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Capital Markets

Sun sets on Talf programme

Funds want more issuance, please; Non-prime ABS will face period of higher financing costs

The Federal Reserve is expected to end its Term Asset-Backed Securities Loan Facility consumer ABS programme at the end of March, say bankers. For most issuers that won’t be a problem, but some issuers of off-the-run ABS asset classes will face a period of more expensive funding.

"We’re not too worried about prime autos and credit cards, as they are pricing well inside of the Talf loan rate," says Mike Wade, head of asset securitization origination for the Americas at Barclays Capital. For example, World Omni came in January with a $885.1 million auto-loan-backed non-Talf eligible deal that priced at a duration-weighted average credit spread of 28 basis points, a full 203bp tighter than its Talf-eligible deal from last April.

Private student loans and auto-dealer floor plans, however, are expected to encounter wider spreads. For these assets classes "the ability to do large deals will suffer because of the lack of leverage that the Talf programme allows for," says Wade. The result is that such issuers are expected to take advantage of the two remaining months of the Talf programme. Bankers say the pipeline is already busy.

That’s good news for Talf funds, which are oversubscribed.

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