S&P: ABS market not yet a victim of coronavirus

Loan performance in the auto asset-backed securities market hasn’t yet deteriorated due to COVID-19, Amy Martin, senior director of structured finance at S&P Global Ratings, told Auto Finance News.

February paydowns, which were aided by tax refunds, were good, Martin said, noting that S&P “hasn’t seen an impact yet” of the coronavirus on auto ABS deals. “It’s too early to tell,” she said.

S&P expects March servicing reports — due in mid-April — to reflect a higher rate of extensions and delinquencies. Further, credit losses are also expected to increase, but the “magnitude of that will depend upon how long it takes for business activity to resume, and for fiscal stimulus to trickle down to those who have lost their hourly wages or had their incomes reduced,” Martin explained. She noted that the credit rating agency has seen a strong correlation between unemployment and credit losses.

While it is uncertain how long the fallout from COVID-19 will affect the economy, Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, told Bloomberg TV that he doesn’t expect the stock market to “get back to business as usual” for the next three months.

February was rife with auto ABS issuance before the pandemic took hold in the U.S., according to presale reports from S&P, Moody’s Investors Service, and DBRS Morningstar. Auto lenders such as Capital One Auto Finance, Ford Credit, GM Financial, Santander Consumer USA, Toyota Financial Services and World Omni, among seven others, injected roughly $6.9 billion of securities into the market.