Micro subprime retail auto ABS deals offer investors a large pickup in spread when compared to the broader subprime auto ABS transactions, according to a Barclays Capital securitized products research report.
Those from so-called micro issuers also benefit from a conservative structure, with high levels of hard credit enhancement and significant excess spread. These factors allow the deals to maintain a strong price/yield profile under adverse stress scenarios. The dollar price on micro subprime retail auto ABS class A, noted Barclays, holds up across even the most severe performance scenarios the bank analyzed.
Micro issuers of subprime retail auto ABS loan ABS are defined in the report as first-time, less frequent, or smaller issues of subprime auto ABS.
Analysts said that issuers that fall into this category tapped the securitization markets with an inaugural transaction in 2009 and have followed on that issuance only sporadically in the past three years. Year-to-date, the micro issuers account for about 10% of total primary market volume in subprime retail auto loan ABS.
From 2009, new issue volume in the auto loan sector has totaled $33.4 billion. Of that, $29.6 billion is from the programatic issuers. The remainder, with an exception of a one-off $1.4 billion transaction from CitiFinancial (CFAIT 2009-1), is fragmented among eight micro issuers, Barclays said.
Barclays analysts expect that some of the micro issuers will grow their securitization platforms, while others will likely continue to bring new deals opportunistically.