Bank of America Merrill Lynch has increased its forecast for issuance of bonds backed by airplane and railcar leases and timeshare loans and other non-traditional asset classes for 2014 by $5 billion to $20 billion.
So far this year, gross issuance of what BAML classifies as “other” types of ABS stands at $13.02 billion, compared with $16.15 billion for all of 2013, according to a BAML report published today. Analyst at the bank expect that issuance of bonds backed by timeshare loans, in particular will continue to be strong as sponsors look to securitize receivable generated during the summer months.
As a result of this revision, BAML has also upped its forecast for all ABS issuance for 2014, to $2015 billion.
So far this year, gross consumer ABS issuance has reached $139bn, 14.1% higher than last year’s comparable period. Issuance of bonds backed by auto loans, credit card debt, student loan, and equipment loans and leases are on target to meet BAML’s full-year forecasts of $100 billion, $50 billion, $20 billion, and $15 billion, respectively.
In the week ended Friday Aug. 22, three securitizations totaling $2.4 billion priced: one backed by prime auto loans, one backed by auto dealer inventory financing, and one backed by equipment loans and leases.
In the secondary market, spreads for all ABS with the exception of subprime auto loan ABS, were unchanged on the week. Spreads for non-prime auto loans widened by 3 basis points, reflecting concerns about the Department of Justice’s probe of underwriting and securitization of these loans.
“At a minimum, we expect spreads for sub-prime auto loan ABS to remain unchanged but would not be surprised to see further widening, as generally benign fundamentals are offset by the potential for increased regulatory actions,” BAML’s report stated.