Esoteric asset classes continue to be an attractive option for yield-hungry investors who have had access to limited issuance volumes of the more traditional structured finance asset classes, said Standard & Poor's in a report published today.
Solid performance through the recent downturn and attractive bond yields should keep investor interest in nontraditional U.S. asset securitizations strong in 2011, the report said.
Issuers are likely to find the spreads attractive as well. The limited volumes from more traditional asset classes combined with solid buyside appetite meant most nontraditional asset classes tightened in 2010.
"2010 was a year of transition from a few perspectives for the capital markets," S&P credit analyst Weli Chen said. "The securitization market adjusted to the expiration of the TALF program, which has been credited with helping to restore a baseline level of issuance with attractive yields for issuers. Mid-year 2010 saw the passage of the Dodd-Frank legislation, and economies around the world and across sectors continue to recover."
In some instances, sector-specific credit markets, such as global trade and container shipping, have started to thaw for the first time since the beginning of the global downturn, said the S&P report. Last week the first whole business deal of 2011 was issued. Cajun Global, which owns Church's Chicken and Texas Chicken, came to market with a $245 million securitization.
Issuers should also be encouraged by the positive reception of last November's issue from Adams Outdoor Advertising. The company completed a $355 million securitization backed by income earned from billboards and other displays. Barclays Capital analysts estimated issuance will grow to between $15 billion and $20 billion in 2011 from 2010 volumes which fell between $10 billion and $15 billion.
"We believe this combination will continue in 2011, providing a favorable environment for nontraditional asset issuers--some of whom will need to tap the securitization market to refinance either term or warehouse debt," S&P credit analyst Carmi Margalit said. "On a more granular level, we believe the whole business and transportation leasing sectors are poised to bolster a recovery that started in the second half of 2010."
