February 2019 Consumer ABS Update

Monthly Commentary

March 04, 2019

New Issue

  • A total of $22bn priced in the ABS market in February, bringing year-to-date issuance to $40bn, a 7% decrease year over year
  • Auto-related companies accounted for 60% of February’s issuance (70% prime/30% subprime) followed by credit cards at 16%. The ABS category “other” accounted for 13% of last month’s volume.
  • Issuance of note includes:
    • American Car Center priced its second auto securitization backed by used car leases to subprime borrowers. The BBB rated note priced at E+115 (1.4 year WAL)
    • Merx Aviation priced a $430mm aircraft deal backed by leases on 19 aircraft with a weighted average age of 8.4 years. The single A rated class priced at ~190/n (4.7 year WAL)
    • Four unsecured consumer loan (marketplace) deals priced:
      • Upstart priced a $230mm deal backed by loans to prime/near prime consumers with a wt. average FICO of 687. The A- rated class priced at E + 85 (0.66 year WAL)
      • Upgrade (co-founder is former LendingClub CEO Renaud Laplanche) priced a $215mm deal backed by loans to consumers with a wt. average FICO of 693. The single A rated tranche priced at E +85 (0.78 year WAL)
      • Sofi upsized and priced a $550mm deal backed by prime consumer loans (wt. average FICO 753) with the AAA rated tranche pricing at E + 60 (1.4 year WAL)
      • Marlette priced a $262mm deal backed by loans to prime customers (wt. avg. FICO of 718). The AA rated class priced at E + 77 (1.2 year WAL)
    • Two student loan deals priced:
      • Nelnet priced a $500mm FFELP deal with the AAA/AA+ rated note pricing at L + 75 (4.4 year WAL)
      • Navient priced a $650mm deal backed by refi private student loans. The AAA rated note priced at L + 90 (5.1 year WAL)

Secondary

  • BWIC volume decreased in February to $10bn (vs. $16bn in January) however, secondary TRACE volume remained healthy
  • Liquid, short ABS spreads tightened with longer duration ABS lagging
  • Prime and subprime auto, credit cards and private student loan spreads tightened while FFELP, marketplace loans and aircraft underperformed
  • The annual SFIG conference took place Feb 24-26 in Las Vegas with a record 7,500 attendees. Tone at the conference in ABS was neutral as consumer fundamentals remain strong while global macro headwinds continue to pose a concern

Consumer News

  • S&P downgraded its ratings on TGI Fridays’ whole business securitization issued in 2017. The agency downgraded the BBB- note to BB+ because of lower performance metrics (i.e. DSCR) due to the closure of 28 stores. Spreads on the A class widened to +450 from +375

Spreads

Source: JPM Research

 

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