Consumer Portfolio Services Inc. boosted demand for its latest securitization by preselling the lower-rated bonds, Chief Executive Charles Bradley told AFN.
In other words, CPS only offered the lower-rated bonds “to a select few buyers to try to lock in the price, rather than go through the normal process,” he said.
The company’s latest $318.5 million issuance, which closed July 27, had “exceedingly better results in terms of the appetite on Wall Street for the paper, the demand, and the number of investors involved,” Bradley said during the company’s second-quarter earnings call in late July. “It was pretty much a 180 from the last few quarters, where everybody said this market is getting tougher and investors are demanding higher yields.”
The presell strategy is sometimes employed when investor demand, or the number of interested investors, starts to slip. “If investor demand stays strong, then issuers will probably do less preselling of bonds in the future,” Bradley said. “If the market remains the same, I would think we would not presell bonds in our next transaction.”
CPS’s transaction was backed by subprime auto loans, with an average balance of $14,548 and an average Fico score of 566, according to an S&P Global Ratings presale report.
This article was written by Natalie Mattila and Larissa Padden.
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