Amadeusz Juskowiak

Us corporate finance assetback market grows

The US assetbacked debt securities market which grew explosively last year is broadening and investment bankers say 1987 could see a variety of issuers

It is interesting to note that the first two assetbacked deals of the year were done by commercial banks said Anthony Dub who heads First Boston Corps assetbacked group

BankAmerica Corps BAC Bank of America unit last week issued 400 mln dlrs of securities backed by credit card receivables via sole manager First Boston Dub said the offering sold out quickly mostly to institutional investors

The Bank of America offering followed a January 16 issue of 200 mln dlrs of similar debt by RepublicBank Corps RPT RepublicBank Delaware unit Goldman Sachs and Co ran the books on that deal with First Boston acting as comanager

However Dub said the Bank of America securities were more closely related to the socalled cars deals that raced to market last year than were the RepublicBank securities

The RepublicBank issue was secured by credit card receivables In contrast the Bank of America deal was the first public offering of credit card receivables because we used a grantor trust vehicle he said

In a grantor trust investors buy assetbacked certificates that represent a specified percentage of an undivided interest in the trust analysts explained

The Bank of America certificates were issued by California Credit Card Trust A which the bank established for that single purpose investment bankers pointed out

The debt has an average life of 179 years and matures in 1992 First Boston gave the issue a 690 pct coupon and priced it at 998125 to yield 695 pct or 65 basis points over comparable Treasury securities Noncallable for life the deal was rated AAA by both Moodys and Standard and Poors

Underwriters away from the syndicate said they believed the Bank of America deal was priced too aggressively AAArated auto paper was trading about 75 basis points over Treasuries when First Boston priced the deal one said

However Dub said the offering sold out quickly anyway

The First Boston executive attributed this to the deals topflight rating by both agencies unlike many of last years cars deals which were rated by S and P alone

Investors receive interest only payments for the first 18 months and then interest and principal payments for the remaining five to seven months Dub detailed

Investment bankers pointed out that because the Bank of America deal did not pay principal for a year and a half the issue had a longer average life than some of the cars deals that were brought to market late last year

The collateral for the trust includes a pool of VISA credit card receivables backed by a letter of credit Bank of America has about four billion dlrs of credit card receivables making it one of the biggest in the US analysts said

Last weeks deal was Bank of Americas second foray into the young assetbacked securities market analysts noted

In midDecember 1986 Bank of America sold via California Cars Grantor Trust 1986A 514 mln dlrs of certificates backed by automobile receivables through Salomon Brothers Inc

Upcoming assetbacked issues include 200 mln dlrs of notes backed by the car leases of Volvo 1986 Lease Finance Corp a unit of Volvo Finance North America Inc via First Boston and 450 mln dlrs of notes secured by sales contracts of Mack Trucks Receivables Corp a unit of Mack Trucks Inc MACK via Shearson Lehmand Brothers Inc

The asset backed market which began in March 1985 totals an estimated 119 billion dlrs