Bankers are readying at least US $8.4bn of ABS for sale next week that could make it the busiest period for primary asset-backed supply this year. The torrent of deals include trades from brand-name companies Dell, CarMax, Nissan and Verizon that bundle equipment leases, car loans and cell phone payments. If all goes well, the supply could turn a near two-week drought in primary ABS supply into one of the year's busiest periods for bond deals.
The year's prior biggest week for supply was the US $6.3bn of ABS issued in the first week of May, according to IFR data. "Hopefully it will be one of the busiest weeks this year," said one ABS banker on Thursday. "It's been quiet for awhile, and some of this is just supply we might have seen spread out more evenly had it not been for Brexit." The primary ABS market - which typically slows to a trickle around the Fourth of July holiday - has remained largely shut since Britain shocked the world on June 23 with its vote to exit the European Union.
Safe-haven US ABS spreads nonetheless have remained largely unchanged since the vote. Three-year fixed rate auto paper was pegged at about 35bp over swaps by Wells Fargo on Tuesday, or 6bp tighter than the 52-week average. Citigroup analysts - although cutting their initial annual forecast for ABS issuance by 16% to US $162bn - said on Thursday that they expect ABS spreads to remain unaffected by the Brexit fallout.
"UK investors are not material to the US ABS market, and unless a slowdown in European trade takes an eventual toll on US manufacturing and employment, we think US ABS is well-insulated," they wrote. Bankers also told IFR that they were not anticipating turmoil to strike once the US ABS market reopened for business. Seven deals began pre-marketing on Thursday morning, and two first-time deals from the pipeline have been in front of investors even longer.
Verizon alerted the market to its US $1.169bn inaugural rated securitization of cell phone installment plans as early as June 28. And subprime lender OneMain met with investors in mid-June about its foray into a new type of securitization backed entirely of loans that refinance debt on used vehicles. OneMain's upcoming US $431m trade of so-called "direct" auto loans differs from other auto ABS programs in that it is backed entirely by borrowers who refinanced or took out cash against their automobiles, instead of using debt to purchase new or used vehicles.