ABS Market Bounds Out of Bed in 99 Aftr Asian Flu.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 9, 2000

The asset-backed securities (ABS) market returned to robust health in 1999 after an Asian Flu-weakened 1998, and Standard &Poor's expects a big year ahead.

Total public ABS issuance -- boosted by big volume increases in the nonresidential mortgage-related term ABS and asset-backed commercial paper (ABCP) sectors -- increased by about 18% over 1998, not including the home equity sector, and reached US$133 billion at year end.

&uot;Double-digit growth is also expected in 2000 in both the ABS term and ABCP markets,&uot; says Joseph Sheridan, managing director, and head of Standard &Poor's Structured Finance Ratings North American ABS group. &uot;The ABCP market grew by 36% and reached US$520 billion, and there was significant growth in most segments of the ABS market in 1999.&uot;

Mr. Sheridan also points out in the rating agency's latest report entitled &uot;1999 ABS Year in Review&uot; that the hottest area in the public ABS market was the auto sector. &uot;It was a banner year for autos,&uot; he says. &uot;New issue volume jumped 23% over 1998.&uot; The full report can be found on RatingsDirect, Standard &Poor's Web-based credit analysis system.

Although spread volatility meant fewer new asset types in 1999, there were innovations in familiar sectors. &uot;Origination of some mature assets took new twists,&uot; says Mr. Sheridan. He cites the first securitization of auto loans originated completely on the Internet -- PeopleFirst.com Auto Receivables Owner Trust 1999-1 -- late in 1999 as an example.

&uot;The next new class will likely be Internet origination,&uot; he says. &uot;In the future, the Internet could add to the supply of ABS and become a fixture in the market, much like monoline credit card and subprime auto issuers have done in the past.&uot;

Standard &Poor's itself introduced a number of innovations in 1999, including a new credit enhancement approach for loan-backed commercial paper conduits. The new credit enhancement levels more accurately reflect the true short-term default risk associated with lending to a portfolio of investment-grade borrowers.

Also introduced in 1999 was Standard &Poor's weekly ABCP Rule 2(a)7 Report, providing compliance information on conduit concentrations. This report -- available through the Standard &Poor's Ratings Services Web site at www.standardandpoors.com/ratings -- was created to inform investors as to whether a conduit has a concentration of the conduit's outstanding assets that exceeds 10%.

As of the end of 1999, the Rule 2(a)7 Web site received more than 400 inquiries a month. &uot;It's a big hit, and it's the kind of innovation you can expect going forward from Standard &Poor's,&uot; says Mr. Sheridan. -- CreditWire