August 2019 Consumer ABS Update

Monthly Commentary

September 06, 2019

New Issue

  • A total of $17bn priced in August, bringing YTD total Consumer ABS issuance to $163bn versus $172bn YTD in 2018.
  • As usual autos dominated new issue volume with 47% of total August issuance. Specialized ABS was the second largest sub-sector, accounting for 23% of August volume.
  • New issues of note included:
    • Two whole business securitizations:
      • SESAC, a performing rights organization, issued a $530mm deal backed by fees earned on music royalty streams that SESAC collects and distributes to affiliated artists (including Bob Dylan, Adele, Neil Diamond, etc.). The 6.7-year BBB rated note priced at 5.25% (~ n + 358).
      • Primrose issued a $265mm deal backed by franchise fees from its network of 405 early education schools and childcare centers. The 6.7-year BBB rated note priced at 4.5% (~n+307).
    • Three student loan issues:
      • ECMC priced a $307mm deal backed by rehabilitated FFELP loans. The 4.6-year AAA floating rate note priced at 110 dm.
      • Sofi priced a $665mm deal backed by refinanced private student loans with a weighted average credit score of 783. The 5.67-year AAA rated note priced at S + 90.
      • Nelnet priced a $418mm FFELP deal with the 5.3-year Aaa/AA+ rated note pricing at L+87.
    • Two servicer advance receivables deals:
      • Ocwen priced a $470mm deal with the 2-year AAA note pricing at S+82.
      • New Residential priced a $400mm deal with the 4-year AAA pricing at S+110.
    • One private equity securitization:
      • Nassau Alternative Investments issued a $318mm deal securitized by cash flows generated from interests in a diversified pool of private equity funds. The single A rated 3.67-year note priced at 4% (~n+260).

Secondary

  • ABS spreads began the month wider due to trade related volatility in the markets, however, flow ABS retraced most of that widening in the second half of the month as markets calmed down and new issue supply decreased.
  • Due to ongoing concerns over the effects of tariffs and trade wars on the global economy, aircraft, container and rail spreads widened 5-10 basis points (bps) over the month.
  • Franchise ABS spreads were also wider 5-10 bps MoM, partly due to negative news on individual issuers such as TGI Fridays.

Consumer News

  • The Fed’s Senior Loan Officer Opinion Survey (SLOOS) for July, detailed continued tightening of lending standards for auto, consumer and credit card loans, especially for subprime borrowers. Demand for credit card and auto loans was also stronger in Q2 than over the past few quarters.
  • The Federal Reserve Bank of New York reported that consumer debt increased 1.4% in the second quarter to a total of $13.8tn. Mortgage debt comprised 70% of total consumer debt followed by student loans (10%) and auto debt (9%). Auto debt increased by $17bn and credit card debt by $20bn. Student loan balances declined by $8bn.
    • The median credit score for originating mortgage loans was 759.
    • The median credit score for auto loans was 703.

Spreads

Media Attachments


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