Data centers and fiber optic technology may be the most topical sectors fueling growth in the esoteric asset-backed securities (ABS) market, but historically tight spreads today across fixed-income asset classes have broadened the market's relative appeal, both for issuers as well as investors.
"At the [recent] ABS East Conference, Guggenheim Securities arranged issuer meetings with well over a hundred distinct investors," said Corey Wishengrad, senior managing director and head of fixed-income at Guggenheim. "The investor base has become quite diverse" for esoteric securitizations.
At the [recent] ABS East Conference, Guggenheim Securities arranged issuer meetings with well over a hundred distinct investors.
Wishengrad, a Lehman Brothers alum, was the co-head of ABS origination, Americas, at Barclays Capital for six years before moving over to Guggenheim in 2014 to head up its structured products team. Since them, Wishengrad said, that team has tripled in size, its deal volume increased more than fourfold, and it has introduced in aggregate more than 100 new issuers to the esoteric ABS market while advising on deals across 30 asset classes, a dozen of which Guggenheim introduced to the market. They include datacenters and oil and gas reserves, both of which have become major asset classes.
"We focus in particular on finding areas of the economy where we can apply securitization structuring to allow issuers to fund themselves more efficiently," Wishengrad said.
In a recent discussion with Asset Securitization Report (ASR), Wishengrad spoke about issues and trends driving the esoteric ABS market.
ASR: How do you uncover areas that might be appropriate for securitization?
Wishengrad: We look for businesses that have characteristics that you see in financial assets [and] other sectors we've successfully introduced to the securitization market. For example, assets with observable and measurable market values that can be converted into cash, and with long-term contracts with either highly diversified or highly rated counterparties.
ASR: What might be some examples of those assets?
Wishengrad: Securitizations were first done with mortgages, and securitization structuring expanded to other types of consumer loans such as auto loans. In the late 1990s and early 2000s—this was before our time at Guggenheim but the same individuals—we were able to apply securitization techniques to things like rental cars that have a measurable asset value and, through the auction market, can regularly be converted to cash. Other operating assets that have been successfully securitized include wireless towers that benefit from long-term leases.
ASR: What do you see as the top two or three most innovative deals this year?
Wishengrad: The C$750 million ($534.3 million) eStruxture Data Centers deal stands out as particularly innovative because it was the first-ever-rated, pure-play, Canadian-only datacenter ABS issuance. We've led a number of other digital infrastructure deals this year, and we're on pace to be in the double digits for structuring and bookrunner roles in that space. The sizable $885 million Compass Datacenters deal, its first Standard & Poor's-rated, Rule 144A transaction, also stands out.
A third deal done in the private market for Kings III, which provides elevator monitoring and dispatch services, was the first ever emergency communications infrastructure securitization that we led on our own.
The C$750 million eStruxture Data Centers deal stands out as particularly innovative because it was the first-ever-rated, pure-play, Canadian-only datacenter ABS.
ASR: What factors are prompting esoteric ABS issuance today?
Wishengrad: From the issuer side, rates have come down and spreads are close to historically tight levels over the past 25 years, resulting in attractive borrowing costs. Some transactions issued in even lower rate environments are approaching their refinancing dates, fueling refinancing supply. And because spreads are tight across fixed-income markets, investors are looking for places where they can find additional yield with an attractive risk-return profile, providing a tailwind to the market.
ASR: Is the premium over other fixed-income the driving factor?
Wishengrad: Correct. In particular, insurance companies, which have long-dated liabilities, seek assets that can match to liabilities. So as more annuities are being sold, partly for demographic reasons, partly because rates are higher than they were pre-Covid, that's also fueling demand.
ASR: Is it drawing new investors?
Wishengrad: The market has expanded to include not only banks and insurance companies but also asset managers, traditional private-credit investors, and pension and sovereign wealth funds. Newer entrants are managing money for insurance companies, which makes structured products a natural investment option for them.
ASR: As the market moves into 2026, what trends do you see emerging?
Wishengrad: Datacenters and fiber are the most topical because of the capital needed across the economy for digital infrastructure, and developers in need of refinancing as their construction and acquisition loans come due are turning to ABS. You have continued demand for AI and cloud computing, and those are significant areas of the economy that require capital. Fiber issuance so far this year is more than two times last year's record; you've had four new issuers in fiber come to market, and over $19 billion of volume since the first deal five years ago.
ASR: Are developers choosing securitization over other types of financing to refinance construction and acquisition loans?
Wishengrad: ABS is an alternative market that issuers can tap for additional liquidity. It's fixed rate and the all-in borrowing costs are attractive relative to other areas of the fixed-income market.
ASR: How has private credit impacted esoteric ABS?
Wishengrad: Private credit has existed in this part of the ABS market for a very long time, in that much of the issuance has been done on a private-placement basis. What's new is that some traditional corporate credit lenders in the so-called private credit space are now expanding into the asset-backed market.
ASR: Have incidents of fraud that have raised concerns in the subprime auto ABS market impacted esoterics?
Wishengrad: It's fair to say that investors are increasingly focusing across asset classes on whether adequate collateral protections have been put in place. As it relates to the esoteric market, generally speaking these deals tend to take longer, and just by their bespoke nature are more heavily scrutinized in the structuring and origination process than more run-of-the-mill deals that are executed on a tighter timeline.
ASR: Are there any developments on the regulatory front that could impact esoterics?
Wishengrad: Nothing specific I would mention, but we're watching bank regulation. For example, the stricter risk-weighting requirements under Basel IV, if implemented, might make certain activities less attractive for banks, which would result in more securitization issuance.
ASR: Markets such as CMBS are showing some cracks in credit performance. Are there any concerns emerging in the esoteric ABS market?
Wishengrad: At a macro level, we have a backdrop of moderate GDP growth, lower unemployment, modest inflation, and as illustrated by recent Q3 results, generally strong corporate earnings. So, big picture, credit performance has generally remained sound.
