Outlook strong in container ABS after booming 2020
Container ABS thrived last year, setting a new issuance record after two decades. Several factors are working in favour of container ABS this year as well, including increased consumption of goods and an opportunity for containers to be used in vaccine distribution.
Shipping container ABS was extremely popular in 2020 because of its longer average life at five years, which enables investors to go further out on the yield curve, according to Wells Fargo analysts in a consumer ABS market update.
In 2020, a total of 11 deals adding up to were $6.96bn priced, compared to just two deals totalling $725m in 2019. Last year set a new record, both in deal number and volume, for container ABS since 2000.
“Container, which we have liked very much, has survived pretty well during Covid-19,” said a rating analyst, pointing to the resiliency container ABS has shown for almost a decade.
Several issuers, including Triton, Textainer and SeaCube came to market with more than one deal, taking advantage of favourable conditions in the securitization market. Many were refinancing deals.
“The reality is, global trade is not going to change that much. It may go in a different direction, but that just hasn’t happened during Covid, nor did it happen in the last four years [under Donald Trump],” added the analyst. “It hasn’t been majorly impacted by any of those external factors.”
According to Kroll Bond Rating Agency, the fundamentals for the container shipping industry should be well supported in 2021 also. For one, global shipping volumes are “already exceeding pre-pandemic levels,” due to China’s early rebound from the virus.
Vaccine distribution is another opportunity, though a short term one. With air cargo expected to be the preferred method of transport for vaccines across vast distances, containers may be able to take up market share as the regional distributor, analysts wrote in a container ABS outlook report.
Triton’s $503m deal was the first container transaction to price in the New Year. The class ‘A’ notes priced at 105bp over swaps and the class ‘B’ notes priced at 195bp over swaps, both coming in tighter than guidance.
Bank of America was the structuring lead, assisted by joint leads Mizuho, PNC and Wells Fargo.
Also in the pipeline is Textainer, which filed an ABS-15G with the Securities and Exchange Commission on Monday. It recently acquired 100% of TAP Funding, a joint venture based in Bermuda, in an effort to simplify its overall corporate structure and focus on its core container leasing business.
“The acquisition of the shares of TAP Funding we did not previously own provides us with sole ownership of a large seasoned portfolio of containers already under our management at an attractive price," said Olivier Ghesquiere, president and chief executive of Textainer in a press release January 20.