Las Vegas - Auto lease ABS professionals highlighted several industry trends for the year ahead at the ASF 2007 conference held here last week, including weakened demand for new cars and higher program concentration limits for foreign vehicles. High on the list, however, was the use of floorplan assets in multiseller extendible note (EN)ABCP programs.
For the floorplan sub sector, the practice represents another funding source, but in the broader context of asset-backed finance, the shift reflects intensified competition between commercial banks for commercial paper business. Specifically, commercial banks are trying to find ways to compete with the growing use of single-seller EN programs, which, in the face of increasing liquidity costs, are becoming more attractive to commercial banks and to non-traditional ABCP sponsors. In particular, a growing number of investment managers and hedge fund managers are finding that they can set up EN programs without expensive bank liquidity lines, if high cashflow assets secure the programs. Among other uses, those programs could represent profitable ways to warehouse assets, whereby investment and hedge fund managers can eventually set up CDOs, industry sources said.