Increased investor interest and growing comfort with marine container securitizations led to spread tightening for the asset class; even for ABS of first-time issuers.
Standard & Poor’s hosted a roundtable on the sector earlier this month where industry players noted that the impact of new investors searching for yield and an alternative to other ABS asset classes means that new issuance volumes will continue to grow for the asset class.
The asset class set an all-time record in 2012 with issuance totaling $3.6billion in volume from 8 issuers, according to a Barclays Capital Jan. 18, securitization report. In 2011, $1.2billion in new issuance from four shelves came to market and in 2010; $400million was issued from a single issuer.
The bank calculated that more than $10 billion of container ABS has been issued since 2000, in 31 transactions from 10 issuers. As of the December 2012 distribution date, the outstanding balance of container ABS was $5.3billion.
“This was a pretty big year in terms of supply and we've seen spreads continue to tighten as the year progressed,” said Hilliard Terry, III, executive VP/CFO, of Textainer Group who spoke at the S&P event. “There hasn't been much differentiation between companies based on size and market position.”
Terry noted that even recent deals, issued by smaller players in the industry, achieved tighter pricing. “I think that's just reflective of the demand for container ABS paper and the attractive yields available to investors versus other asset classes,” he said.
Jeffrey Gannon, President of Beacon Intermodal Leasing LLC, a new issuer in the container ABS space said at the S&P roundtable event that Beacon's first issuance in September had a yield of 3.75%. “A few early issuances in 2012 had yields in the 4.5% to 5% area, while yields on issuances after August broke through 4%,” he said.
In the near term Barclays expects investors will continue to look to the asset class as a way to diversify from traditional consumer ABS and also pick up attractive yield.
Peter Younger, President/CEO, of the Cronos Group spoke at the S&P roundtable event and said that he estimates there is still a significant amount of cash looking for investment opportunities in this asset class.
“We've seen an increase in the number of new potential investors/lenders who have devoted meaningful time to understanding the asset class for purposes of investment/lending for a better yield,” said Younger. “As there is more demand to deploy cash in our asset class, we'll likely see yields and margins continue to tighten in 2013.”