August 2018 Consumer ABS Update

Monthly Commentary

September 07, 2018

New Issue

  • A total of $17bn Consumer ABS priced in August, bringing YTD issuance to $175bn
  • Total ABS new issue volume increased 9% year over year. All ABS sectors saw an increase in issuance with the exception of credit card ABS (decrease of 23%).The largest increase was in the auto and consumer loan space (up 19% and 21% year over year respectively)
  • New issue spreads continue to flatten across the term curve and also across various tiers of issuers. Issuance of note during the month includes:
    • Two student loan deals:
      • SOFI priced a $710mm deal of refinanced student loans. The 5.4 year AAA/Aaa rated note priced at 65/ n
      • Nelnet priced a $500mm FFELP deal with the 7 year AA+ / Aaa rated notepricing at L + 70
    • Two consumer marketplace lending deals:
      • Upstart priced a $190mm deal backed by unsecured consumer loans with an average FICO score of 690. The 0.73 year A- rated note priced at 77/e and the 3.7 year B- rated note priced at 365/n
      • Prosper priced a $500mm deal backed by unsecured consumer loans with an average FICO of 713. The 1 year A3/A+ rated note priced at 75/e and the 2.85 year B3/B+ rated note priced at 300/n
    • Two container deals:
      • Textainer priced a $260mm deal with the 5.2 year A rated note pricing at 140 /n
      • SeaCube priced a subordinate tranche off its 2013/2014 deals (master trust). The $70mm 2.5 year BBB rated note priced at ~350 / n
    • One aircraft engine deal:
      • Willis priced a $375mm aircraft deal backed by 55 commercial aircraft engines and one airframe. The 6.3 year single A rated note priced at 190 / n

Secondary

  • Over $20bn traded in the secondary market (20% via BWIC)during August, per TRACE reporting.
  • Over the month, spreads tightened 1-3 bps for flow ABS and5 bps for FFELP. Subprime auto spreads tightened 5-10 bps across the stack
  • Spread basis between issuers continues to compress,especially in the subprime auto space where risk tolerance remains high.

Consumer News

  • The Office of the Comptroller of the Currency (OCC) has started to accept bank charter applications from fin tech companies. An approved application would allow a fin tech company to accept and hold deposits. Comptroller of the Currency Joseph M. Otting noted: “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank.”

Spreads

Source: JPM Research

 

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