The performance of the European securitization market over the last few weeks, with deals getting strong order books and tight spreads, has proved that now is the perfect time to bring out securities backed by unusual kinds of collateral.
While an issuer bringing out an esoteric transaction in the busy months of September and October might fear it getting lost among heavy supply from regular issuers, strong technical factors in the market have already supported several esoteric transactions to get strong executions.
Following traditions
In some ways it may seem counter-intuitive for an issuer to bring out an off-piste transaction now.
An official at one investor said it could do the credit work on a deal from a regular issuer — such as a Silverstone RMBS transaction from Nationwide Building Society — in as little as two hours. It can take several days for investors to weigh up a debut issue backed by unorthodox collateral.
This can naturally lead to these transactions being the first to get left behind in busy periods.
September is usually one of the heavier months for ABS issuance. In 2024 and 2023 issuance volume calmed in August before ramping up in September and October and then tapering off during November and December, according to month-by-month cumulative European ABS issuance data from TwentyFour Asset Management.
So far, this pattern has continued in 2025, with an almost silent August and a very busy September.
Esoteric issuers may look at this and naturally think it more prudent to wait until a quieter window like November or December to bring out a deal.
This would be a mistake, for two main reasons.
Fewer potholes
One reason is that although there are often trends in issuance volumes, there are important differences between 2024 and 2025.
Unlike last year, when the US election was scheduled for the start of November, this year there is no major event planned in the autumn that could put issuers off.
While supply for November and December will almost certainly be more gradual than in September and October, this is no guarantee that esoteric issuers will enjoy more attention.
They could instead face deficient demand from investors full up on the early autumn's crop.
Strong technicals
The other reason issuers should bring out their esoteric deals now is that this category of bonds has already performed well since the market reopened.
One reason is that many bankers said the new issue market closed too early, on July 17.
After a long gap and with masses of cash to invest, since issuance resumed on August 18, investors have been less discriminating about which deals to invest in.
A perfect example is Waterfall Asset Management's £271m Odyssey Funding transaction, the first European RMBS to include home equity line of credit (Heloc) loans.
It priced the £197m triple-A rated senior notes with a 2.1 year average life at 86bp over Sonia on September 3 — 11bp tighter than where the last second lien RMBS had been priced before the summer break.
Although Waterfall is an experienced sponsor, it would have been reasonable to expect it to pay a hefty premium to issue the first Heloc securitization in Europe.
Odyssey Funding had £100m of protected interest in the senior notes, which were three times covered at final terms, or 5.3 times covered on the free float. Even some of the major bank treasuries, which only started investing in second lien RMBS in the last couple years, bought some of this paper, GlobalCapital understands.
Although this trade benefited from the protected interest, it was still an incredible result for a debut asset class backed by loans from a debut originator, Selina Finance.
The Odyssey trade is clear evidence that esoteric issuers have a golden opportunity to bring out transactions while investors still have plenty of dry powder to shower on ABS.