Week after week of heavy issuance is starting to tell on securitization investors. It's not that they out of cash to put to work, unlike in recent waves of supply, but they are pushed for time and they have taken plenty of paper on board in recent weeks.
So that leaves them looking for buys that don’t take too much work and bring them diversity, ideally with a bit of yield as well.
Out of recent deals, Premium Credit’s insurance premium financed backed trade is the archetype for a trade that should thrive. The collateral is unique in European ABS, but the issuer has just done its seventh deal, which means investors know the shelf well. It priced the deal on May 16, growing the trade by £50m to £400m and tightening spreads across the offered tranches.
Dilosk’s trade, priced on May 15, offering Irish buy-to-let RMBS finished 3.6 times covered on the €170.53m senior tranche. Rare collateral, but the issuer’s ninth deal.
Lender & Spender made a resounding success of its debut deal on May 23, a first time issuer, but owned by market regular auxmoney. It was offering another rare asset class: Dutch consumer ABS. Meanwhile, Alba Leasing attracted orders in excess of €1bn — very strong demand — for its Italian leasing deal, Alba 14, priced the same day.
What those trades have in common is that they pay over 65bp, come from well-established issuers and offer access to rare collateral.
Other deals aren’t exactly struggling to get over the line, but ‘selectivity’ has become the buzzword. The market is so busy that investors will far prefer to look at trades they are sure they can get approval for. They are also no longer merely looking to add paper; there's been a good quantity of supply already, though paper paying higher spreads has been more limited.
If they don’t offer exactly what investors are in the mood for, issuers are having to make concessions, either on time in the market or on spread. The early indication for Charter Court’s UK prime RMBS was that pricing would come on May 17, but it took until May 23 to get it done, finishing with books 1.1 times covered on the offered £300m.
Santander’s Kimi 13 began marketing on May 7 and was not priced until May 23. It was rewarded for its patience with a vast order book, though the seniors were priced in line with fellow Finnish auto shelf Tommi from February.
There are investors for everything in the European ABS market still; but for those with something a little more eye catching to sell, the market is just right.