Capital One is prepping a securitization of credit card receivables, which has been upsized to $850 million from $650 million, according to Bloomberg.
Still, the pricing guidance reported by the agency — 37 basis points over 1-month Libor — reflects the increasing bleed from troubled markets, such as high-yield corporates, as discussed in a report yesterday from Bank of America Merrill Lynch analysts.
Early last year, a comparable deal from the issuer priced at 20 basis points over.
The transaction is the sixth of the year issued by the company's vehicle Capital One Multi-Asset Execution Trust (COMET).
The single-tranche deal has a credit enhancement — or cushion against losses — of 21% of the amount of COMET 2015-6, according to a presale from Fitch Ratings, which gave the deal a AAA.’
The expected life is two years, while the legal final maturity is June 15, 2020.
The deal is the 22nd COMET transaction and will bring the total outstanding amount in the program to a hair over $19 billion.
In addition to the credit enhancement, the top notch rating for the deal is based on a strong track record from prior deals. The enhancement provided by outstanding subordinated notes, which would take the first hit in the event of losses.
Securitization deals have seen widening spreads recently, partly from what some see as contagion from other corners of the financial market.
“High yield is a source of instability in other sectors,” said BAML analysts, pointing to parallels with the market in the late 1990s, when stress in one financial product affected other, seemingly unrelated ones.
Expectations of higher interest rates are also affecting asset-backeds as well as anticipated new supply, although in the case of credit card deals, issuance so far this has been well below the pace to this point last year.