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Capital One plays its cards right

By 2002 Capital One's rapid growth took it deep into sub-prime territory, stirring up a crippling rise in its borrowing costs and scaring off bond investors. Having learnt its lesson, the credit card firm has made a remarkable return to favour.


AT FIRST GLANCE, the deal was nothing special. Launched in the first week of March, it was quite small, at just $250 million, and priced at 22 basis points over Libor, within a pretty standard range for a single-A rated asset-backed deal.

But the issuer was credit card company Capital One, and for its executives and funding team it was a major achievement to be able to raise capital at such a run-of-the-mill level. Less than a year before, at the end of April 2003, the company had launched a two-tranche single-A asset-backed deal, and had to pay for the privilege: 117bp over Libor for the $200 million tranche and 125bp over swaps for the $150 million portion.

Earlier the same month it had brought its first public capital markets deal in nearly six months, a $1.2 billion triple-A securitization, and had to pay 39bp, 17bp more than it paid for the single-A deal this March.

Back in 2003 Capital One was still being punished – for its own sins in 2002 as well as for those of its sector and the market as a whole.

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