A securitization rule implemented this month, which requires auto loan and lease securitizers to provide loan-level data, will likely drag down securitization volume this year, said Amy Martin, senior director of structured finance at S&P Global.
“Reg AB II loan-level requirements went into effect, so we think that’s probably going to stall issuance until January,” she told AFN. Now, instead of a 10% year-over-year increase in ABS volume, S&P anticipates a 4% decline. S&P had originally projected yearend volume to reach $75 billion.
However, on the heels of the Reg AB II implementation and slower vehicle sales volume, the ratings agency now expects auto ABS volume, excluding lease and floorplan, to close out the year at $66 billion, Martin said. “That’s about a 4% reduction from last year, which was $68.3 billion,” she said. “Prime will make up about 59% of issuance, up from 55%, and subprime will be down just a bit, from 35% to 34%.”
Auto ABS activity is tied to vehicle sales volume, which is projected to decline 1% this year to 17.3 million units by yearend, according to S&P’s economists. Furthermore, Santander Consumer USA and Ally Financial Inc. — two of the largest issuers — have reduced issuance levels this year.