-- Daniel O’Leary
Issuers of equipment asset-backed securities could start offering subordinated pieces of their transactions this year in a bid to satisfy investor appetite for yield, according to speakers at the equipment loan and lease ABS sector review at the ASF2011 conference.
John Cho, managing director at JPMorgan, said the outlook for the trend was good. “A lot of folks are reaching for yield—subordinated bonds are becoming more and more popular,” he said. “I think now we’ve gotten to the point where A and BBB are much in vogue. Rates have gone up a little bit, but not enough that the demand for yield is still there.”
Tom Beckmann, assistant treasurer at CNH Capital, said junior pieces had been popular with investors in the firm’s last few of deals. “We’ve sold BBBs for the last three or four deals, so there’s great demand out there,” he said. “I think the only thing that could be impeding that, besides a change in the economic outlook, would be regulation.” Beckmann pointed to the Dodd-Frank Act’s 5% risk retention provision, saying the rule could kill....