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By Marine Cole
About three years after the asset-backed securitization market started to collapse, issuance has yet to improve and the market has actually worsened in 2010.
With just one ABS deal this week from SC Germany Auto, the market for global ABS saw its slowest week since Dec. 27. ABS issuance in Europe totals $45.6 billion so far this year, down 72 percent from the same time last year, while in the US, issuance totals $77.2 billion, down 12 percent, according to data provided by Thomson Reuters.
US credit card receivables, in particular, have seen a notable decline in 2010 with just eight issues totaling $4.1 billion, compared to 26 issues totaling $28.6 billion for the same period last year. "Total US ABS backed by credit card receivables is at the lowest year-to-date level since the same period in 1988, and down significantly from the market peak in 2007 when 100 offerings raised $58.5 billion," according to Thomson Reuters.
The recent slowdown in ABS issuance was in part prompted by the financial regulatory overhaul. As CFOZone reported this week, the regulatory reform has eliminated protection of credit ratings agencies from lawsuits when underwriters include their ratings in prospectuses used to sell ABS, which brought the agencies to ask Wall Street not to use their ratings at all.
While the Securities and Exchange Commission has historically prohibited the sale of ABS without ratings in selling documents, it said Thursday it would temporarily allow issuers of ABS to omit credit ratings in their filings as market participants transition and adapt to the new rules.
In other markets, the UK is pulling some big numbers, with its largest month for private equity-backed mergers and acquisitions since the crisis started, and a lead in European initial public offerings so far this year.
After this week's announced $4.6 billion PE-backed acquisition of engineering company Tomkins by Onex and Canada Pension Investment Board, July has already been the largest month by volume of PE-backed M&A in the UK since December 2007, according to Thomson Reuters. "While overall M&A activity is down 12 percent in the UK, there has been a flurry of private equity-backed transactions and financial sponsor M&A activity is up six times from the same period last year," it said in a report Friday.
In equities, the recently announced IPO from UK online grocer Ocado raised $563 million and is the third largest IPO in the UK this year after the $1.9 billion offering from Essar Energy and the $1 billion offering from mining company Vallar.
The UK leads European IPO issuance with 19 offerings raising $5.3 billion followed by Poland and Russia with $4.2 billion and $2.7 billion respectively. Last year at this time of the year, there weren't any IPOs offered by UK companies.
Still, although the IPO picture in the UK is looking better, it's far from stellar. Activity remains subdued and investors remain wary. For example, the Ocado IPO priced Wednesday and has traded down approximately 14 percent since then.
The Asia Pacific region is the top region for IPO issuance with 406 deals in 2010 valued at $72.8 billion.
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