GE's TALF Eligible Deal Launches At 1-Mo Libor +210BPS
May 05 2009 - 10:46AM
Dow Jones News
General Electric Co.'s (GE) $1 billion credit card loan backed
deal has launched, according to a term sheet Tuesday.
The deal, eligible for funding under the Federal Reserve's Term
Asset-Backed Securities Loan Facility, or TALF, is expected to be
sold later Tuesday, the loan application deadline for funding under
the program.
It launched at 210 basis points over one month London interbank
offered rate, or Libor.
Other TALF eligible deals scheduled to be sold are motorcycle
company Harley Davidson Inc.'s (HOG) $500 million deal, Honda Motor
Co.'s (HMC) auto-loan-backed $1.75 billion bond, CNH Global N.V.'s
(CNH) equipment loan-backed $1 billion deal and General Electric's
(GE) $1 billion credit-card-backed deal.
Eligible new issuance stands at about $11 billion, a notable
increase over issuance seen in the first two months of the TALF,
when investor wariness kept many on the sidelines.
The spurt in issuance of TALF-eligible deals and the subsequent
increases in size of these bonds are signs that investors have
finally warmed up to the Fed's consumer lending program.
"There is an upsizing on most of the deals, showing that TALF is
a success," said Dan Nigro, an asset-backed securities portfolio
manager at Dynamic Credit Partners in New York.
Despite the "cumbersome paperwork" there are "lots of benefits
once you have been through the process," he said, noting that
investors can get attractive returns once they get the nonrecourse
loans from the Fed to buy newly created asset-backed
securities.
Deals from Honda, Volkswagen AG (VLKAY) and CNH were all
increased in size.
On Monday, JPMorgan Chase & Co. (JPM) sold its $5 billion
credit-card-loan-backed deal at 155 basis points over the one-month
London interbank offered rate. This was the largest TALF- eligible
bond so far.
TALF is aimed at jump-starting consumer lending.
Investors apply for loans to finance bonds backed by credit
cards, student loans, and other consumer loans once a month.
Issuers have clustered bond sales around the loan application
deadline, which is the first Tuesday of the month.
The Fed will accept loan applications between 1 p.m. and 3 p.m.,
EDT, and will release information about how much investors applied
for later Tuesday.
TALF-eligible issuance stood at $8.2 billion in March and just
$2.57 billion in April.
-By Anusha Shrivastava, Dow Jones Newswires; 201-938-2371;
anusha.shrivastava@dowjones.com