GERMANY: VW leads way to reopen Europe's ABS market
Volkswagen Financial Services has announced plans to securitise auto leases in a benchmark-sized public deal that would reopen Europe's asset-backed securities (ABS) market after a year-long freeze.
Reuters notes that there have been no European ABS issues for a year since the bankruptcy of Lehman Brothers disrupted the markets on 15 September, 2008. VW's finance arm was also the last in Europe to issue ABS on 12 September last year.
JP Morgan and WestLB have been named to manage the forthcoming VCL 11 Auto Lease deal and plan a launch following a pan-European roadshow scheduled for the week of 21 September, according to the announcement.
Markus Ernst, a structured credit analyst at UniCredit, told Reuters that the VW deal is to be marketed publicly on a standalone basis. An auto deal would be a logical type of ABS to reopen the market because auto leases are likely to have short maturities and are a more standardised asset class than mortgages, with a generally sound performance, he added.
Reuters said that some ABS buyers such as structured investment vehicles (SIVs) have gone out of business, and others such as many money market funds have shunned the market after significant losses. Because VCL 11 is the first new ABS, the deal's managers roadshow will give investors time to analyse the structure and to ramp up their credit committees again, the source told the agency.
An ABS trader said that if VCL 11 leases are short term and the deal is well received, it could price at spreads of between 120 and 170 basis points. By way of comparison, the last ABS deal a year ago - the EUR967m (US$1.4bn) VW securitisation of auto loans called Driver Six - priced at 90 basis points over one-month Euribor for the triple-A tranche.
ABS spreads have tightened over the summer, playing catch-up with this year's rally in corporate bonds, after the market finally absorbed a load of pre-crisis paper from distressed sellers such as SIVs and after a year without new issuance.
Analysts told Reuters that the VW deal could prove to be the first of a number of new issues.