AmeriCredit Deal: ABS Market Thawing
It would seem that credit markets, frozen at the beginning of the year are beginning to shake loose..
AmeriCredit, who provides financing to car buyers with poor credit, raised $750 million in the year's first public sale of bonds backed by subprime auto loans.
The offering was increased from the $500 million initially planned. The simple explanation is that investors are once again looking for asset backed securities. The AAA portion of the sale with a three-year maturity priced to yield 365 basis points over benchmark rates. The bonds were being marketed at a spread of 380 basis points over the benchmark. The weighted average coupon on the Notes to be paid by AmeriCredit is 6.0%. It is the first sale since September for ACF.
The co-managers are Barclays Capital (BCS), Lehman Brothers (LEH) and Wachovia (WB). Net proceeds from securitization transactions will be used to provide long-term financing of receivables.
This is good news for ACF investors like Leucadia (LUK) and still more evidence that auto related investing ought to hold up in the current environment and excel as we come through it.
Bloomberg reports "Demand is also returning for bonds backed by car loans made to borrowers with good credit. The finance arms of Ford Motor Co., GMAC LLC and Chrysler LLC have raised a total of $9.7 billion since April 15 by selling asset-backed debt, including a $5 billion sale by Ford, its biggest since 2002."
Time to get serious about the sector.
Disclosure ("none" means no position):Long WB, None
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