PFS Financing's $550 Million TALF-Eligible Deal Sold -Source
03 June 2009 - 4:40AM
Dow Jones News
Nearly $15 billion of consumer loan-backed bonds have sold ahead
of the loan application deadline for a Federal Reserve program
Tuesday.
Investors can borrow money from the central bank through its
Term Asset-Backed Securities Loan Facility, or TALF, to buy these
bonds. Tuesday is the deadline for the fourth round of loan
applications. The Fed's loans are non-recourse, which means the
bank takes the bulk of the loss if the bond purchase goes awry.
This makes the investment more attractive and "protects you from
the downside," said Robert Lee, a partner and portfolio manager at
Lord Abbett in Jersey City, N.J., who believes the TALF program is
a "prime example of what has been working."
That said, the Fed has had to cajole investors to participate in
its program and fine-tuned it to make the terms more enticing for
buyers. It has increased the length of the loans to five years from
three and said it will offer loans to investors to buy existing
commercial mortgage bonds.
About a dozen deals emerged ahead of the fourth loan-application
deadline for the Fed's program to revitalize the asset-backed
securities market.
Ford Motor Co. (F) sold two bonds that are eligible for TALF.
Other auto makers selling bonds include BMW and Nissan Motor Co.
(NSANY).
John Deere Owner Trust, Chesapeake Funding LLC and PFS Financing
Corp. also sold bonds Tuesday.
One $275 million triple-A rated tranche of the PFS deal with a
duration of 1.94 year sold at 150 basis points over one-month Libor
while the second $275 million tranche, with a 2.68 year duration,
sold at 180 basis points over one-month Libor.
Friday, American Express Co. (AXP) sold a $1 billion credit-card
loan-backed deal at 135 basis points over one-month Libor. Monday,
Citigroup Inc. (C) sold its $4 billion credit-card loan-backed deal
at 210 basis points over one-month Libor.
Also Monday, First National Bank Of Omaha sold its $600 million
credit-card loan-backed deal at 135 basis points over one-month
Libor.
Many of the TALF-eligible deals have grown in size, such as one
of the Ford deals, dubbed Ford Credit Auto 2009-B, which doubled to
$2 billion from $1 billion.
J.P. Morgan Chase & Co. (JPM) issued a non-TALF eligible
deal Monday that was increased in size to $1.5 billion from an
original $750 million.
Until this round of issuance, TALF-eligible bonds worth more
than $25 billion were sold this year.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com
(Michael Aneiro contributed to this report)