By Matthew Cowley Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The deafening silence in the market for bonds backed by consumer credit loans was interrupted Tuesday with a deal brought by car maker Nissan Motor Co. (NSANY).
The deal came despite a worsening outlook for the U.S. car sector. Sales slid further in November as Toyota Motor Corp. (TM) reported a 34% drop and Ford Motor Co. (F) a 31% decrease. The dour numbers, on the back of October's moribund sales results, highlight the pressures facing the auto industry and why the Detroit Three is seeking federal assistance to help it through the current environment.
The car company's finance unit sold $600 million in bonds backed by high-quality auto loans to money managers and insurance companies. The size was increased from $500 million due to investor demand, in the first transaction the market has seen since a Nov. 24 deal brought by AmeriCredit Corp. (ACF), which was backed by lower quality subprime loans.
This is also the first deal brought since the government unveiled a program to buy up $200 billion of these asset-backed transactions. The government is hoping that investors will use the cash from the program, scheduled to start up in February, to buy up new deals, in an attempt to keep credit flowing to those consumers still able and willing to take out loans.
The consumer debt-backed bonds slumped in October and November amid the turmoil of the global credit crunch.
The Nissan Auto Receivables Owner Trust 2008-C transaction was announced Monday and sold by Tuesday morning, although some work had been done "behind the scenes" to lay the foundations, said a person close to the deal.
The bonds were sold in four tranches with varying maturities and interest rates. The largest tranche for $185 million had an average life of 0.99 years, and paid a floating interest rate equivalent to the U.S. dollar one-month London interbank offered rate plus a spread of 3.5 percentage points, equal to about 5.71% based on Tuesday's rates.
That's much higher than the 0.5 percentage point spread Nissan paid on a similar transaction it brought in January, according to a person close to the deal. Still, the pricing was about 100 basis points below where similar bonds are trading in the secondary market, so in that context, it's a "positive sign for the market," he said.
Nissan is considered to be a top tier issuer, so it has a good following from investors, the person said. Moreover, because there hadn't been a primary market deal "in a while" there were investors that had cash to put to work, and which could secure larger chunks of a transaction than they could in the secondary market, he said.
The transaction, based on prime auto loans for customers with credit scores above 750, carries some protection to sweeten the deal for investors. There's a 4.5% over-collateralization rate, and a cash reserve fund equal to 25 basis points. Underwriters for the deal were JPMorgan and RBS.
It's still too early to tell whether this means the ABS market is on the path to a full recovery. Although there have been rumors of other issuers looking to do deals, there's "nothing confirmed at this point," said the person.
-By Matthew Cowley, Dow Jones Newswires; 201 938 5692; matthew.cowley@dowjones.com
(Mike Barris contributed to this report)
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(END) Dow Jones Newswires
December 02, 2008 16:24 ET (21:24 GMT)

Publié le 02 Décembre 2008 Copyright © 2008 Dowjones