UPDATE: Bank Of America Offers $1.995 Billion TALF Deal
August 26 2009 - 3:47PM
Dow Jones News
Bank of America/Merrill Lynch is in the market with a $1.995
billion auto loan-backed deal, according to a person familiar with
the matter.
The deal is eligible for a Federal Reserve program, the Term
Asset Backed Securities Loan Facility, or TALF, through which
investors can procure cheap loans to buy newly created consumer
loan-backed and new and existing commercial mortgage-backed
bonds.
Bank of America's deal, dubbed BAAT 2009-2, is jointly led by
Bank of America/Merrill Lynch, Barclays Capital, Citigroup, Credit
Suisse and Royal Bank of Scotland.
Last month, Bank of America (BAC) sold a $3.993 billion
auto-loan backed deal at 135 basis points over a benchmark. That
was the bank's first deal eligible under TALF.
TALF was set up in March to revitalize the securitization
market, shuttered following the bankruptcy of Lehman Brothers
Holdings Inc. (LEHMQ). That market, in which banks sell loans
packaged as securities on to investors, is vital in keeping credit
flowing to the broader economy.
Initially targeted at securities backed by consumer loans, TALF
was expanded to include commercial mortgage loan-backed bonds. The
program was set to expire Dec. 31; last week, the central bank and
the Treasury Department extended their support, citing "impaired"
conditions in financial markets.
TALF loans against newly issued asset-backed securities and
existing commercial mortgage-backed securities will be extended
through March 31, 2010. For newly issued CMBS, which take a
significant amount of time to put together, the extension is until
June 30, 2010.
Since the launch of the program, $85.45 billion in consumer
loan-backed deals have been sold, the bulk of it using non-recourse
loans at attractive rates from the Fed.
Besides reviving issuance, TALF has also revived investors'
appetite: Recently, ABS deals have been increased to $5 billion as
investors took advantage of the Fed's cheap loans. That is
reminiscent of the pre-crisis days, when deals were regularly
increased in size to the $6-billion to $10-billion range.
There have been no new CMBS deals but some are said to be in the
works.
The next loan application deadline for the ABS portion of the
program is Sept. 3. For CMBS, the deadline is Sept. 17.
-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227;
anusha.shrivastava@dowjones.com