Consumer ABS

Portfolio managers should consider choosing CLOs and ABS over corporate credit and agency MBS over Treasuries in 2025, says asset manager Janus Henderson.

Loans on used cars, extended to borrowers with prime credit characteristics, make up the reference pool of assets.

Coupons range from 4.4% on the noted rates P1/A1+ from Moody's and S&P, to 5.66% on the notes rated Ba1/BB+.

The deal is structured as a public securitization, under Rule 144A, and is supported by lending indirectly through more than 1,100 partnerships across the country.

Outstanding loans eligible for repossession in December 2022 saw a 22.5% increase from December 2019, but redemptions were higher than pre-pandemic levels.

PAID 2024-PT1 follows a repayment sequence where funds are released to certificate holders after the control class has been paid down to maintain required levels of overcollateralization to the deal.

Consumer credit is deteriorating, but structured credit is well suited to weather the slide.

Those metrics were merely a return to solid pre-pandemic levels and do not suggest a deterioration, says Moody's. Yet a broader, and more weakened employment picture is emerging, SMBC Nikko Securities says separately.

Although the deal will sell just one tranche of notes to investors, those notes benefit from 26.0% in subordination, which comes from a subordinated transferor amount deficit.

With Theorem, Pagaya's fund management business is expected to grow to more than $3 billion of capital