US: GM Financial to introduce higher-yielding ABS deal image

The US automaker’s sub prime-auto lender, which is currently under an investigation from the Justice Department, said it moves to introduce an asset-backed bond deal that would have a bigger yield for those who purchase it.

GM Financial and Santander Consumer USA, the biggest issuer of asset-backed bonds involved with car owners with poor credit, both received a subpoena from the US Justice Department, which demanded access to documents from the lenders on underwriting criteria, origination, warranties and securitization of sub prime loans.

According to Barclays Plc the government probe comes as the sales of securities from car loans linked to people with shady credit history rise – from $21.5 billion in 2013 to $14.2 billion in the bonds sold so far this year.

“Most of the gains seen in ABS spreads in 2014 were reversed during the first two weeks of August,” said Wells Fargo & Co. analysts, as investors took a more cautious approach.

The $1 billion transaction sees the company issuing a $93.4 million portion rated BBB, which should reward investors with 170 basis points above the benchmark interest rate, says a source close to the deal, who declined to be identified because the details of the transaction are not yet public.

Via Bloomberg