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Hot ABS market rolls on with big deals, small spreads
By Joy Wiltermuth
NEW YORK, July 19 (IFR) - Three more deals priced in the red-hot ABS primary market on Tuesday, taking advantage of strong conditions as investors rush to buy exposure to US consumer credit.
Ford Motor (LSE: 0P4F.L - news) , John Deere and credit card servicer World Financial Network raised a combined US$2.4bn in the wake of two deals Monday and a whopping 12 trades last week.
Half of Ford's new US$1bn deal was a 2.97-year Triple A class that priced at 60bp over interpolated swaps, in from guidance of 63bp area.
The carmaker initially looked to sell only US$784m of bonds to help dealers stock their showrooms with Ford vehicles.
But the renewed demand for US consumer-related debt of late has allowed many issuers to sell larger deals than planned.
World Financial Network, which supplies shoppers at Victoria's Secret and other retailers with credit, upsized its deal by more than US$400m to US$682.5m on Tuesday.
Capital One (LSE: 0RCZ.L - news) on Monday sold a huge US$1.35bn credit card deal that increased from US$500m after order books reached more than US$2.5bn, according to one senior ABS banker.
"It's definitely a favorable environment," the banker told IFR. "I think others will look to top-size deals and capture this open window for issuance."
Elsewhere, Fannie Mae priced a US$1.3bn mortgage bond Tuesday tighter than expected after seeing voracious demand for the trade.
Its top US$500m of 2.79-year Baa2/BBB bonds cleared at one-month Libor plus 145bp, after bankers cut pricing from guidance in the 160bp-170bp range.
Online lender Social Finance (SoFi) also took advantage of the robust conditions for its new US$422.6m student loan securitization.
Its 3.27-year Triple A class was revised to the 110bp area over Libor from 110bp-115bp, an investor said.
Morgan Stanley (Xetra: 885836 - news) strategists cautioned that, while upping exposure to consumer credit, the buyside should cut holdings of US corporate debt.
"We continue to favor credit but lower our weight to US corporates, given a large (year-to-date) rally, late-cycle readings from our models and our US credit team's caution," they said. (Reporting by Joy Wiltermuth; Editing by Marc Carnegie)
