07/08/2011

American Express Eyes Card-Bond Offering

American Express has been chatting up underwriters about floating its first offering of credit-card bonds in more than a year.

Like other big card lenders, Amex has mainly relied on savings deposits to fund itself in the past couple of years. But with $5.7 billion of card bonds set to mature this year, the company is expected to tap the asset-backed securities market to refinance at least a portion of those obligations. In meetings with securitization bankers, Amex has outlined a deal that could hit the market before the end of the third quarter and weigh in around $1 billion.

Talk of the offering has lit a fire under investors, who have been salivating for fresh credit-card securities from top-tier issuers like Amex. U.S. card-bond issuers sold $6.9 billion of securities during the first half, though most of that came from small and mid-size players such as Cabelaís and 1st Financial. Amexís last offering was a $911.8 million transaction that priced in April 2010 via Barclays.

Like other major card lenders, Amex has steered clear of the asset-backed bond market ever since the Financial Accounting Standards Boardís FAS 166 and 167 rules undercut the balance-sheet benefits of securitization last year. Its 2010 card-bond issuance totaled just $1 billion, compared to $2.3 billion the year before and $11.7 billion in 2008, according to Asset-Backed Alertís ABS Database.

One securitization banker said the company is eyeing a return to the bond market not so much because it has to, but because it wants to keep its funding options open. ďItís all about diversifying its financing avenues,Ē the source said. ďIt canít rely on deposits for everything. Itís showing people it can still pull off a deal.Ē

Another market player said Amex also is looking at commercial-paper conduits as an alternative to refinance some its maturing bond obligations.

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