(Bloomberg) – Bankers repackage everything from fast food franchises to fitness center fees, into fastest-paced bonds since the global financial crisis, as investors seek protection against yields and inflation .
This year’s sales of U.S. asset-backed securities have already exceeded $ 300 billion, according to data compiled by Bloomberg – and more are expected by the end of the year. Post-crisis issuance records were also set for private label commercial mortgage bonds and secured loan bonds, which are also expected to accelerate.
“Solar energy, consumer loans, container leasing and commercial transactions as a whole offer attractive yields and spreads to some extent,” said Dave Goodson, head of securitized credit at Voya Investment Management. “These so-called esoteric sectors remain well supported with a lot of money to invest.”
On Monday, Self Esteem Brands, a franchisor of businesses including its flagship Anytime Fitness gyms, priced $ 505 million ABS backed by franchise agreements, royalties and fees. In entire corporate securitizations like these, companies mortgage virtually all of their assets.
Last month, the fried chicken restaurant chain Church’s Chicken sold a $ 250 million securitization backed by franchise and royalty guarantees. Golden Pear Funding recently securitized financial settlement litigation costs on everything from personal injury cases to wrongful convictions. And Oasis Financial has priced a similar deal related to medical lien payments.
The deluge of ABS sales was so intense that it began to weigh on prices, especially for bonds backed by subprime auto loans and student loans. Despite this, investors appear bullish, given the positive outlook for consumer credit, boosted by the pandemic-era stimulus checks.
“There are strong underlying salvage values for everything from cars to homes. The underlying collateral of many ABS is resistant to inflation, ”said Daniel Lucey, senior portfolio manager who invests in securitized credit at SLC Management. “In a low yielding, high inflation environment, securitized debt is attractive relative to short-term corporate debt, both in terms of spread and yield. “
Last week, Goldman Sachs urged investors to move away from corporate bonds to ABS and other securitized debt as inflation raises wages and increases the value of cars and homes. Its strategists have said valuations look better in securitized bonds than in corporate bonds on a historical basis.
–With help from Charles Williams.
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