Consumer loan ABS

Three types of consumer finance receivables have been securitised in the past credit card receivables, auto receivables (essentially auto loan and auto lease receivables), and other consumer finance receivables, which typically include unsecured personal loans. Credit card receivables are discussed in Chapter 13. The purpose of this chapter is to provide an overview of the European auto and consumer loan ABS markets and review the structural, collateral, and performance characteristics of the two asset classes. We decided to review auto and consumer loan ABS combined in one chapter because of the many similarities between the two asset classes. 

Although the first public securitisations of European auto and consumer loan receivables were completed in the early 1990s, issuance in both sectors did not really take off until the mid- to late 1990s. But since then, for lenders of auto and consumer loans alike, securitisation has become one of the favourite sources of funding and an effective way of managing their balance sheets. European auto and consumer loan ABS originators have... 

European Auto and Consumer Loan ABS Issuance by Year (1997-2002)... 

Traditionally, the two sectors have been clearly dominated by repeat issners. For example, in 2002, repeat issuers acconnted for approximately 75% of all anto ABS issued and 82% of all consumer loan ABS issned (by issnance volume). Exhibit 14.2 shows the top five European anto and consnmer loan ABS issuers ranked by cumulative issuance vol-nme from 1997 to 2002. 

Among the dominant issuers of European consumer loan ABS is Cet-elem, the consumer credit arm of Compagnie Bancaire, which in turn is... 

The second largest issuer of European consumer loan ABS is ABN Amro, which has accessed the securitisation market twice since 1997 through its Amstel Consumer Loan Securitisation programme. In each of the two cases the notes are euro-denominated and backed by Dutch consumer loans. 

Banco Comercial Portugues has completed three consumer loan ABS transactions since 1997. Nova Finance No. 1, Nova Finance No. 2, and Nova Finance No. 3 were issued in 1998, 2001, and 2002, respectively. Nova Finance No. 1 is Deutschmark-denominated and Nova Finance No. 2 and Nova Finance No. 3 are euro-denominated. All three transactions are backed by Portuguese consumer loans. 

Banco Espirito has completed two European consumer loan ABS transactions, Lusitano Finance No. 1 (Portuguese consumer loans) and Lusitano Finance No. 2 (Portuguese consumer loans and leases the consumer loans are originated by Banco Espirito, the leases are originated by Besleasing Mobiliaria). Notes and collateral are euro-denominated. 

Tranching of European auto and consumer loan ABS transactions is much less standardised than, say, European credit card transactions. While most credit card transactions come with three tranches, typically... 

Although auto and consumer loan ABS structures are not very standardised, most transactions have a range of structural features in common. The purpose of this section is to provide an overview of typical auto and consumer loan ABS structures. 

Exhibit 14.6 below shows the structural diagram for a typical auto or consumer loan ABS transaction. Although there have been attempts to create a master-trust like structure for consumer loan ABS, we discuss in this chapter the most common structure used for auto and consumer loan ABS issuance. ... 

In the following review of some of the fundamental auto and consumer loan ABS mechanics, we will use three transactions as practical examples two auto ABS transactions, FIAT 1 and Globaldrive B, and one consumer loan ABS transaction. Paragon Personal and Auto Finance (No. 1) (PPAF 1). The FIAT 1 transaction was completed by Fiat in July 2000 and at that time it represented the largest European auto transaction completed. Globaldrive B was completed by FCE Bank in March 1999. PPAF 1 was completed in 2001 by Paragon Finance PLC. In Exhibit 14.7 we outline the structural details for the senior notes of FIAT 1, Globaldrive B and PPAF 1. 

Many Participants in the European auto and consumer loan ABS markets tend to be buy-and-hold investors, and so offer-side liquidity in the second-... 

In most completed European auto ABS transactions, the senior classes have been structured so that the bonds feature an amortising payment structure with an average life of between 3.5 and 4.5 years consumer loan ABS transactions tend to have slightly longer average lives, often between four and five years. 

A typical auto or consumer loan ABS transaction features one to four tranches, generally rated between triple-A and triple-B. Exhibit 14.11 shows the credit enhancement levels for the FIAT 1, the Globaldrive B, and the PPAF 1 transactions. The three transactions are all structured differently and as such, the senior notes in each issue benefit from different levels as well as types of credit enhancement. 

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