August 4, 2009 / 9:35 PM / 10 years ago

Issuers rev up $6.5 billion of TALF supply

NEW YORK (Reuters) - Investors easily absorbed the $6.5 billion of TALF eligible deals offered in the U.S. asset-backed market on Tuesday ahead of the Federal Reserve’s emergency loan subscription deadline later in the week.

ABS spreads held steady at recently tighter levels despite the emergence of some bid lists on Tuesday in moderate trade.

With only two days left before the Fed’s deadline under its Term Asset-Backed Securities Loan Facility, activity in the market centered around the variety of issues offered and the strong demand for the supply.

TALF eligible credit card securities totaled $2.7 billion for the August subscription period. GE Credit Card’s sale was the largest offering at $1.75 billion. It was increased in size from $1.25 billion to accommodate investor interest.

“These securities are branded cards that are used by retail buyers and comprise way more customers with much smaller balances. From a diversification standpoint in the trust, you probably have a fairly good mix,” said Darcy Morrison, senior ABS analyst at Evergreen Investments in Charlotte, referring to the list of TALF credit card deals.

World Financial Network and First National Bank of Omaha were also selling a combined $1 billion of credit card securities in the latest round under TALF, dealers said.

In other sectors, $3 billion of student loan securities were offered by SLM Student Loan Trust and SLC Student Loan Trust, while other securities deals were backed by equipment loans and auto dealer floorplans, dealers said.

Wheels, an issuer that had not offered securities in the ABS market since 2005, emerged with a $700 million fleet lease offering that met strong buyer interest and was oversubscribed by multiple times, market sources said.

Another $255 million securities offering backed by auto floorplan ABS came by way of World Omni, which had not issued securities since 2004, markets sources said.

“Issuers like World Omni and Wheels hadn’t come to market in years. They’ve come out of the woodwork to most likely capitalize on the funding,” said one bond investor.

Many credit the Fed’s TALF program with bringing the new issue ABS market back to life following its near shutdown by a credit crisis in 2008. About $53 billion of ABS securities have been sold under the Fed’s TALF program since its launch in March and spreads have narrowed dramatically, reducing funding costs for issuers in the ABS market.

Spreads on three-year AAA-rated credit card securities, which were driven to a record wide spread of 550 basis points during the height of the credit crisis, now trade at 105 basis points over swaps.

Three-year auto ABS issues have come in by a similar amount to trade at 120 basis points over swaps, traders and analysts said.

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