Read the latest articles and press releases about securitization and structured finance.

SFA Research Corner: Harnessing the Potential in Private Asset-Based Finance

Private structured credit, known as Private Asset-Based Finance (Private ABF), is rapidly gaining traction as issuers seek diverse capital sources and banks adjust their lending practices. Launching a Private ABF strategy alongside an existing Traded Asset-Backed Securities (Traded ABS) team offers a pragmatic approach to adapt to this evolving landscape. By broadening the pool of capital providers, this strategy benefits issuers by expanding their funding options, investors by providing more diverse investment opportunities, and banks and service providers by increasing their market reach. Having a team well-versed in both strategies enables investors to navigate market changes effectively and capitalize on emerging opportunities.

SFA Research Corner: Surging Auto Insurance Premiums Impact Credit and Affordability

This week we are excited to introduce our Research Feature, part of a suite of research products that explore emerging trends in the broader economy and their potential impact on securitization. Our inaugural feature, titled "Surging Auto Insurance Premiums Impact Credit and Affordability," delves into the rise in auto insurance premiums and the strain they place on household finances. For securitization participants, this trend demands attention as the upward trajectory of auto insurance premiums presents a significant challenge to the already declining credit performance of $1.5 trillion in auto loans. Authored by William Black of Black Analytics LLC, this feature draws on his extensive expertise gained during his tenure at a leading rating agency, where he led the Consumer Structured Finance New Issue Ratings team for the Americas for over two decades. Mr. Black authors a newsletter, Consumer Credit Matters, which can be found here.

SFA Research Corner: Private Credit Loans Trending Larger, Contributing $22bn to CLO New Issuance in 2023

In a recent analysis of 28 private credit loans and 15 broadly syndicated loans, Moody’s identified a noticeable correlation between the expanding size of private credit loans and the diminishing presence of financial maintenance covenants. Unlike the covenant-lite structures commonly associated with syndicated loans made to large companies, private credit loans made to middle-market companies have historically been characterized by robust covenant packages and maintenance requirements. In 2023, CLOs backed by private credit loans have contributed $22 billion to the $99 billion CLO new issue market. This marks an 85% increase compared to the previous year and stands in stark contrast to CLOs backed by broadly syndicated loans, which experienced a 31% decline during the same period.

SFA Research Corner: Consumers Turn to Credit Unions—Credit Unions Turn to Securitization

On September 26, Ent Credit Union, a federally insured state-chartered credit union (FISCU) in Colorado, issued its first auto loan ABS. This is the sixth credit union auto ABS this year, bringing the total to ten since credit unions entered the auto ABS market in 2019. Auto loans make up 31%, or roughly $500 billion, of the $1.6 trillion of consumer loans held by credit unions. Remarkable loan growth in recent years attests to consumer demand, but also puts pressure on funding sources, impacts the balance sheet and, in the current interest rate environment, poses potential liquidity challenges. Larger credit unions have responded by turning to securitization.

SFA News

SFA’s Research Corner: U.S. Credit Card ABS Tacking Into Headwinds Stays the Course for Now

SFA’s Research Corner considers credit card ABS which, unlike other asset classes, are tied to the prime rate and are particularly sensitive to the Fed’s rate hikes. Credit card debt is nearing a record $1 trillion, up 15% year-over-year. Younger borrowers are mounting debt at nearly twice that rate and also pushing into delinquency at twice the rate for all age groups.

SFA News

SFA’s Research Corner: Sitting in Limbo Waiting for the Dice to Roll–An Update on Student Loan ABS

In Research Corner, we see the waiting game playing out in student loans and student loan ABS (SL ABS). Performance for post-2010 private credit SL ABS and private credit refinancing SL ABS has been “solid” thus far, according to the S&P Student Loan ABS newsletter. The rating agency expects adequate levels of credit enhancement on investment-grade SL ABS to “absorb deterioration and remain stable.”

SFA News

SFA Research Corner: Loan Downgrades: The Canary in the CLO Coal Mine?

Thirty-four corporate obligors whose leveraged loans are held by U.S. Corporate Loan Obligations (CLOs) were downgraded in August. This is the highest monthly number of CLO-held loan downgrades since July 2020, according to S&P’s SF Credit Brief.

SFA News

Mind the Gap – Alternative Data, RMBS to Help Address Wealth Inequality

New in @SCI_Newsfeed, our Head of Research Elen Callahan discusses how securitization can be a useful tool in addressing the growing wealth inequality gap.

SFA News

Searching for Standardization: Connecting RMBS to Social Capital

SFA’s latest Research Corner piece examines current use of existing ESG standards within RMBS, at both the corporate level as well as at the structured finance level. The report notes that SFA members Fannie Mae and Freddie Mac currently provide corporate level disclosure in line with SASB disclosures.

SFA News

SFA Research Corner: Driving Towards Decarbonization: Connecting Auto ABS to Climate Change

Green auto ABS deals represented $3.5 billion of the $29 billion issuer-designated ESG securitizations in 2021. Proceeds from these deals financed the purchase of green vehicles at Tesla and Toyota, the inaugural issuers of green auto ABS deals, by financing low- or zero-GHG-emissions vehicles.

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