U.S. CORPORATE FINANCE - ASSET-BACK MARKET GROWS
The U.S. asset-backed 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 asset-backed
deals of the year were done by commercial banks," said Anthony
Dub, who heads First Boston Corp's asset-backed group.
    BankAmerica Corp's <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 Corp's <RPT>
RepublicBank Delaware unit. Goldman, Sachs and Co ran the books
on that deal, with First Boston acting as co-manager.
    However, Dub said the Bank of America securities were more
closely related to the so-called "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 asset-backed 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 1.79 years and matures in
1992. First Boston gave the issue a 6.90 pct coupon and priced
it at 99.8125 to yield 6.95 pct, or 65 basis points over
comparable Treasury securities. Non-callable for life, the deal
was rated AAA by both Moody's and Standard and Poor's.
    Underwriters away from the syndicate said they believed the
Bank of America deal was priced too aggressively. "AAA-rated
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 deal's
top-flight rating by both agencies, unlike many of last year's
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 U.S., analysts said.
    Last week's deal was Bank of America's second foray into
the young asset-backed securities market, analysts noted.
    In mid-December 1986 Bank of America sold, via California
Cars Grantor Trust 1986-A, 514 mln dlrs of certificates backed
by automobile receivables through Salomon Brothers Inc.
    Upcoming asset-backed 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 11.9 billion dlrs.
 Reuter
