Springleaf Finance Corp. plans to sell $400 million of securities linked to personal loans, the subprime lender’s second offering of such asset-backed securities.
Standard & Poor’s is expected to rate $342 million of the notes single-A, according to a person familiar with the transaction who asked not to be identified because terms aren’t public. Citigroup Inc., Bank of America Corp. and Credit Suisse Group AG are managing the sale for the Evansville, Indiana-based financier, the person said.
Companies have issued $74 billion in asset-backed debt linked to consumer and business borrowing this year, according to Wells Fargo & Co. Offerings such as the Springleaf transaction that are tied to unusual collateral pay higher yields than standard deals including those linked to auto debt, which account for 42 percent of sales this year, Wells Fargo analysts led by John McElravey said in a report today.
Springleaf sold $604 million of bonds backed by personal loans secured by everything from jewelry to electronic equipment in its first asset-backed deal linked to personal loans on Feb. 20, according to data compiled by Bloomberg. The company paid 210 basis points more than the benchmark swap rate on A rated bonds maturing in 2.47 years, the data show.
Relative yields on asset-backed bonds tied to U.S. household borrowing have been relatively stable as concern that the Federal Reserve may begin to wind down its purchases of Treasury and mortgage bonds roils markets, according to Deutsche Bank AG. The central bank has been buying $85 billion of the debt each month in its third round of quantitative easing.
“Every other market has seemingly gone into cardiac arrest over the last two weeks due to concerns about QE tapering except the ABS market,” Deutsche Bank analysts led by Harris Trifon said in a report yesterday.
Top-ranked bonds tied to auto loans are yielding 38 basis points more than Treasuries, unchanged from a week ago, according to a Bank of America Merrill Lynch index.