M&T Bank Corp. (MTB) is marketing its first bonds linked to auto loans as planned sales of asset-backed securities this week surge to $7.25 billion after $11.8 billion in all of August.
The lender is offering $1.4 billion in bonds tied to vehicle loans to the most creditworthy buyers, according to people with knowledge of the transaction who asked not to be identified because terms aren’t public. The deal from the Buffalo, New York-based bank is being managed by Credit Suisse Group AG, Barclays Plc and JPMorgan Chase & Co.
Sales of bonds linked to U.S. household debt are accelerating after plummeting last month, according to data compiled by Bloomberg. Auto companies, which account for the largest share of the asset-backed market, are offering $5.75 billion of the securities, the people said.
“The apparent lull in the new-issue market seems to be giving way to another wave of new-issue volume,” Bank of America Corp. analysts led by Chris Flanagan in New York said in a Sept. 6 report.
While sales of the debt are poised to jump this month, the Bank of America analysts reduced their issuance forecast by $20 billion to $180 billion as banks sell less of the debt than anticipated, they said in the report.
Companies offering deals this week include the finance units of Ford Motor Co. (F), Hyundai Motor Co. and Toyota Motor Corp. (7203) Blackstone Group LP’s Exeter Finance Corp. is selling $500 million of bonds backed by car loans to subprime borrowers as sales of such debt rise.
About 13 subprime auto issuers have tapped the asset-backed market this year as new entrants crowd the segment, according to Citigroup Inc. Originations of car loans to borrowers with poor or limited credit have doubled since the fourth quarter of 2009 to reach $18.4 billion during the same period in 2012, Citigroup analysts led by Mary Kane in New York said in a Sept. 6 report. The pace of growth is likely unsustainable, they said.
“Many subprime lenders’ business models derailed amid similarly competitive” conditions when the market peaked in 2001, the analysts said.
Top-ranked securities backed by auto loans to borrowers spanning the spectrum from the weakest to the most creditworthy are yielding 48 basis points more than Treasuries, down from a 13-month high of 56 basis points on July 3, according to a Bank of America Merrill Lynch index.
To contact the reporter on this story: Sarah Mulholland in New York at email@example.com
To contact the editor responsible for this story: Alan Goldstein at firstname.lastname@example.org