June 2017 Consumer ABS Market Update

Monthly Commentary

July 06, 2017

Primary

  • Primary issuance in June totaled close to $20B, bringing the YTD volume to $125B. YTD volume is over 25% higher than 2016’s YTD volume.
  • Specialized ABS dominated the issuance calendar, accounting for 45% of volume. Leading the way were unsecured consumer loans with $3.6B and whole business with $2.1B. Issuance of containers also saw an increase with over $1B pricing.
    A few highlights include:
    • LendingClub issued its first sponsored transaction with a $279mm deal. The single A rated 0.4yr tranche priced at 110/e. The collateral in the deal consists of unsecured, subprime consumer loans.
    • Springleaf launched its first deal of the year – a $652mm transaction. The company, an originator of mostly unsecured consumer loans through retail branch locations, priced the AA 3.5yr senior at 100/n, yielding 2.7%.
    • Upstart, a marketplace lender of unsecured consumer loans, issued its first deal. The $163mm deal priced an A rated 0.9yr senior at 125/e and a BB rated 3yr subordinate at 475/n, yielding 2.65% and 6.4% respectively.
    • Jimmy John’s, the sandwich restaurant chain, brought to market an $800mm deal. The 4yr BBB tranche priced at 183/n, yielding 3.625%. The deal is backed by franchise royalty income.
    • Textainer priced their second deal of the year. The $500mm transaction included a 5yr A rated senior tranche that priced at 174/n to yield 3.55%. The deal is collateralized with shipping containers.

Secondary

  • Volume in secondary trading totaled over $6B with cards and autos accounting for over 60% of volume, while student loans made up over 20%. Spreads for cards and autos were generally 1-2bps weaker and were flat for highly rated FFELP student loans.
  • Trading activity for rental car ABS had a noticeable increase in June, particularly Hertz. While the rental car industry continued to face challenges, spreads for rental car ABS tightened 5-10bps following Hertz’s issuance of $1B in second-lien secured notes.
  • Within the container ABS market, improving fundamentals led to a resurgence in new issuance, which in turn led to an increase in secondary trading. Spreads tightened 10-15bps during the month.

Market/Consumer News

  • Total consumer credit rose at an annualized rate of 2.6%, the smallest increase in nearly six years according to a report by the Federal Reserve. Nonrevolving credit, which accounts for nearly 75% of total consumer credit, grew at annualized rate of 2.9%, the slowest pace since 2011.

Spreads

Source: BofA Merrill Lynch Global Research

 

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