UPDATE 1 - Affirm returns to ABS market after IPO
"Buy now, pay later" fintech company Affirm made a strong return to the US ABS market on Tuesday after the company's blockbuster IPO less than a month ago.
Huge investor demand greeted the San Francisco-based lender's US$500m deal, Affirm Asset Securitization Trust 2021-A, which is backed by a revolving portfolio of point-of-sale consumer loans.
The 144a/Reg S offering fetched about US$4bn in orders, helping bankers tighten spreads on all five classes of notes inside their guidance, a source familiar with the deal said.
"People feel very good about consumer credits right now," the source said.
It was the first deal from Affirm to achieve a Double A rating from DBRS Morningstar on its senior tranche. Last year, Affirm's highest ABS rating was Single A from DBRS.
The rating bump stemmed from more financial disclosures and some performance data on Affirm's deals from last year, according to the source.
In Tuesday's deal, the US$407.2m Double A rated note with a 1.78-year WAL cleared at 70bp over EDSF, inside guidance of 75bp-80bp. It was far tighter than the 190bp on the Single A rated, 1.85-year WAL note in Affirm's first revolving ABS that priced last July, AFFRM 2020-A.
The higher rated senior note, together with inclusion of a single B rated subordinate class for the first time, bolstered the deal's appeal to more than 30 fund managers who were already eager for more exposure to a sector offering higher yields than more liquid and less risky ABS, the source said.
Barclays structured the latest Affirm deal and was a joint book manager with Truist Securities.
AFFRM 2021-A followed blistering demand for other consumer loan issues since the start of the year with investors confident that consumer delinquencies will remain low, helped by expectations of more government aid and a recovering economy supported by vaccine rollouts.
Since late January, Regional Management, Freedom Financial Network and Upstart, a fintech lender which went public in December, have racked up huge orders for consumer loan securitizations, bankers and investors said. Affirm's shares have also more than doubled from the IPO price of US$49.
"We are not expected to have a prolonged economic downturn. [Consumer ABS] is a good proxy for the appetite to take on pro-cyclical risks," a senior portfolio manager said.