And so it begins. The slow decline into Christmas is upon us.

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“We are full, let’s talk in the new year,” investors claim. “Let’s just pre-place it with some friendlies,” the bankers say as they get into the holiday swing of things.

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But BNP Paribas and Findomestic have no time for Christmas spirit. Instead, they invoke the soul of Ebenezer Scrooge. Work must continue. European ABS investors are not full. And they are still hungry for yet another dollop of Auto ABS paper.

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Christmas is only a mindset, and so it proved with the pricing of AutoFlorence 4, BNP Paribas PF and Findomestic’s Italian Auto ABS.

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Despite 43 prior Auto trades this year, culminating in over€27bn of issuance, AutoFlorence’s two-and-a-half year absence ended with a bang. It was by no means a given that investors would flock to it given the aforementioned €27bn of Auto ABS is already €6.5bn more than the record set last year.

Conservative and tempting IPTs were not just in keeping with the fashion of the day, they were necessary. Offering a 5bps pickup on the seniors versus the most recent comparable trade, A-BEST, and up to 20bpsfurther down the stack more than did the trick.

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The first book update saw strong coverage with 1.4x (on the free float), 3.4x and 2.5x (5.1x on the FF). The deal was originally planned to be €600m, with 50% of Class A retained and 50% of Class C protected. 

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But despite pouncing on the enthusiasm with tighter spreads, demand remained very strong. An upsize to €850m duly followed and the final prints were just about the tightest seen in Italian Autos since the end of the Covid pandemic.

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For BNP Paribas as an arranger, it’s their 70^thdeal of the year, which took their underwriting volume above €19bn – 19 deals and roughly €5bn clear of all challengers. If anyone deserves a rest this month, it’s them!

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Elsewhere, there were 6 other trades priced last week, but only two were publicly offered. For most other market participants, the winter slowdown is already upon us.

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Morgan Stanley’s €212m CMBS backed by a single senior loan to finance a European portfolio of 18 distribution-focused logistics assets had been out in the market for a few weeks, and struggled to drum up enough demand to consider any tightening.

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Similarly, it was a long stint in the cold for the €280mDutch buy-to-let RMBS sponsored by Cerberus. Fairbridge 2025-1 struggled to build any momentum with books barely covered despite a couple of weeks marketing and tempting IPTs.

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The deal brought together three Dutch BTL lenders, two of which were hitting screens for the first time. Add in the slightly esoteric nature of the collateral and the general feeling of Christmas cheer (as discussed), and it’s not hard to see why things can be tough for latecomers this year.

Selling rock-solid Auto ABS is one thing, but CMBS and Dutch BTL RMBS debut issuers… that takes a bit of work.

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For Fairbridge in particular, the pool includes 8.3% of short-term bridging loans. It would not surprise me if the main difficulty in pitching to investors came here. For the first year of the trade, amortization is in a pro rata structure as these bridging loans mature. After a year, it becomes sequential.

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By paying off the mezzanine notes at the same time as the seniors, it means that the issuer’s cost of funding remains low in the early part of the deal, while keeping the seniors riskier for longer and reducing the yield for mezz investors over time.

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Perhaps the idea of drumming up bumper demand on this sortof trade was always going to be a bridge too far at this time of year.

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Final Word

That’s all from me this week. I am exhausted and it’s only Monday morning. That’s because I did my good deed for the month by baby-sittinga 5-year old next door.

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Said 5-year-old’s little sister managed to knock over her mummy’s tea and burn herself. It was fine, but babies need to get looked at. Enter hero dog-dad who got a glimpse into his own future, looking after a child with a crazy dog and a massive Arsenal match to watch.  

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If the Arsenal players had as much energy as my dog, I think they would’ve grabbed a win!

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5-year-old on the other hand was good as gold… until he had to go to bed. Thank god his brave sister was back home just 30 minutes after bedtime.

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Have a great week

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Tom

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