© 2026 Arizent. All rights reserved.

ABS

Weekly Wrap: Signs of life in credit-card ABS market

Published 3 Min Read

Corporate-card lender Brex Inc., a 2017 startup backed by about $900 million in private-equity and debt capital, began looking at securitization as a potential strategy to diversify its funding sources in 2019.

That deal finally came to fruition this year, when San Francisco-based Brex priced its first issuance of securities backed by the receivables from client payments on Mastercard-branded commercial charge accounts. The $185 million Brex Commercial Charge Card Master Trust series (issued through a master-trust structure) priced in March, oversubscribed at nearly three times.

"Just given the volume that we had in receivables, and that we had a really strong credit performance in our portfolio, we decided that it made sense for us," said Erica Dorfman, Brex' senior vice president of payments and capital markets (and former head of capital markets at SoFi).

Despite the strong investor appetite evident in the Brex deal, traditional credit-card ABS issuers have largely been absent from the market the last two years.
brex.png

After a post-crisis peak of $44 billion in issuance volume in 2017, credit-card ABS volume declined in both 2018 ($32.3 billion) and 2019 ($21.2 billion) and were even fewer and far between in 2020 with only $3.5 billion in deal activity (according to data on Finsight.com). Formerly regular credit/charge-card ABS issuers such as Capital One, Discover Financial Services and American Express have not issued deals since 2019, and Citigroup's card trust has been dormant with no new issues since 2018.

Dorfman said that Brex was well aware of the bank industry's recent reticence in issuing bonds from their credit-card series trusts, when it went into its own deliberations on whether to securitize card payments. "When you look at the bank-card issuing space, yes, it's been really quiet," Dorfman said. "A lot of that has to do with the deposit market and the cost of alternative funding for banks. But for us, we don't have deposits. So it is important for us to look at the securitization market, look at the warehouse market and look at other sources of funding."

Brex' deal, along with a card securitization in early March from non-prime consumer finance company Mercury Financial, seems to have thawed the pipeline. This month saw the pricing of two large-bank card ABS deals: a $1 billion series offering sponsored by Bank of America and a US$755 millioin deal from Canadian Imperial Bank of Commerce – both of which have pushed 2021’s total ABS tally to more than $3 billion to close in on surpassing 2020's whole-year volume level.

Glen Fest

CIFC enlists CLO deal partners in philanthropic efforts

CIFC Asset Management announced this week it has established a philanthropic program – in connection with deal partners involved in its CLO issuance – that will raise funds for social, economic and environmental change.

CIFC is making its inaugural $145,000 donation through the CLO Initiative for Change to Black Girls CODE (BGC), a non-profit organization focused on expanding science and technology education opportunities for girls of color ages 7 to 17.

Also joining in the contribution were RBC Capital Markets, Appleby (Cayman) Ltd., Allen & Overy LLP, Milbank LLP, BNY Mellon, and Locke Lord LLP – each of whom was involved in the issuance of CIFC Funding 2021-IV, CIFC’s latest CLO.

“As we foster the next generation of learners and leaders, it is essential to promote and advocate for racial and economic equity, and BGC’s mission embodies these principles,” said Mark Sanofsky, Managing Director at CIFC and a member of the firm’s diversity & inclusion Committee, in a press release statement.

“CIFC's commitment to supporting Black Girls CODE will be instrumental in helping us continue to drive transformative change in the tech industry and get closer to our goal of teaching 1 million girls how to code by 2040,” added Kimberly Bryant, the founder of BGC.

Glen Fest

DBRS Morningstar: SFR multi-borrower deals riskier than single-loan deals

In weighing the impact of the coronavirus pandemic on the fledgling single-family rental (SFR) securitization market, DBRS Morningstar found that deals that pool loans from multiple (and smaller) borrowers have fared more poorly than those in single-borrower transactions.

In a 39-page research report analyzing SFR deal performance in April, DBRS Morningstar found that the pandemic’s economic impact (rising jobless numbers, forbearance mandates and restrictions on collections/evictions) was more pronounced in conduit-structured deals that usually involve pools of interest-only and balloon-payment loans from lesser-capitalized investors.

For example, the average tenant delinquency rate shows the single-borrower SFR transactions may have had more stable tenancy. The rate for March "remained low" at 5.5%, even though COVID-19’s impact caused delinquencies to increase five times on a month-to-month basis over the previous year for loans in single-borrower SFR portfolios.

“However,” the report noted, performance data shows “ for the loans in the multiborrower transactions, the coronavirus pandemic has had a greater impact.” Sixty-day plus delinquencies grew in March 2021 (4%), exceeding February’s 3.9% rate, and 30-day delinquencies increased to 0.8% in March from 0.1% in February.

“In addition, the performance data showed an increase in balloon payment defaults as borrowers likely faced difficulties obtaining refinancing commitments as a result of the pandemic,” the report stated.

Multiborrower SFR deals reflect not only the lower capitalization levels of the borrowers in the pool, but also reflect that the loans “are generally collateralized by fewer properties” and there is a higher geographic concentration of properties in multiborrower deals, which are more vulnerable to regional market downturns.

The report also noted that “SFR securitizations issued in 2018 or later may be more at risk for potential rating volatility because the transactions have not been sufficiently seasoned and the rental properties have not yet accumulated adequate home price appreciation.”

Glen Fest

GSE risk management strategy shows resilience after a tough year

Credit risk transfers used by Freddie Mac to manage distressed mortgage risk stageda relatively quick rebound after faltering in 2020, a new Federal Housing Finance Agency report published Monday finds.

Although capital markets disruption from the pandemic, refinancing anda new capital rule all posed challenges for CRTs, the one government-sponsored enterprise that returned to the market after a few months’ absence was able to exceed 2019 issuance levels by year-end.

Freddie Mac’s results suggest that if Fannie Mae were also to come back, the whole market could rebuild the CRT protection on its total unpaid principal balance of single-family loans reference pools relatively quickly.

See story

Bonnie Sinnock

Burst of CLO refinancings expected ahead of Libor’s end

Managers of U.S. collateralized loan obligations may look to jam in more refinancings and related transactions by the end of this year, before the CLO and loan markets start switching to different benchmarks and potentially turn chaotic.

A lack of consensus regarding the eventual replacement for the London interbank offered rate could cause turbulence for CLOs in the fourth quarter, according Bank of America Corp. The benchmark is widely used across the sector and set to go away by June 2023 at the latest.

This could add even more steam to the boom in refinancings and “resets” of CLOs, which allow portfolio managers to lock in sweeter terms on outstanding deals. Combined total sales this year are about to cross $100 billion, according to data compiled by Bloomberg, the fastest pace ever as the tally builds to a likely annual record.

See story

Bloomberg

For reprint and licensing requests for this article, click here.

More From Asset Securitization Report