May 2019 Consumer ABS Update

Monthly Commentary

June 04, 2019

New Issue

  • A total of $20bn in Consumer ABS priced in May, bringing YTD ABS volume to $108bn, a 5% decline year-over-year.
    • $11bn of May issuance was auto-related with $6bn in specialized ABS (aircraft, unsecured consumer, whole business, etc.) and $1.5bn in equipment ABS
  • Issuance of note included:
    • One student loan deal
      • Navient priced a $609mm deal backed by refi student loans (private) from their Earnest shelf. The 1.5 yr and 5.65 yr AAA rated tranche priced at 39/e and 84/n respectively
    • One container deal
      • SeaCube priced a $375mm shipping container deal. The issue was upsized by $75mm and the 5 yr single A rated class priced at 145/n
    • Three consumer loan issues
      • SOFI upsized and priced a $650mm deal with the 1.5 yr AAA tranche pricing at 55/e. The deal is backed by unsecured loans to consumers with a wt avg credit score of 755
      • Prosper priced a $175mm personal loan securitization (707 wt avg FICO). The 0.79 yr A+ rated note priced at 75/e
      • SpringCastle priced a $938mm consumer loan deal. The 3 yr AAA rated tranche priced at 115/n
    • Two aircraft securitizations
      • JP Lease Products and Services (JLPS) priced its inaugural aircraft ABS deal. The $553mm deal is backed by 15 aircraft (63% narrowbody) with a wt avg age of 4 years and wt avg lease term of 8.3 years. The 4.5 yr single A rated class priced at 4% (~185/n)
      • Goshawk priced a $643mm securitization backed by 18 aircraft leases (79% narrowbody / 18% widebody) with a wt avg age of 5.3 years. The 5 yr single A rated class (67% LTV) priced at 4% (~188/n)
    • One whole business deal
      • Dine Brands priced a $1.3bn whole business securitization backed primarily by franchise revenue from their Applebee’s and IHOP restaurants. The 5 yr BBB rated note priced at 215/n

Secondary

  • Increased selling in the middle of the month caused short flow ABS spreads to widen 1-3 basis points (bps). Selling was mainly to raise cash and rotate into new issue as well as some profit taking from the rally in rates.
  • However, as macro volatility hit later in the month, widening in ABS seniors continued with spreads 5-10 bps wider month-over-month. Most of the widening was seen in fixed rate 2-4 yr senior cards and autos.
  • Sub IG bonds remained well bid and were flat over the month.

Consumer News

  • The Fed released its quarterly Senior Loan Officer Opinion Survey (SLOOS) for Q1 2019. Banks reported tighter lending standards for credit card loans in light of higher credit card delinquency rates. Lending standards for auto loans were unchanged with a small percent of banks reporting increased interest rates on auto loans. Lending standards on other consumer loans were unchanged over the quarter.

Spreads

Source: Bank of America Merill Lynch Research

 

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