SF market round-up: Bleak outlook for credit card ABS

Since the passing of the UK’s Enterprise Act in April 2004, UK bankruptcies have doubled and individual voluntary arrangements (IVAs) – whereby borrowers can enter into a formal arrangement with their creditors – have risen fivefold. This is now becoming uncomfortably clear in the credit card ABS sector where charge-off levels were up from 4.72% in June 2005 to 7.04% in June 2006 according to S&Ps European Credit Card indices. Excess spread in these deals is trending commensurately downwards, from 7.13% to 6.31% over the same period.

Since the passing of the UK’s Enterprise Act in April 2004, UK bankruptcies have doubled and individual voluntary arrangements (IVAs) – whereby borrowers can enter into a formal arrangement with their creditors – have risen fivefold. This is now becoming uncomfortably clear in the credit card ABS sector where charge-off levels were up from 4.72% in June 2005 to 7.04% in June 2006 according to S&Ps European Credit Card indices. Excess spread in these deals is trending commensurately downwards, from 7.13%