(Bloomberg) --Bayview Asset Management, an investment firm known for its focus on mortgages, debuted in the auto bond market this year, selling one of the largest auto asset-backed securities deals ever last week.
The company has sold three auto bonds — which repackage car loans into securities of varying risk and size — with the latest being one of the largest in history: a $4.6 billion offering exceeded only by bond sales from Ford Motor Co. and Bank of America Corp. in the 2000s, according to data compiled by Bloomberg.
The sales come as investors are becoming increasingly wary of rising delinquencies and search for higher quality debt, such as prime auto ABS. In just a few months, Bayview has been able to place roughly $8 billion of such debt, repackaging loans originally made by US Bank. But unlike traditional ABS issuers such as Ford Motor Credit Co. or General Motors Financial Co. Inc., they've sold the bonds privately, bypassing a broad community of investors that bid for a piece of these securities. Bayview didn't respond to a request for comment.
"This new Bayview deal caught a lot of people by surprise," said John Kerschner, head of US securitized products at Janus Henderson, a major investor in asset-backed securities, including auto loan-backed bonds. "Usually with deals of this size you see them coming."
In each deal, Bayview effectively bought auto loans from US Bank and used them as the collateral to sell asset-backed bonds. One benefit of the most recent deal is that roughly 42% of the more than 146,000 auto loans included in the deal are backed by Tesla vehicles and were made to highly credit-worthy borrowers, according to Moody's Investor Service, which rated all three deals.
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Morgan Stanley served as the underwriter on all three deals, according to data compiled by Bloomberg. A spokesperson for Morgan Stanley declined to comment.
US Bank, a subsidiary of US Bancorp, last year downsized its auto loan book following the acquisition of MUFG Union Bank, according to its parent company's most recent annual report. That included selling $4 billion of indirect auto loans to third-party securitizations, the report said. Securitizations include bonds backed by auto loans.
A spokesperson for US Bank declined to comment.
Bayview, which managed $15.8 billion in assets including mortgage debt as of March 31, is based out of Coral Gables, Florida and has offices in New York, London and Geneva, according to its website. It's known as a mortgage servicer and has previously sold bonds backed by mortgages.
--With assistance from Charles Williams.
© 2023 Bloomberg L.P.
