November Consumer ABS Market Update

Monthly Commentary

December 04, 2018

New Issue

  • A total of $16bn priced in the primary market during November, bringing YTD ABS issuance to $237bn, a 4% increase year-over-year.
  • Auto issuance accounted for almost half of the November primary market with $7.6bn pricing.
  • Other issues of note include:
    • Three aircraft deals:
      • Apollo Aviation priced a $610mm deal backed by 35 aircraft with a weighted average age of 13.9 years. The 3.8 year single A rated class (66.5% LTV) priced at 4.5% (~140/n).
      • BBAM priced a $757mm deal backed by 29 aircraft with a weighted average age of 9.8 years. The 4.9 year single A rated class (64.5% LTV) priced at 4.5% (~147/n).
      • Vx Capital priced a $189mm deal backed by 35 freighter aircraft with a weighted average age of 23 years. The 3.5 year single A rated class (55% LTV) priced at 5.5% (~250/n).
    • Two whole business deals:
      • Wingstop priced a $320mm deal backed primarily by existing and future franchise fees. The 4.95 year BBB rated note priced at 5% (~180 /n).
      • Taco Bell priced a $1.45bn deal backed by its domestic revenue generating assets. The 4.9 year and 9.5 year BBB rated notes priced at 125/n and 180/n respectively.
    • Four consumer loan deals:
      • SoFi priced a $550mm unsecured loan deal with the 1.3 year AAA rated note pricing at e + 55.
      • Marlette priced a $336mm unsecured loan deal with the 1.15 year AA rated tranche pricing at e + 75.
      • Mariner priced a $222mm deal backed by 35% hard secured loans (perfected assets), 45% secured (untitled goods) and 24% unsecured loans. The 2.5 year A/AA- rated noted priced at 110/n.
      • Oportun priced a $175mm unsecured loan deal with the 3 year A+ rated tranche pricing at 120/n.
    • One student loan deal:
      • Navient priced a $688mm deal backed by refinanced private student loans. The 5.5 year AAA rated class priced at 85/n.
    • One solar deal:
      • SunStrong Capital priced a $400mm solar lease deal with the 8.2 year single A rated note pricing at 265/n.
    • One drug royalty deal:
      • DRI Capital’s priced a $100mm drug royalty securitization with the 2.67 year BBB rated floating note pricing at 160dm.

 Secondary

  • Spreads widened across all ABS asset classes with most sectors spreads reaching 52 week highs. Heavy supply (number of deals) in the first half of the month coupled with broader market volatility contributed to the spread widening.
  • Within flow ABS, short cards and autos widened 10-12 bps and longer duration 10-15 bps. 3 year AAA card and auto spreads are at now at 2016 levels.
  • Subprime auto spreads widened 10-30 bps over the month and 7 year FFELP spreads are about 15 bps wider.

Consumer News

  • Moody’s upgraded 11 tranches ($1.25bn) from Santander’s subprime auto deals issued between 2015 and 2018. Upgrades were attributed to a decline of cumulative net loss assumptions and the build up of credit enhancement.
  • S&P issued a request for comment on proposed updates to its FFELP rating methodology for new and existing bonds. Part of the proposal would move the evaluation of principal paydowns from five years before the legal final maturity date to seven years prior. If the new methodology is approved, it is estimated that less than 5% of current FFELP bonds outstanding would be negatively impacted.

data tables

Source: JPM Research

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