Westlake Financial Services drew in 37 investors for its 2016-2 securitization, up from 32 investors for its 2016-1 securitization. The growth is attributed to stabilizing credit performance industrywide and higher investor confidence in the lower-rated tranches, Westlake’s President Ian Anderson told Auto Finance News.
The recent disruption in the capital markets — causing investors to demand higher yields on the lower-rated bonds — stemmed from noise about a potential “bubble” in the subprime lending sector, Anderson said. However, the “bubble” talk quieted in the second quarter “and seemed to be more of a first-quarter scenario,” he added.
To that end, Westlake Automobile Receivables Trust 2016-2 — a $550 million deal which closed June 16 — garnered more investors than the $450 million 2016-1 securitization which closed Jan. 21, Anderson said. Westlake had around 30 to 32 investors for each ABS issuance in 2015, he added.
Additionally, interest rates widened out late last year — increasing 25 basis points — which has caused the cost of funds to an issuer to increase “much more than the previous year or in 2014,” Anderson said. However, since then, rates have “tightened back up,” mostly on the subordinated tranches, he added.
In recent months, investors have “gotten more confident” in the ABS market, Anderson said, because the players who pulled back from investing in the lower-rated bonds in the first quarter “jumped back into the market” in the second quarter, creating higher investor demand overall — especially for the lower-rated bonds.
For more auto finance insights like this, register for the upcoming Auto Finance Summit, Oct. 5-7 at Bellagio Las Vegas. Visit www.AutoFinanceSummit.com for more information.
