September 2017 Consumer ABS Update

Monthly Commentary

October 05, 2017

Primary

  • 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

  • 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.

Spreads

Source: BofA Merrill Lynch Global Research

 

Media Attachments


This material is for general information purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security. TCW, its officers, directors, employees or clients may have positions in securities or investments mentioned in this publication, which positions may change at any time, without notice. While the information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. The information contained herein may include preliminary information and/or "forward-looking statements." Due to numerous factors, actual events may differ substantially from those presented. TCW assumes no duty to update any forward-looking statements or opinions in this document. Any opinions expressed herein are current only as of the time made and are subject to change without notice. Past performance is no guarantee of future results. © 2017 TCW