ABS
ABS or asset-backed securities are bonds or notes created via securitisation that are backed by a range of assets or receivables.
Generically, all securitisations can be labelled ABS and it is often used as a coverall term; in some cases in SCI, ABS will be used in this manner.
However, in many cases, ABS are taken to exclude mortgage-backed securities (MBS) and structured credit instruments, such as CDOs. If so, then asset-backed securities or ABS are taken to include consumer ABS, such as credit card securitisations, auto loan or dealer floorplan ABS, student loan securitisations, project finance/infrastructure securitisations and equipment leasing-based transactions.
ABS originators are typically loan issuers, such as banks, credit card companies, auto finance and consumer finance firms, but can be any institution that generates regular, quantifiable future income flows (or cashflows), which includes governments.
To create asset-backed securities, institutions sell pools of their loans to a special-purpose vehicle, or SPV, which then sells the loans to a trust. The trust then repackages the loans as interest-bearing securities and issues them. This true sale of the loans to the SPV ensures that the ABS is treated as being bankruptcy-remote from the originator.
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SRT fast-track testing underway
Market updates and sector developments
The ECB is set to begin testing a new fast-track process for the supervisory assessment of SRT, which it has developed in close dialogue with the European Banking Federation. The SRT assessment of an individual securitisation transaction currently takes about three months, but the fast-track process aims to substantially reduce this time for sufficiently simple securitisations meeting certain requirements.
Market Moves 19 February 2025
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Scope of ESMA consultation questioned
Private securitisation disclosure proposal 'puzzling'
ESMA last week launched a consultation on revising the disclosure framework for private securitisations under the Securitisation Regulation (SECR), proposing a simplified reporting template designed to improve proportionality in information-sharing processes. However, the timing and restricted scope of this latest consultation is questionable.
“ESMA's proposals could streamline the reporting requirements for certain transactions. However, they also exclude a .......
News 18 February 2025
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Job swaps weekly: ARC promotes two and appoints APAC chair
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees ARC Ratings making a number of senior structured-credit-focused appointments spanning Europe and Asia. Elsewhere, Cadwalader has added three fund finance partners in London, while CIFC Asset Management has named a new md overseeing CLO tranche investing in its New York office.
ARC Ratings has promoted two Lisbon-based structured finance executives .......
Market Moves 14 February 2025
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Tech to streamline funding solutions
AI meets ABF in new strategic partnership
Encina Lender Finance (ELF) and securitisation fintech Cardo AI have formed a strategic partnership aimed at improving efficiency, transparency and accessibility across the burgeoning ABF market. The two firms hope to “revolutionise” ABF transactions by combining Cardo AI’s expertise in AI analytics with ELF’s expertise in structuring and credit risk management.
The agreement highlights the increasing role .......
Market Moves 12 February 2025
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Real Madrid: future of football finance?
Wave of stadium financing deals set to modernise European sports investment
Real Madrid President Florentino Pérez is reportedly considering plans to restructure the football club’s ownership model with one that may resemble the German 50+1 approach, with the club introducing private investment while remaining under fan control. This model – which has boosted profitability and sustainability across Bundesliga clubs – could accelerate a broader trend of financial modernisation in .......
News Analysis 12 February 2025
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Record levels of US auto ABS to continue in 2025
Country could exceed last year's record issuance, but tariff-related uncertainty looms
The US auto ABS market is set to experience another strong year of issuance in 2025, based on strong investor demand for recent transactions and positive consumer sentiment surrounding lower interest rates. However, it will have to contend with geopolitical uncertainties if it is to surpass the record levels reached last year, with ongoing questions surrounding the impact of .......
News Analysis 11 February 2025
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SABL 'mutually beneficial' for private credit funds and banks
Cadwalader partner Jeffrey Nagle and special counsel Michael...
The rise of private credit has been one of the biggest stories in finance in the last decade, and some observers forecast that by 2028 the private credit market once again will double in size. This continued growth, as well as other market and regulatory forces affecting bank lenders, has promoted innovation in the space. Increasingly, and perhaps out .......
Talking Point 10 February 2025
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SCI in Focus: ABF key motivator in private credit consolidation
Acquisitions driven by opportunities beyond traditional corporate lending
The alternative credit sector saw a continued drive towards market consolidation in 2024, with asset-backed finance (ABF) emerging as a key motivator for such activity. Last year saw a near-record US$260bn in acquired AUM, according to Gapstow’s annual review of acquisitions among alternative credit managers, with direct lending dominating the space.
Direct lending firms accounted for 70% of .......
News Analysis 7 February 2025
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Job swaps weekly: Haynes Boone poaches asset securitisation team
Securitisation people moves and key promotions
This week’s round-up of securitisation job swaps sees Haynes Boone strengthen its fund finance and asset securitisation practices with the hiring of seven attorneys from Seward & Kissel in New York. Elsewhere, several other law firms have added partners in Australia and Japan, while ARC Ratings has recruited a new Hong Kong-based ceo to spearhead its expansion in the .......
Market Moves 7 February 2025
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MA reforms set to boost UK securitisation
PRA to deliberate on 'Matching Adjustment Investment Accelerator' in 1H25
The UK securitisation sector is poised to see a steady increase in activity, following the implementation of Matching Adjustment (MA) reforms introduced in late 2024. While the reforms offer more flexibility in asset-backed investments – shifting the requirement from a fixed to a highly predictable (HP) cashflow for part of insurers’ portfolios – the market can expect a gradual .......
News Analysis 7 February 2025
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British Business Bank backs EV financing
New support for £100m+ EV lending facility amid market uncertainty
The British Business Bank has committed to support a structured lending facility from Paragon Bank geared at incentivising the adoption of EVs in the UK’s used auto market. The announcement comes amid ongoing regulatory uncertainty in the UK car financing market, which could impact auto finance providers and, in turn, the flow of auto ABS deals.
Through .......
News 6 February 2025
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UK auto ABS outlook diverges from European peers
Recent court ruling weighs on 2025 expectations for some auto finance providers
Regulatory uncertainty in UK car financing is suppressing the outlook for auto ABS in the country. A decision taken last year by the Court of Appeal of England and Wales will likely impact some auto finance providers – and the auto ABS pipeline – in the country in 2025, according to a report by Morningstar DBRS, in contrast to .......
News Analysis 5 February 2025
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Best of frenemies
Bank-asset manager ABF partnerships set to accelerate
ABN AMRO and Ares Management this week forged a strategic collaboration on a €1.3bn infrastructure loan portfolio, marking the latest in a growing wave of partnerships between banks and alternative asset managers. The deal highlights the increasingly intertwined relationship between traditional lenders and private credit sponsors.
“This collaboration will not only strengthen our position in the infrastructure .......
News Analysis 31 January 2025
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Job swaps weekly: Oaktree puts the boosters on ABF team build-out
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees Oaktree making a number of key appointments as it ramps up its asset-backed finance strategy. Elsewhere, Morgan Lewis has snapped up a structured finance partner from Akin Gump, while Blackstone has hired a former Atlas SP director as principal in its credit and insurance platform.
Oaktree Capital Management has hired .......
Market Moves 31 January 2025
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SCI in focus: ABF synergies or rivalries?
Insurer and asset manager private credit tie-ups proliferating
One key tailwind behind the acceleration and growth of asset-backed finance (ABF) this year is the increasing interest of insurance companies and alternative asset managers in this subsegment of private credit. Dynamics within this space are evolving and while many insurers are choosing to join forces with asset managers, some unaffiliated insurers might push back in 2025, seeking to .......
News Analysis 28 January 2025
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Shaping Aperture's structured credit strategy
Vladimir Lemin, global head of structured credit at Aperture Investors, answers SCI's questions
Q: You recently joined Aperture to lead the newly launched structured credit strategy. What attracted you to the firm and role?
A: Throughout my career, I’ve been fortunate to work with and learn from some of the best investors and risk managers at Magnetar Capital and One William Street Capital. My time at the Wharton School also sparked .......
The Structured Credit Interview 28 January 2025
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EMEA RMBS strengthens following resilience in 2024
Market forecast for stable to improving performance in 2025, supported by strong indicators
The overall RMBS market in EMEA is expected to exhibit stable to improving performance in 2025, bolstered by a resilient macroeconomic environment. GDP growth and moderating inflation rates across Europe are anticipated to contribute positively to asset performance.
Barbara Rismondo, associate md within Moody’s EMEA SF team notes: “In general, we do expect the overall ABS and RMBS .......
News Analysis 27 January 2025
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Job swaps weekly: Investcorp names successors to Ghose and Shandell
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees Investcorp promoting two team members to lead its liquid credit investment strategies as part of a succession plan. Elsewhere, ARC Analytics has appointed a new ceo for its data business, while Ninety One has hired an RBC BlueBay Asset Management veteran as portfolio manager on its developed market specialist credit team.
Market Moves 24 January 2025
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Heat pump ABS faces headwinds in Europe
The heat pump ABS market faces scalability hurdles, includin...
The nascent market for heat pump ABS faces significant challenges despite its potential role in Europe’s energy transition. A lack of support from policymakers and a shortage of historic default data are proving to be hurdles for an asset class that has often been tipped to follow solar ABS’s ascent into everyday European securitisation discourse.
Declining heat pump .......
News Analysis 21 January 2025