US Securitization Awards 2024: ABS Deal of the Year — Affirm 2023-A
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US Securitization Awards 2024: ABS Deal of the Year — Affirm 2023-A

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Already recognised as a leading esoteric ABS issuer, 2023 was the year that Affirm took a major leap forward to establish itself as a programmatic issuer in the ABS market.

Throughout 2023, Affirm issued nearly $2.5B of ABS, bolstered by the company’s ability to manage credit outcomes, cutting-edge technology, and commitment to constructive investor engagement. However, it was the 2023-A issuance that made Affirm the clear winner of GlobalCapital’s ABS Deal of the Year for 2023.

Despite the volatile macroeconomic backdrop that lingered through late 2022 and well into early 2023, Affirm was able to build the transaction’s total size to $900MM through a phased issuance approach. The company issued $500MM in January, and an additional $400MM through a reoffering in April on the back of overwhelming investor appetite. The strength of investor demand for the transaction was evidenced by the 3x oversubscription on the final offering amount of $900MM.

“This deal was a testament to both our disciplined approach to execution and investors’ overall reception despite the volatile macroeconomic backdrop. We appreciate the continued trust that investors have in our platform and look forward to expanding our reach as a programmatic issuer in the ABS market” says Brooke Major-Reid, Chief Capital Officer at Affirm.

Affirm’s other transactions last year were no less remarkable. Affirm’s 2023-B transaction, which also featured an additional notes issuance, totaled $1.1B across issuances in September and December. Its 2023-X1 transaction of just over $400MM included the sale of residual certificates to third-party investors — the first for Affirm in nearly 18 months.

By the end of 2023, Affirm’s total ABS tally had reached $6.4B across 16 discrete offerings, with

$2.4B in calendar year 2023 alone, and the ABS platform attracted over 100 unique investors across a diverse array of investors including major insurance companies, money managers, pension funds, hedge funds and other alternative asset managers.

Major-Reid says reaching that milestone demonstrates the company’s focus on generating quality assets and ability to provide value to a broad range of capital providers. “Communicating the way we underwrite and manage risk has allowed us to attract a larger, more diverse pool of investors who have many investment opportunities in the wider structured finance market.”

Affirm’s run of successful deals in difficult conditions also exemplified its commitment to bringing transactions to market across credit cycles and issuing programmatically. “We demonstrated robust liquidity and that we could add capital over time, which we did consistently throughout the year,” says Major-Reid. At the end of 2023, Affirm was sitting on $15.5B of funding capacity across all its funding channels — including ABS.

The foundations on which Affirm’s capital platform is built are its technology, engineering capability, and risk management. The company’s approach to underwriting every transaction and assessing risk resulted in strong credit outcomes over the course of 2023, despite some of the challenging macroeconomic dynamics that impacted US consumers. Affirm’s credit performance is in part a function of its shorter duration assets, which have a weighted average life of approximately 4-5 months, coupled with transaction level underwriting.

The San Francisco-based fintech’s sustained momentum is a resounding statement in response to the existential questions about how its buy now pay later business model would handle rising interest rates. Some parts of the market dismissed Affirm’s previous success as a product of low-interest rates, but throughout the year Affirm’s top-line GMV demonstrated the durability of our origination capabilities in different interest rate environments. In the ABS sector specifically,

Affirm’s 2023 issuance was up 65% year-on-year versus total consumer ABS issuance declining 33% over the same period.

Not only did Affirm prove its competence in managing credit while generating quality assets, but the company’s core products proved their value for consumers and merchants through difficult macroeconomic conditions. “Across our offerings customers benefited from the fact that they could pay for purchases in instalments, while merchants recognised the value of financing offers to drive conversion and overall revenue,” says Major-Reid.

As the company moves forward, it will continue to double down on the elements that have driven its success. “We’ll continue to partner with investors across the board, and innovate to ensure that we remain relevant to consumers and merchants,” Major-Reid says. “ABS is a very deep market and we are committed to accessing it in a constructive, thoughtful way.”

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