General Electric Co. plans to sell $563 million of bonds backed by credit-card payments as sales of the debt rise.
The securities, including $500 million in top-ranked notes, are set to be placed with investors this week, according to a person familiar with the offering who asked not to be identified because terms aren’t complete. The Fairfield, Connecticut-based company last issued similar bonds in June, according to data compiled by Bloomberg.
Sales of asset-backed securities linked to credit-card debt in 2012 are at the highest level in two years, according to Wells Fargo & Co. Companies issued $18.9 billion of the bonds through Aug. 15, up from about $10 billion during the same period of 2011, the Charlotte, North Carolina-based analysts said in a report yesterday.
“Credit-card lenders have increased their use of securitization compared with the previous two years to refinance maturing bonds at lower yields and to meet strong demand from investors seeking a safe haven,” according to the analysts led by John McElravey.
American Express Co., the biggest credit-card issuer by purchases, sold $2.68 billion of the bonds last week in the largest asset-backed deal this year, Bloomberg data show. The company issued top-ranked securities maturing in about three years to yield 13 basis points more than the benchmark swap rate, Bloomberg data show. The transaction was increased from $1.72 billion.
While issuance has climbed, it’s below the 2007 peak of $93 billion, Bloomberg data show. Wells Fargo forecasts as much as $30 billion in 2012 sales.
Growth in the credit-card asset-backed segment will probably be limited, according to Wells Fargo. Tighter relative yields have drawn some issuers back to the market, though lenders including Capital One Financial Corp., Bank of America Corp. and Citigroup Inc. have not sold the debt in “several years,” the analysts said. The sector contracted following 2010 regulations that scrapped capital relief banks had obtained for asset-backed offerings.
Relative yields on top-ranked securities linked to credit-card payments have dropped to 43 basis points more than Treasuries from 83 basis points on Dec. 31, according to a Bank of America Merrill Lynch index. A basis point is 0.01 percentage point.