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GM Financial Leads $4.8B of Asset-Backed Securities Deals

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GM Financial, the unit of General Motors Co. (NYSE: GM) that finances buyers with blemished credit, leads companies planning $4.8 billion of asset-backed bonds as sales of the debt surge. The lender plans to sell $1 billion of securities linked to subprime auto loans, according to people with knowledge of the transaction who asked not to be identified because terms aren't public. Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG and Morgan Stanley are managing the transaction for the Fort Worth, Texas-based company. Sales of bonds linked to subprime vehicle debt are climbing, accounting for 13.2 percent of asset-backed issuance this year compared with 10.5 percent in 2012, according to Wells Fargo & Co. Borrowers have sold about $10 billion of the securities to date, analysts at the bank led by John McElravey in Charlotte, North Carolina, wrote in a June 7 report. CPS Auto Finance, a unit of Consumer Portfolio Services Inc., is marketing $205 million of bonds backed by auto loans to subprime borrowers with the weakest credit, one of the people said. First Investors Financial Services, a Houston-based lender acquired by private-equity firm Aquiline Capital Partners LLC in November, plans to sell $200 million of similar debt. Other lenders selling asset-backed bonds this week include Ford Motor Co. and SLM Corp., the people said. Dearborn, Michigan-based Ford is offering a $1 billion issue tied to loans that finance cars on dealer lots. SLM, the student lender known as Sallie Mae, is selling $1.25 billion of securities linked to government-guaranteed education loans. Companies have issued $74 billion in asset-backed debt linked to consumer and business borrowing this year, with auto debt accounting for 45.2 percent of sales, according to Wells Fargo. The extra yield investors demand to hold top-ranked bonds tied to auto loans rather than Treasuries was 38 basis points as of June 7, unchanged from a week earlier, according to the Bank of America Merrill Lynch AAA U.S. Fixed Rate Automobile Asset Backed Securities index. A basis point is 0.01 percentage point.

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