GMAC’s UK arm sold a triple-A rated £400m ‘A’ class at 45bp over one month Libor, at the tight end of guidance, and 5bp tighter than the wide end of initial price thoughts at 47bp-50bp. The pricing compares with the 85bp GMAC offered on its last deal from the shelf in March. The short dated notes have a 1.55 year weighted average life and 17.1% credit enhancement.
With the order book in excess of £475m on Thursday, leads were able to increase the size of the tranche on offer, after they had earlier suggested the ‘A’ tranche would be a “minimum” of £350m.
The issuer retained the £42.8m ‘B’ tranche, priced at 100bp over one month Libor, as well as an unrated £33.4m subordinated tranche.
Bank of America Merrill Lynch, Lloyds Bank and RBC Capital Markets acted as joint lead managers on the transaction.
One of the leads said the order book showed “good strength”. Compared with the first half of the year, which saw three UK auto ABS deals priced, recent transactions from Ford Credit Europe, Volkswagen and now GMAC have all shown greater participation from bank treasuries, he said.
The lead banker said that in the first three UK auto ABS deals this year, from FirstRand Bank, GMAC and Close Brothers, bank treasuries accounted for an average of 32% of the order book, but they accounted for closer to 50%-60% on the three deals issued more recently.
The banker also reported that foreign accounts were taking up a growing proportion of the investor base for UK auto ABS deals. The three deals earlier in the year saw around 93% of the notes allocated to UK investors, which has declined to between 75%-80% on the Ford and Volkswagen deals, he said.
“Notwithstanding Brexit, investors are clearly comfortable with short dated UK collateral, while the headline noise around the Volkswagen emissions scandal has now dissipated,” he said.
Spreads in the secondary ABS market were described as robust on Thursday, although the volume of trades remains low. Some dealers marked down inventory by a couple of points early on Wednesday morning, but the effect was short-lived and spreads bounced back quickly.
“It’s a strong market but there’s very little flow,” said one trader. “We’re seeing some enquiries from people looking to buy but not a huge amount of activity.”