NEW YORK, July 26 (IFR) - Investors aggressively bid on a
fresh supply of asset-backed securities (ABS) this week, hoping
to take advantage of slightly juicier spreads before they
inevitably tighten again.
Nearly US$7bn in bonds backed by assets including auto-loan
payments, structured settlements, and electric-utility charges
were marketed this week. With a slate of well-established
issuers returning to the market and yields at higher levels than
earlier this year, underwriters had little trouble filling out
the order books.
Auto deals, the mainstay of the ABS market, attracted the
Demand was so strong, in fact, that Ford, a frequent
and popular auto ABS issuer, was able to fast-track its
US$1.342bn prime auto-loan deal, basically dictating to
investors the range at which the deal was expected to price.
"Once again the issuer continued its strategy that some in
the market refer to as the 'Ford syndicate approach', in which
it skipped price 'whisper' talk and announced the deal with
official price guidance," said a senior ABS banker with
knowledge of the deal.
"The strategy tells investors they should prioritize their
work on the deal and lets them know right away where the trade
should expect to price."
Once a tranche becomes one-time subscribed, Ford offers a
so-called "subject" warning, which means it's ready to price.
The Triple A classes of the FORDO 2013-C transaction were about
1.5 times oversubscribed.
About 90 investor orders took part in the deal, consistent
with Ford's prior two transactions this year. Orders were said
to be in the US$30m to US$40m-size range from investors, as
opposed to larger US$100+m requests.
According to a market participant with knowledge of the
deal, the trade probably could have "tested through guidance
levels", or priced slightly tighter, but Ford, which taps the
market frequently, wanted to get the deal done quickly.
In fact, every transaction that printed this week was priced
within or tighter than its price guidance levels, meaning that
there was very strong demand for the paper.
While next week could be a bit of a letdown following this
week's US$6.9bn total, the next few weeks leading up to Labor
Day should see a steady pipeline with a blend of both large and
small-scale ABS issuers, according to securitization insiders.
BETTING ON SPREAD
Three prime auto issuers, including two names that already
tapped the market in 2013, priced new deals this week for a
total of US$3.7bn.
Spread levels were wider than their previous offerings in
2013, which enticed more investors to participate, although
Deutsche Bank ABS analysts said spreads are eventually expected
The Triple A slices of Ford's current deal offered tenors of
1.05, 2.25 and 3.38-years and were talked at EDSF plus
20bp-22bp, interpolated swaps plus 27bp-29bp and interpolated
swaps plus 35bp-37bp. Final pricing was set on the tight end of
the ranges at 20bp, 27bp and 35bp, respectively, but were still
12bp, 11bp and 18bp wider than the company's 2013-B transaction
that priced back in mid-May.
The Triple A weighted average spread was 25bp for the
current transaction compared to 13bp in Ford's last deal.
The 3.88-year AA+/AA (S&P/Fitch), 3.96-year AA/A and
3.96-year A/BBB notes were priced at interpolated swaps plus
60bp, 80bp and 140bp. The subordinate bonds were the first to
get sold and were said to be up to five times oversubscribed.
The weighted average spread through the Triple B notes was 35bp
with a weighted average yield of 1%.
The subs in the 2013-B series were printed 20bp-30bp tighter
at 40bp, 60bp and 110bp.
Deutsche Bank, Morgan Stanley and RBC were the joint leads
on the Ford 2013-C offering.
Nissan returned this week with its second prime
offering of the year, the US$1.4bn Nissan Auto Receivables
2013-B Owner Trust (NAROT) 2013-B.
Pricing levels were tighter than Ford's deal at EDSF plus
16bp, interpolated swaps plus 25bp and interpolated swaps plus
30bp for the Triple A tranches. Subscription levels across the
deal were said to be two-to-four times oversubscribed.
It was also heard that an investor account had made an
initial bid to purchase an entire tranche.
JP Morgan (structuring lead), Citigroup and Societe Generale
were the joint leads. Investor demand increased the deal from an
initial size of US$1bn.
The Triple A notes in Nissan's last deal, January's NAROT
2013-A series, were priced at EDSF plus 6bp, interpolated swaps
plus 10bp and interpolated swaps plus 16bp.
Lastly, Mercedes made its 2013 debut this week with its
US$975m Mercedes-Benz Auto Receivables Trust 2013-1. It was the
issuer's fifth prime securitization since its debut offering in
The 1.03 and 2.16-year Triple A classes were priced similar
to Nissan at EDSF plus 16bp and interpolated swaps plus 25bp.
The 3.16-year class stamped 2bp wider at interpolated swaps plus
RBS (structuring lead), Bank of America and RBC were the
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