September 2017 Consumer ABS Update

Monthly Commentary

October 05, 2017


  • New issuance slowed down in September to $13.5B. Nearly 65% of issuance was in autos and 10% in cards. With YTD volume at $175B, 2017 is currently on track to surpass 2016’s total volume of $196B.
  • A few highlights include:
    • Hertz returned to the market for the first time in over a year and issued $820mm across two deals. The 5yr AAA tranche priced at 145/n.
    • LendingClub priced its second deal of the year. The $323mm deal consisted of one senior and two subordinate classes. The 0.8yr Class A priced at 97/e, while the 2.1yr and 2.9yr subordinate classes priced at 195/n and 335/n, respectively. The deal is backed by unsecured consumer loans.
    • Sofi launched a $527mm deal, collateralized by unsecured consumer loans. The 1yr AA tranche priced at 65/e, yielding 2.2% and the 3.2yr priced at 105/n, yielding 2.8%.
    • Dunkin’ Brands issued a $1.55B deal with the 7yr BBB bond pricing at 165/n. A portion of the proceeds will be used to pay down an existing tranche.


  • Secondary trading volume totaled over $5B. Cards and autos accounted for over 50% and student loans contributed to over 30%. Spreads were generally a couple of basis points tighter for high quality cards and prime autos.
  • Hertz rental car ABS continued to be actively traded with 3-4yr senior bonds tightening in about 20 basis points during the month.
  • National Collegiate Student Loan Trust bonds were weaker this month with some of the last cash flow bonds trading down 8 points (see related news below).

Market News

  • The U.S. Department of Education released data on the 3-year cohort default rate on federal student loans. The rate edged up from 11.3% to 11.5%.
  • The Consumer Financial Protection Bureau announced a preliminary settlement with the National Collegiate Student Loan Trusts in which the trusts will pay over $19mm and audit all of the 800,000+ private student loans in the trusts. The settlement stemmed from allegations that the trusts used illegal debt collection lawsuits on defaulted borrowers.


Source: BofA Merrill Lynch Global Research


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