UPDATE: Bank Of America, Toyota Boost Auto ABS In Flurry Of Sales
April 11 2012 - 7:00PM
Dow Jones News
Bank of America Corp. (BAC) on Wednesday increased its prime
auto loan asset-backed securities issue by a third to $2.37 billion
as it led the biggest day of ABS issuance five months on Wednesday,
according to investors familiar with the issue.
Nearly $5 billion of auto ABS sales on Wednesday comes on the
heels of $23 billion last quarter, the most in a decade and
swamping the $14 billion of the debt sold in the same period a year
ago, according to Barclays. Wednesday's total ABS volume was about
$5.4 billion, a number that likely marks the most active new deal
day since Nov. 9, according to data provider Dealogic.
Investor demand for auto bonds due to relatively high yields,
stable credit ratings and low default rates since the financial
crisis has helped fuel a boom in car loans and an expansion of
credit to riskier borrowers. Auto loans were the main component to
a $8.7 billion increase in U.S. consumer credit in February,
following big gains in November, December and January.
"The ABS machine appears fairly unstoppable, especially among
auto issuers who have seen a sharp run up in auto purchases by more
confident consumers," said Christopher Sullivan, chief investment
officer at the United Nations Federal Credit Union in New York.
Investor demand has kept yield spread premiums low. Spreads on
AAA rated three-year auto ABS are hovering around 25 basis points
above interest-rate swap rates, up from a 19-month low of 20 basis
points in March but down from 40 basis points in December,
according to Credit Suisse.
Other new issues on Wednesday included $1.1 billion subprime
auto ABS for General Motors Co.'s (GM) financial unit through
dealers led by Credit Suisse Group AG (CS, CSGN.VX), while Royal
Bank of Scotland PLC's (RBS, RBS.LN) RBS Securities sold another
$1.5 billion in ABS for Toyota Motor Corp.'s (TM, 7203.TO) credit
arm, according to investors familiar with the deals. The Toyota
issue was increased from $802 million.
Barclays PLC (BCS, BARC.LN) and Credit Suisse sold $457 million
of ABS supported by credit cards issued by General Electric Co.'s
(GE) GE Capital, meantime. More than $1 billion of other ABS priced
earlier this week.
The Bank of America bond, the first auto ABS issued by the bank
since June 2010, illustrates a move by many lenders to take market
share from the so-called captive lending units of auto makers,
analysts said.
A loosening of underwriting standards is creating risks in
securitizations, however, according to Moody's Investors Service.
The ratings firm last month said risks of bonds sold by a new,
untested subprime auto loan ABS issuer Exeter Finance Corp. weren't
properly addressed even though the issue still garnered
high-investment grades from DBRS and S&P.
Easing underwriting standards could push auto loan losses higher
next year, but ABS ratings are expected to be stable, S&P said
in a note on Monday.
-By Al Yoon, Dow Jones Newswires; 212-416-3216;
albert.yoon@dowjones.com
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Aug 2024 to Sep 2024
GE Aerospace (NYSE:GE)
Historical Stock Chart
From Sep 2023 to Sep 2024