Chrysler Corp., this year's securitization junkie, made another massive draw on the asset-backed market yesterday, this time offering fixed-rate securities backed by floating-rate assets.
Packaged in two tranches by a Salomon Brothers team, the $1 billion deal hinged on an internal interest-rate swap that enabled Chrysler's Chrysler Financial Corp. to act as the counterparty in converting cash flows from dealer floor-plan loans pegged off the prime rate into fixed-rate securities.
The first piece, Carco Auto Loan Master Trust 1991-2, consists of $250 million of two-year securities priced as 7 3/7s to yield 7.63%, 80 basis points over the Treasury curve.
The second piece, Carco Auto Loan Master Trust 1991-3, consists of $750 million of five-year securities priced as 7 7/8s to yield 8.76%, or 95 basis more than comparable U.S. government securities.
The deal's structure -- pitched as a credit card deal in an auto issue's wrapper -- was designed to broaden Chrysler's investor base. But both tranches hit the market 10 basis points cheaper than expected, reflecting buyers' reluctance to swallow the new swap structure.
The securities, which are expected to carry triple-A ratings from the major agencies based on a 12% subordination, are backed by loans made by Chrysler's U.S. Auto Receivables Co. to finance car and light truck inventories.
The number three U.S. automaker and its units, banished from the straight debt market because of junk-grade ratings, have been stripping assets aggressively this year.
Yesterday's deal marked Chrysler's eighth trip to the asset-backed market in the past seven months, and puts its 1991 asset-backed sales at more than $5 billion. Most of those assets were loans made to U.S. car buyers and dealers.
In the straight debt market, Atlantic Richfield Co. went long with $150 million of 40-year notes.
A Salomon team priced the noncallable securities as 9 1/8s to yield 80 basis points more than the bellwether long bond.
Moody's Investors Service rates the securities Al; Standard & Poor's Corp. rates them A-plus.
The deals came as seasoned high grades largely marked time in the secondary market.
Junk bonds, meanwhile, finished flat to 1/8 point lower, though Trans World Airlines Inc. bucked the trend to climb nearly three points on news that the carrier completed restructuring talks.
Elsewhere, Moody's and Standard & Poor's yesterday smiled on municipal bond insurer AMBAC Inc., which is gearing up to sell $150 million of debentures as early as tomorrow. The deal comes on the heels of Citibank's public stock offering of 50.3% of AMBAC.
Moody's assigned an Aa2 rating to the prospective offering of unsecured and unsubordinated debentures. The agency said AMBAC's principal revenue source for repaying the debt is its AMBAC Indemnity Corp. subsidiary, which "insures a well diversified, high quality portfolio of municipal bonds and has a large capital base and reliable future income stream."
Standard & Poor's, meanwhile, gave the issue a AA-plus and affirmed AMBAC Indemnity's AAA claims-paying ability.
While citing AMBAC's strong capital and seasoned book, Standard & Poor's noted that "the bond insurance industry is confronting a period of weakened credit quality in the municipal sector.
"Should this environment result in increased losses, the capacity of the operating company to provide dividends up to the holding company could be constrained," the agency warned. "This factor, coupled witht he uncertainty associated with the nature and timing of additional ownership reduction by Citibank, contribute to the negative outlook assigned to the debt of the parent company."
