9/8/2025
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Well, we said it could be the busiest week of the year and so it has proved with over €5bn (equivalent) placed last week.
Never mind about stock market jitters, fears over government borrowing costs, the rising price of gold – European ABS is going gangbusters.
Excluding CLOs, 8 deals were priced last week while we already have 6 in the pipeline hoping to be done by Friday, September 12. Yet as has become the norm this year, it’s German Autos that are leading the way – with Stellantis and Volkswagen both securing bumper
demand on their latest deals, the €475m ECARAT DE 2025-2 and the €1.25bn VCL 46.
The number of German auto trades priced in 2025 now stands at 15, which is already a post-GFC record. But perhaps more remarkable is the fact that demand for such paper remains as strong as ever.
Volkswagen’s VCL 46, arranged by ING with Commerzbank and LBBW as joint-lead managers, got the week off to a strong start when the deal was priced on Wednesday. The books were 2.1 times covered on the AAAs, with an original deal size of €750m. Initial guidance jumped 5bps tighter than IPTs to 45bps over 1-month Euribor, but it did not deter investors. So, Volkswagen did the natural thing and lumped another €500m on the table at a final price of 44bps over 1-month Euribor.
It’s the tightest print of VCL since 2023, but to place nearly €1.2bn at the same time is truly remarkable.
Stellantis’ ECARAT DE priced late on Friday, and while they didn’t opt for the bumper upsize like Volkswagen, they were similarly able to drag investors into the high-40 bps region. With a 2.7 year WAL versus VCL’s 1.28 year deal, selling €435.8m of AAA paper at 48bps over 1-month Euribor is not to be sniffed at.
The start of last week saw the S&P 500 fall over 1.8%, with similar moves in the Dow Jones (-1.3%) and the FTSE 100 (-0.9%). Meanwhile, the cost of UK government borrowing has continued to rise with the 30-year yield hitting 5.72%, its highest level since 1998.
Similarly, German Bund yields rose, with the 30-year yield reaching 3.38%, its highest point since 2011 as investors continued to worry about the fiscal stability of the major European economies.
These jitters fell away somewhat towards the end of the week, but for now, those concerns are helping not hurting European ABS. Investors are worried about inflation risk and higher debt levels, but as ABS in Europe is one of the few floating rate products around, it could be used to act as a hedge against the volatility in fixed income.
The technicals have already been heavily in the issuer’s favour this year, so it’s not a surprise to see the market grind even tighter, but the next few weeks and months could be akin to walking a tightrope.
European ABS has become much more resilient since the challenging days of 2022, where war in Ukraine made issuance difficult for all comers. But sustained fears over the UK and Eurozone’s finances will surely be a worry for all hoping to issue before 2025 is out.
Below is the rest of the deal flow for the week and the pipeline for the week ahead.
Before I go, just wanted to shout out some of the other exciting news we’ve seen this past week, starting with Selina Finance’s sterling debut, and the debut UK HELOC (home equity line of credit) transaction, the £271m Odyssey Funding.
It’s been a breakthrough year for equity release securitization with deals like Summerhouse 1 (you can read ARC Ratings’ Report here). But HELOCs, which are much more prominent in the US, had not featured until Selina came along. So, a great result to see it price a full capital stack as well. GlobalCapital went into a bit more depth – here.
And finally, it’s great to see Heike Hoehl back in the market. The ex-Santander syndicate head is now at ING, who have become a growing presence in the league tables over the past couple of years.
And as for me, well the next time you hear from me I’ll be either ecstatic or devastated. My golfing semi-final takes place this Sunday and every time I think about it, it is as though my chest will explode. But nerves are no bad thing, just means you care.
Wish me luck and have a great week!
Tom
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