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With the UK car finance mis-selling scandal bringing the sterling Auto ABS market to an almost complete standstill for the past 12 months, it seems that we could have a case of a few issuers looking to make a late dash through the ABS market before year-end.

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In September, Volkswagen brought its Driver 10, and last week saw BMW price its seventh edition of a UK Bavarian Sky, while Oodle’s Dowson shelf is set to price next week. What are the odds we get a couple more through the door with maybe 6 weeks of an open market left?

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Before the Court of Appeal’s judgment shocked the market, there were 10 deals priced in 2024 up to November. But since then, there’s been too much uncertainty to get any consistent volume, meaning BMW became just the third UK Auto ABS of 2025.

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Now with more certainty around the financial redress schemes that will stem from the scandal, there is clearly confidence that at least one major hurdle for investors has been overcome.

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Unfortunately though, the broader UK macroeconomic picture isn’t exactly inspiring confidence, so any deals will still have to proceed with caution. And that was exactly the case for BMW’s £400m Bavarian Sky 7.

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Investors are simply not interested in being pushed around, and so, while IPTs started out with hefty restraint at mid-60s over Sonia, books could only get to 1.5x covered and 62bps over Sonia.

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Volkswagen managed to get 60bps, so 2bps wide of that is no mean feat. But matching 2024’s Bavarian Sky 6 at 55bps never looked to be on the cards.

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As for next week’s Dowson 2025-1 trade, it has generally looked to offer a 10bps-plus pickup against the well-known car manufacturers. Perhaps that point of difference will serve them well this time around.

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Just a whisper of widening

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Elsewhere, the very slight trend of widening appears to be continuing. It’s still quite difficult to read too much into it, and some would argue (quite rightly) that it’s November so what else would you expect. Perhaps a clear view on where levels are won’t be truly visible until the January deal flow gets going.

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Nevertheless, there are signs. Staying with UK, Pepper Money’s third Polaris trade of the year was almost a bit Jekyll and Hyde (I had to get one Halloween reference in).

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Offering a full capital stack, the non-conforming RMBS, known as Polaris 2025-3, with 96.1% of the collateral being owner-occupied and 3.9% being BTL was originally slated at £326m. However, following strong demand, that was upsized to £430m.

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Yet the AAAs were only 1.3 times covered at IPTs of mid-high 80s, around 10bps wide of the July Polaris 2025-2. They eventually landed at 82bps over Sonia, 5bps wide of the July trade. But what’s odd is how strong the mezz demand was in comparison.

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Indeed, the £33m AAs were so oversubscribed, that at 6.7 times covered, the surplus of £135m actually exceeded the Class A’s £113m. Such was the demand in the mezzanine that spreads screeched tighter on Class B-E, as you can see in the table below.

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Overall, it’s hard to read too much into the slightly subdued performance of the seniors since Polaris 2025-3 took Pepper’s total funding for the year in RMBS over £1.5bn. But perhaps just a sign that things are not as easy as they look for issuers right now.

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As for euros, there were also only two deals. A €850m Consumer ABS from Santander Consumer’s Germany shelf, and a reissue of Credit Agricole’s €931.7m Italian Auto ABS, A-Best 24. It was originally fully retained, but has now sold but has now sold everything minus the most junior tranches and €300m of the AAA notes.

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Final Word

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That’s all from me this week. If you’re looking for some further reading, the PRA released some small updates on CRR and Solvency II requirements, which you can read here.

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As for me, I played just my second round of golf since my calamitous defeat at the start of October. It was the winter pairs knockout, and so of course, with no golf swings for over 3 weeks, I proceeded to make 3 birdies on my way to a personal best 1-over Par. It’s a stupid, infuriating game at times.

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This weekend, I have my parents coming to visit the new house, so I better start cleaning now to ensure they have nothing to nitpick over. I don’t really have in-laws, but my parents make up for that in spades by assuming the worst of me at all times.

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Have a great week

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Tom

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