Parts Inc., one of the largest automotive wholesale distributors in the U.S., launched a credit tenant lease via Wachovia Securities last week, sources said.

Some positive news emerged last week on the proposed future flow transaction from water treatment company, Hyflux (see ASR, 10/11/04). Last August, Deutsche Bank Securities was appointed to evaluate the securitization of SingSpring, a wholly owned subsidiary of Hyflux, currently developing the first water desalination plant in Singapore. The plant is contracted to supply water to the Public Utilities Board for the next 20 years.

Year to date as of 04/21 Term (days) 04/15 04/18 04/19 04/20 04/21 1-week

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 4,207.7 1 16.6 8 Credit Suisse First Boston 3,449.5 2 13.6 7 Citigroup 3,206.3 3 12.6 5 Barclays Capital 3,195.9 4 12.6 6 Merrill Lynch & Co Inc 2,502.4 5 9.9 4 JP Morgan 2,270.2 6 9.0 4 Banc of America Securities LLC 2,001.3 7 7.9 4 Wachovia Corp 1,837.0 8 7.2 4 Goldman Sachs & Co 1,289.0 9 5.1 1 Lehman Brothers 780.3 10 3.1 1 Industry Total 25,356.3 - 100.0 24 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 5,670.4 1 19.7 9 Morgan Stanley 3,864.6 2 13.4 13 Citigroup 3,526.6 3 12.3 8 UBS 3,142.6 4 10.9 7 Lehman Brothers 2,639.2 5 9.2 8 Bear Stearns & Co Inc 2,271.2 6 7.9 5 Groupe Caisses d'Epargne 1,742.0 7 6.1 2 Banc of America Securities LLC 1,454.9 8 5.1 6 Wachovia Corp 1,241.9 9 4.3 3 JP Morgan 987.3 10 3.4 2 Industry Total 28,787.8 - 100.0 72 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 1,775.0 1 24.6 7 Morgan Stanley 1,754.0 2 24.3 3 Citigroup 1,125.0 3 15.6 3 Barclays Capital 799.1 4 11.1 7 Credit Suisse First Boston 413.3 5 5.7 2 Lehman Brothers 375.0 6 5.2 1 Banc of America Securities LLC 374.1 7 5.2 5 Merrill Lynch & Co Inc 262.6 8 3.6 3 Deutsche Bank AG 249.1 9 3.5 4 Societe Generale 92.5 10 1.3 1 Industry Total 7,219.5 - 100.0 20 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 725.8 1 17.8 1 JP Morgan 725.8 1 17.8 1 Barclays Capital 725.8 1 17.8 1 Morgan Stanley 566.7 4 13.9 1 Deutsche Bank AG 566.7 4 13.9 1 HSBC Holdings PLC 566.7 4 13.9 1 Citigroup 212.0 7 5.2 1 Industry Total 4,089.5 - 100.0 3 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 18,933.6 1 10.6 27 Countrywide Securities Corp 18,051.7 2 10.1 18 Lehman Brothers 16,792.3 3 9.4 38 Morgan Stanley 16,762.0 4 9.4 18 Royal Bank of Scotland Group 16,619.6 5 9.3 25 Deutsche Bank AG 15,602.4 6 8.7 30 Credit Suisse First Boston 14,234.2 7 8.0 31 Merrill Lynch & Co Inc 9,844.1 8 5.5 11 Banc of America Securities LLC 8,671.1 9 4.9 19 Goldman Sachs & Co 7,070.5 10 4.0 12 Industry Total 178,654.7 - 100.0 279 Source: Thomson Financial

On Friday, April 8, as many in the financial world were fixated on the second round of The Master's, Ford Motor Co. was lowering its earnings outlook for the year and pulling in the reins on the $3 billion auto ABS deal it introduced to the market the previous day.

In response to the bulging proportion of floating-rate issues in the ABS market, Lehman Brothers plans to launch its first ever U.S. ABS Floating Rate Index. The index, initially covering $253 billion worth of transactions, is scheduled to go live May 1.

PNC Financial Services Group is positioning itself to issue equipment lease ABS. Steve Geis, managing director at PNC, said the bank is attempting to increase the size of its equipment-lease warehousing facilities through talks with a number of equipment finance companies. Once it has expanded those facilities adequately, the bank plans to begin issuing term deals in the sector. Geis declined to name the companies or give a timeframe for the first possible deal.

The U.S. primary ABS market was in bloom last week, pricing roughly $9.6 billion as of Thursday evening. The home equity sector accounted for over $6 billion in new issues, including two deals well over the $2 billion mark.

As its parent's corporate debt rating teeters on the brink of junk status, General Motors Acceptance Corp. will tap the ABS market with a $1.5 billion auto lease offering, marking GMAC's first foray into the auto lease sector. The deal is structured with a novel three-tiered, true-sale process which buffers it from the dual headline risk of GMAC's declining credit quality and the potential of a Pension Benefit Guaranty Corp. asset seizure in the event of a bankruptcy.

As auto ABS spreads widen and corporate concerns about industry giants like General Motors Corp. and Ford Motor Co. pervade the market, researchers at Morgan Stanley have jumped into the fray to compare the performance of ABS deals from all major issuers. In a nearly 200-page report issued last week, Morgan Stanley not only sizes up the issuers themselves, but also provides individual deal performance metrics for nearly every auto deal currently in the market.

Automobile industry analysts with Morgan Stanley put forth a bearish outlook for the auto sector on a conference call held last week, forecasting weak cash flows for the first quarter and sluggish global demand.

Funding agreement-backed note issuance levels reached a record $11.8 billion in the first quarter of 2005 according to a Standard & Poor's Ratings Services' research report. The numbers reflected a 70% increase from volume reported in 4Q04 and an 11% raise compared with the same quarter the previous year, SunAmerica Life Insurance Co. was the largest issuer of funding agreement-backed notes year-to-date with $2.3 billion of issuance. Allstate Life Insurance Co. followed in second place with $1.1 billion and General Electric Capital Assurance Co. came in third with $300 million in total volume generated, the report added.