Consumer ABS

A "second look" finance partner for retailers like Home Depot and Sears Home Pro is offering $167.3M in bonds secured by receivables on high-interest cards and installment accounts.

Like recent Federal Education Loan Program securitizations from Nelnet and Navient, it has meaningful exposure to rehabbed loans and loans in income-based repayment plans.

The $286.4 million deal is an important test for Upgrade, which has raised $142 million of equity over the past two years but has yet to turn a profit.

Refinance loans account for just 21% of the collateral, and even among those borrowers, just under half have advanced degrees.

Auto loan securitization has been in overdrive this year, even if the global tussle over import tariffs is injecting a note of caution.

Nearly a third of borrowers, 29.5%, backing the $500 million transaction are making timely payments, up from 27.4% for the prior deal and higher than the lender’s previous two deals.

Widening spreads on ABS have made deposit funding relatively more attractive; the rating agency now expects full-year issuance to be at the low end of its original forecast of $40 billion to $50 billion.

Partly for this reason, Kroll expects losses on the transaction, PMIT 2018-2, to reach just 12.4% over the life of the deal, down from 13.4% for the previous transaction.

The $423.2 million Master Credit Card Trust 2018-3 consists of three tranches of notes maturing in January 2022, one floating-rate and two fixed-rate.

Conn’s has increased the credit enhancement on its latest consumer loan securitization to account for rising losses on its managed portfolio, according to rating agency presale reports.