This article was produced by IFR and originally published on www.IFRe.com.
Private-label ESG securitisation issuance in dollars has been increasing, as first-time borrowers add to the supply from companies returning to this quickly developing market.
- According to Refinitiv, the volume of private-label dollar ESG securitisation has reached US$2.08bn this year.
- ABS bankers said that more deals are on the way in the coming weeks.
- Despite the rise in ESG securitisation, the number of companies that format their ABS, RMBS and CMBS to comply with the ESG principles remains relatively small.
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Car loan provider Tricolor Auto Acceptance is preparing to issue its first social bond, a US$212m offering with proceeds intended to fund lending to the underserved Hispanic market.
On the energy front, solar financing firm Sunrun is readying a US$913m ABS, its first securitisation of the year.
The volume of private-label dollar ESG securitisation has reached US$2.08bn this year, up from US$1.47bn over the same period in 2021, Refinitiv data show.
ABS bankers said that more deals are on the way in the coming weeks after some offerings were held back due to recent market volatility related to the prospect of rising interest rates and the Russia-Ukraine war.
This week’s securitisations follow a solid reception for two ESG deals last week – transport lessor Trinity‘s US$245m green railcar lease transaction and consumer lender OneMain Financial‘s inaugural US$600m social bond.
Money raised from the OneMain deal will be used to fund loans to lower-income borrowers in U.S. rural areas.
“The transaction was oversubscribed in all classes, and we believe it was well-received, as evidenced by the upsize from US$500m to US$600m,” a OneMain spokeswoman said of the social bond.
OneMain was the second consumer lender to price a dollar social bond.
Last July, UK-based online lender Prodigy Finance completed a US$274m ABS backed by international student loans for the first-ever dollar social bond.
Trinity also drew solid orders for its latest green ABS after becoming the first company to issue a green dollar railcar ABS last year.
“For Trinity, we saw strong demand across the board from both long-time Trinity investors as well as first-time investors in rail,” a source familiar with the deal said.
The number of companies that format their ABS, RMBS and CMBS to comply with the ESG principles remains relatively small, even as overall ESG debt issuance has accelerated in recent years due to growing investor demand.
Government mortgage agencies Fannie Mae and Freddie Mac have been the leading all-U.S. ESG issuers with active programmes to reduce energy use and promote more affordable housing.
Meanwhile, securitisations of solar loans and mortgages on properties with local tax breaks to improve energy efficiency have become a small but steady presence in the ABS sector.