Volkswagen announced it is looking to publicly syndicate an auto lease ABS deal out of the VCL series. It would be the first step toward reopening the European market after its year-long hiatus.
Market reports indicated that Volkswagen has planned the sale for the week of Sept. 21 and JPMorgan and WestLB were mandated to conduct the deal.
Price talk for the deal are in the 150 basis points area. Deutsche Bank analysts said that the paper looks cheap compared with two-year floating rate U.S. auto bonds trading at around 70 basis points.
“Auto ABS is a natural asset class for a market restart given the short duration of the assets and by extension the bonds,” Deutsche Bank analysts said. “Added to this is the fact that auto manufacturers have more limited and expensive funding alternatives compared to banks.”
The analysts also said that some talk has emerged regarding various U.K. banks’ possible issuance of public RMBS. They added that a deal would bode well for the sector, but the economics for U.K. prime RMBS paper still look tricky given pricing expectations for shorter dated auto notes.
“We continue to see a sponsor with a top-tier RMBS program, able and willing to lead the way in attempting to unlock the market, and ready to pay-up relative to cheaper alternative funding channels (senior unsecured & covered bonds) as a necessary first step,” analysts said.