Players in the European consumer ABS sector are asking for more deal data and prefer simpler securitization structures.
This is based on comments made at the panel called Navigating the Changing Environment of the European Consumer Securitization Market at Information Management Network's Global ABS 2010.
Gerlinde Schwab, portfolio manager at PIMCO Europe, said that loan level data is “absolutely necessary.” She stated that investors also need originator reporting and additional data on the historical performance on the loans backing consumer ABS transactions.
“The quality of data has to be improved,” she said, adding that this is necessary to attract non-European investors into the market, specifically U.S. buyers who are so used to having loan level information readily available.
Annick Poulain, managing director at Moody’s Investors Service, said that reporting standards among ABS European issuers vary substantially so it requires some time for investors to properly understand data and make comparisons between deals.
“This is why standardized reporting is important and would be attractive to investors in this market,” she said.
Aside from asking for more detailed deal information, the panelists also said that they would like to see more fully amortizing offerings as well as fully sequential over prorata transactions.
In a separate interview with ASR, Poulain said that from a performance standpoint, European consumer ABS have performed fairly well and have remained resilient except for a couple of outliers.
For instance, ratings in the U.K. credit card sector have been stable despite the charge-offs, which have risen in 2008 and 2009 and now seem to stabilize. Poulain said that the higher yields of the receivables and credit enhancements on these transactions have offset this increase.
The same goes for auto loans, which have thus far dominated issuance in the European consumer ABS market. German collateral holds the lions share. German loans, according to Poulain, are conservatively underwritten and the German borrowers are not highly leveraged. Delinquencies have remained very low in this sector inspite of the recession.
“The general message is that these deals have performed very well and there has been stability in the ratings,” she said. “There has not been a lot of rating adjustments in the last two to three years and the deals have remained fairly resilient."
In terms of issuance, auto ABS activity has centered on deals from the U.K., Germany and the Netherlands, said Marco Spano, an executive director in debt capital markets and ABS at Mediobanca.
He added that they were working on trying to bring a Compass auto securitization to market along with three other originators,. However, they were unsuccessful because although the market briefly opened in September 2009, the problems in Greece shut it down again.
