TALF deals sparse as deadline nears

By Nancy Leinfuss

NEW YORK (Reuters) - U.S. asset-backed securities spreads held steady in quiet trade on Monday, as about $1.5 billion of TALF-eligible sales were on deck to price on the eve of the Federal Reserve's subscription deadline.

Under the Term Asset-Backed Securities Loan Facility (TALF) program, the Fed makes loans available to investors for the purchase of securities backed by consumer debt such as autos and credit cards, thereby freeing up capacity for lenders to make new loans.

"Right now, there are just two deals being offered to investors in the market but issuers have until tomorrow," said one syndicate official, referring to CarMax Auto Finance and World Omni auto sales.

Under the program designed to unclog consumer debt markets, issuers sold $8.2 billion of auto and credit card ABS deals under the program's debut program in March. Nissan Motor, Ford Motor, Citibank and Huntington Auto were among the issuers.

Auto finance companies, that rely heavily on the securitization market for funding, are expected to be the largest beneficiaries of the program. Still, only two issuers have marketed deals so far as the April 7 deadline nears.

CarMax, a unit of CarMax Inc (KMX.N), is expected to price $735 million of securities backed by a pool of used and new auto and light-truck vehicle loans. Another $750 million auto deal is being offered by prime retail auto ABS issuer World Omni, dealers said.

Some market participants said TALF customer agreements are presenting a hurdle for wider investor participation, while others say poor demand for autos as the unemployment rate soars may also be limiting demand for credit.

"On the demand side, a few more investors signed up for TALF, but issues around the customer agreements have not been resolved," said Chris Flanagan, analyst at JPMorgan Securities. "Dealers are farther rather than closer to a standard customer agreement, which could potentially hurt secondary trading of TALF eligible ABS," the analyst said.