Three Deals Launched on TALF-Debut Day

Nissan, Ford and Citigroup Test the Waters; Investors SkepticalArticle Comments (2) more in Markets Main »Email Printer Friendly Share: Yahoo Buzz facebook MySpace LinkedIn Digg del.icio.us NewsVine StumbleUpon Mixx Text Size By LIZ RAPPAPORT The Federal Reserve and Treasury lending program designed to revive consumer and business lending launched Thursday with at least three deals, though not all investors used the government's financing. Nissan Motor Co. and Ford Motor Credit Co. sold more than $4 billion of bonds backed by auto loans that were eligible for the Fed's Term Asset-Backed Securities Loan Facility, or TALF. Citigroup sold $3 billion of securities backed by credit-card payments. All the issuers were able to sell at or just below rates where similar types of securities trade in the open market. "This is a good start, but just a start," said Joseph Astorina, analyst at Barclays Capital. "We need to see more deals to view the program as a success." The Fed announced that it lent $4.7 billion to TALF borrowers. The completion of the deals suggests the Fed is having some success in thawing the market. Sales of asset-backed securities, a market critical to keeping credit flowing to consumers, have shrunk from more than $1 trillion in 2006 to just $3 billion during the first two months of 2009, according to Dealogic. "We participated and we're pleased," said Max Holmes, founder of Plainfield Asset Management LLC, a Connecticut distressed-assets hedge fund, which bought some of Ford's TALF-eligible securities Thursday. Citigroup had been locked out of the market for such deals since May of 2008. Nissan had sold an auto-loan securities deal earlier this year, but it trades at levels about one percentage point higher than the current deal's interest rate. The TALF program, which was announced in November and began accepting applications for loans Thursday, allows hedge funds and other investors to borrow from the central bank on favorable terms. Investors in turn use the cash to buy newly issued securities backed by auto loans, credit-card debt and other consumer financing. On Wednesday, the Fed announced it is expanding the types of securities the Fed will accept as collateral to include those backed by mortgage-servicing payments, loans to buyers of business equipment, leases for car-rental companies and loans to auto dealers. The Treasury has said the program also may expand to accept residential and commercial mortgage-backed securities. All TALF eligible securities must be rated triple-A by two credit-ratings firms. The Fed had initially launched the program to lend up to $200 billion to investors buying securities backed by consumer and small-business loans. In early February, the Treasury announced it could expand the program to $1 trillion and include funding for mortgage-loan securities.