For insurers of asset-backed bonds, very little changed in 2Q00, with overall market penetration rising to 21.0% from 20.1% in the first quarter – not a meaningful shift, industry watchers said.
However, for the second consecutive quarter, monoline penetration was down from its 1999 numbers. In the 2Q99, the sureties did $12.8 billion in asset-backed business, which amounted to 23.9% of the $53.5 billion in total U.S. public issuance, compared to this quarter’s $12.6 billion (of $58.9 billion), according to Thomson Financial Securities Data.
Interestingly, there was more dispersion across asset classes than in previous quarters. In the fourth quarter of 1999 and first quarter 2000, home-equity and auto receivables accounted for 97% and 98% of insured proceeds respectively. In the second quarter, the two classes made up 83% of insured proceeds.
Ambac led the pack again, claiming just over $4 billion in wrapped proceeds, at par with its first quarter numbers. Insuring a $500 million Ikon Receivables deal, the monoline is the only so far this year to have penetrated the equipment lease-backed sector.
A $550 million Keycorp student loan-backed deal was insured in June by MBIA, marking the fourth time a deal of that asset type has featured a wrap. Education Finance Group is the only other issuer to bring an insured deal to market within the last five years. EFG’s most recent wrapped student loan deal closed in October 1999. AMBAC insured the deal.
Reclaiming much of its market share, MBIA wrapped $3.9 billion in public asset-backed securities, up approximately 66% over its $2.3 billion first quarter issuance.
“I think it’s clear looking at some of the numbers, everyone is down compared to last year,” said Mark Zucker, head of the structured finance group at MBIA. “I think the interesting part of this, that is not shown here, is what our pipelines look like. I’m certain our competitors are in the same positions. Our pipelines are considerably more robust now than they were first quarter.”
Further, Zucker said that year-to-date, MBIA’s CDO business is stronger than it was in 1999, though those numbers do not show up in the public issuance tally.
“There are pockets within the market that are hot,” Zucker said. “The CDO business is a hot business.”
He added that international business has been equally robust.
Nearly tying MBIA in insured public ABS, Financial Security Assurance wrapped six deals for $3.75 billion, level with its first quarter numbers. Freddie Mac made its quarterly appearance, wrapping an Option One deal for $842 million.
Of recent newsworthy events, Dexia finalized its acquisition/merger with FSA. According to Chairman and Chief Executive Officer Robert P. Cochran, FSA plans to ramp its asset-backed business going forward, though Dexia’s hand will be especially lucrative in FSA’s global efforts.
Separately, Financial Guaranty Insurance Corp. was seen building its ABS team, though the surety, which has only wrapped a small handful of asset-backed deals in the past year or so, was inactive in the second quarter.