May 2017 Consumer ABS Market Update

Monthly Commentary

June 05, 2017

New Issue

  • A total of $23.5bn Consumer ABS priced in May, bringing YTD total issuance to over $100bn (30% greater than YTD 2016).
  • Over half of May issuance was from the Auto and Credit Card subsectors.
  • Deals of note that priced over the month include:
    • Three student loan deals:
  • Nelnet priced a $535mm FFELP deal with the 6.28 year Aaa/AA+ class pricing at 78 dm
  • Sofi priced a $560mm deal collateralized by refinanced student loans with the 4.9 year AAA class pricing at 2.65% (80/n). This is SOFI’s third private student loan deal this year.
  • Earnest priced a $175mm refi deal with the 3.4 year A/AA rated class pricing at 2.672% (100/n)
    • One Aircraft ABS deal:
  • Apollo Aviation issued a $600mm deal with the 4.3 year A rated tranche pricing at 4% (~218/n). The deal is backed by 32 aircraft with an average age of 12.2 years.
    • Two whole business deals from first time issuers:
  • Coinstar issued a $900mm deal with the 5.8 year BBB tranche pricing at 5.25% (~320/n)
  • Five Guys priced a $440mm deal with the 6.8 year BBB-/BBB rated tranche pricing inside of guidance at 4.625% (~ 262/n)
    • Two Container ABS deals:
  • Textainer issued an upsized $420mm deal with the 4.65 year A rated class pricing at 3.75% (~180/n)
  • SeaCube priced a $248mm deal with the 5 year A rated tranche pricing inside guidance at 3.65% (~178/n)
    • Two Consumer Loan deals:
  • Sofi issued a $530mm deal collateralized by unsecured consumer loans (avg FICO 733) with the 1.87 year AA rated notes pricing at 2.786% (120/e). This is Sofi’s ninth consumer loan securitization.
  • Prosper priced a $500mm deal, also collateralized by unsecured consumer loans (avg FICO 706), with the 0.81 year A-/A rated class pricing at 2.576% (125/e). This is Prosper’s sixth securitization.

Secondary

  • Spreads remained firm to tighter over the month with the exception of rental car ABS. Hertz and Avis ABS spreads widened 20-30 bps on the As and 50+bps on the Bs. Weakness in rental car bonds stems from poor Q1 earnings combined with a continued decrease in used car prices and increased competition from car sharing services.
  • Container ABS spreads tightened 20 bps over the month on the back of strong new issue prints from SeaCube and Textainer.
  • Subprime auto spreads remained stable over the month despite continued negative headlines, as structures continue to build credit enhancement through delevering.

Consumer News

  • Hertz announced disappointing Q1 results driven by lower daily rental pricing and weak residual values.
    • Q1 revenue totaled $1.92bn vs. an estimate of $1.95bn
    • Q1 adjusted loss / share came in at $1.61 vs. an estimated loss / share of $0.84
  • Propser Marketplace Inc., an online consumer-finance company, has cut its workforce by 44% since March 2016. Reductions had been due to lower loan originations and higher delinquencies.

Spreads

Source: BofA Merrill Lynch Global Research

 

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