DFS Discover Financial Services

AmeriCredit Corp.'s (ACF) auto loan-backed deal has been increased in size and has launched, according to a term sheet.

The deal is now $600 million, up from an original $500 million. Its largest tranche, worth $147.54 million, launched at 55 basis points over a benchmark.

Investors can buy the security using cheap non-recourse loans through the central bank's Term Asset-Backed Securities Loan Facility, or TALF. The next loan application deadline for TALF is Feb. 5.

Having a healthy asset-backed market is important as it eases the flow of credit and helps lower the cost of borrowing for consumers. Issuers can package loans backed by auto or student loans and credit-card debt and sell them to investors. When buyers grew wary of such collateral, they withdrew from this market and the central bank had to step in with TALF.

Other TALF-eligible deals that emerged this month included Nissan Motor Co. (NSANY, 7201.TO) with a $900 million bond, Ally Bank with a $750 million security, Ocwen Advance Receivables with a $200 million deal, Cabela's Inc. (CAB) with a $300 million credit card loan-backed deal and Navistar International Corp. (NAV) with a $200 million equipment floorplan-backed bond.

"There's only one more round of TALF left so issuers are trying to get deals done," said Jim Harrington, a senior portfolio manager at Ryan Labs Asset Management in New York.

The consumer loan-backed portion of TALF, scheduled to end in March, was set up last year to draw investors to buy newly created asset-backed securities. More than $100 billion in securities eligible for TALF have been sold since its launch.

"TALF was needed to jumpstart the market," said Paul Colonna, president and chief investment officer at General Electric Investment Corp., speaking at the American Securitization Forum's conference earlier this week. "The program has been a huge success."

That said, he noted the market does not want "a myriad of programs." Instead, investors are supposed to be in the business of assessing risk and evaluating how to invest. "We need to get back to a normalized market of risk and reward," he said.

Issuers initially used the TALF crutch to sell their bonds but, by November, the volume of non-TALF deals sold was higher than TALF deals. In August, 95% of asset-backed securities sold were eligible for TALF. By November, that figure was down to 32%.

Among the non-TALF deals this month are a $750 million credit card loan-backed deal from Discover Financial Services (DFS) and a $1.54 billion auto lease-backed bond from Ford Credit Auto Lease.

Earlier this month, Volkswagen AG (VLKAY, VOW.XE) sold a $1.38 billion auto loan-backed deal, Bank of America Corp. (BAC) sold a $1.496 billion auto loan-backed deal, World Omni Financial Corp. sold a $917 million bond and the state of Missouri had a student loan-backed deal.

The sale of non-TALF bonds shows this market is ready to operate without the Fed's support.

-By Anusha Shrivastava, Dow Jones Newswires; 212-416-2227; anusha.shrivastava@dowjones.com

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