12/18/2009

Issuers Look to January as Demand Fades

Manheim Financial has postponed a planned securitization in response to waning investor demand, on the heels of a similar move by Ford.

Both companies now intend to bring their offerings to market early next year, when investor interest is expected to rebound.

Manheim's offering would be its first. The Atlanta company, which offers floorplan financing to car dealers and auto-rental businesses in the U.S. and Canada, had begun preliminary marketing efforts earlier this month with Barclays on board as bookrunner. It pulled back last week, as buysiders headed to the sidelines for the rest of the year.

A source said Manheim isn't desperate for funding, and believes an early-2010 deal would offer a lower cost of capital.

Ford was marketing an auto-loan issue in late November that would have qualified for buyer financing under the Federal Reserve's most recent round of Term Asset-Backed Securities Loan Facility funding, which went out Dec. 3. It held off after investors demanded wider spreads than it expected.

The moves underscore a trend that has been taking shape for about a month. Investors, who usually tone down their buying around yearend, stepped away a few weeks earlier than usual this year to lock in gains. Issuers, however, kept pitching transactions. The result was a supply-and-demand imbalance that has caused funding costs to rise.

One banker said buyers are also looking for any possible flaw or worst-case scenario to justify wider spreads. Issuers that don't need immediate funding are now retreating in response, with the belief that their deals would be easier to place after the yearend holidays.

There's word that a timeshare lender is planning a securitization for next month.

Late-year technicals are also showing up on the secondary market. For instance, numerous bid lists stemming from liquidations of collateralized debt obligations and other structured-product portfolios traded well in early December. That activity started to slow last week.

Among new transactions, Allegheny Power subsidiaries Monongahela Power and Potomac Edison separately priced utility-fee securitizations of $67 million and $22.4 million on Dec. 16. Each had a 19.1-year senior tranche that priced at an issuer-friendly 88 bp over swaps, reflecting investor sentiment that such deals are a safe place to park capital. Saber Partners of New York acted as advisor on both long-planned offerings.

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