U.S. Bancorp Mulls Card ABS After Lockheed Deal


U.S. Bancorp may get back into the asset-backed game after the Minneapolisbased company's record breaking corporate card deal with government defense contractor Lockheed Martin.

Believed to be the largest card purchasing program in the world, Lockheed is expected to incur approximately $750 million in annual charges, which should total nearly $4 billion over the life of the five-year agreement.

U.S. Bancorp is the largest issuer of Visa corporate and purchasing cards in the world, and was chosen as Lockheed Martin's purchasing card provider after the leading bank card issuers were invited to bid for the company's business.

While market sources said they liked the idea of corporate-card debt backed by a company known for lucrative government and defense contracts, U.S. Bancorp may need some convincing.

The bank has primarily raised capital through the wholesale markets, a funding source that U.S. Bancorp treasury executive Steve Lobo described as "cheaper" in comparison to the ABS market thus far.

But while U.S. Bancorp may be a relative neophyte to the ABS market, it does have a history in corporate card bond issuance. The bank's only securitization was a $400 million corporate card deal completed in 1997. The five-year Visa card securities were split among one large triple-A rated tranche and a small $6 million single-A piece. J.P. Morgan led the sale.

And, Lobo said, the bank always looks at the potential for securitizing its corporate card portfolio as well as other debt product.

The bank has completed one securitization. Lobo said the bank wanted get the systems capability in place so if internal and external economic environs looked right in the future, it could pull the trigger on a deal with a fair amount of confidence. This holds true today, he said.

"If it makes sense, we'll do it," he said about the corporate card debt, but added that he was not in a position to comment any further on the matter.

The company's first deal was completed out of the First Bank Corporate Card Master Trust Series 1997-1 - when Minneapolis-based First Bank System Inc. acquired Portland-based U.S. Bancorp and also acquired its name. - SK