Will 2014 be the year of the cell tower?

Barclays expects securitization of small business loans, leases on telecommunication towers, shipping containers, and other kinds of esoteric assets to increase next year, helped by a gradual improvement in the economy and investors continued appetite for higher-yielding assets.

Issuance of so-called off-the-run asset backeds was one of the few areas of growth in the securitization market this year, outside of mortgages.  For 2013 to date, total volume of esoteric ABS $25 billion, up from approximately $20 billion in 2012. In fact, this year’s issuance of esoteric ABS was the highest since 2007. The sector was led by Small Business Administration deals and cell tower ABS, as both American Tower and SBA Communications came to the securitization markets to fund their wireless tower portfolios. There were also several securitizations of servicer advance receivables from HLSS and Nationstar. Barclays estimates that outstandings in the entire non-traditional/esoteric sector are approximately $108 billion as of the end of the third quarter.

As these asset classes become more common, some of these businesses may also become more regular ABS issuers. For example, there were only two container ABS deals totaling $400 million issued in 2010, but this year, there have been 11 deals totaling over $3 billion. Barclays expects non-traditional ABS issuance to grow again in 2014, with total issuance rising to $30 billion, a 20% increase from this year’s levels.

While securitization of other assets, such as credit cards and auto loans is unlikely to pick up, Barclays expects total non-mortgage related issuance will reach $185 billion in 2014. That would be up from an expected $175 billion for all of 2013. This year’s volume represents a drop of 8% from 2012. The decrease may have been driven by the wide availability of cheap deposit funding for banks, which issued less credit card-backed ABS, and the more favorable conditions in the unsecured debt and equity markets for many issuers, such as auto makers.

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