Corporate-card lender Brex Inc., a 2017 startup backed by about $900 million in private-equity and debt capital, began looking at securitization as a potential strategy to diversify its funding sources in 2019.
That deal finally came to fruition this year, when San Francisco-based Brex priced its first issuance of securities backed by the receivables from client payments on Mastercard-branded commercial charge accounts. The $185 million Brex Commercial Charge Card Master Trust series (issued through a master-trust structure) priced in March, oversubscribed at nearly three times.
"Just given the volume that we had in receivables, and that we had a really strong credit performance in our portfolio, we decided that it made sense for us," said Erica Dorfman, Brex' senior vice president of payments and capital markets (and former head of capital markets at SoFi).
Despite the strong investor appetite evident in the Brex deal, traditional credit-card ABS issuers have largely been absent from the market the last two years.
After a post-crisis peak of $44 billion in issuance volume in 2017, credit-card ABS volume declined in both 2018 ($32.3 billion) and 2019 ($21.2 billion) and were even fewer and far between in 2020 with only $3.5 billion in deal activity (
Dorfman said that Brex was well aware of the bank industry's recent reticence in issuing bonds from their credit-card series trusts, when it went into its own deliberations on whether to securitize card payments. "When you look at the bank-card issuing space, yes, it's been really quiet," Dorfman said. "A lot of that has to do with the deposit market and the cost of alternative funding for banks. But for us, we don't have deposits. So it is important for us to look at the securitization market, look at the warehouse market and look at other sources of funding."
Brex' deal, along with a card securitization in early March from non-prime consumer finance company
Glen Fest
