China auto ABS revives securitisation optimism

Author: Ashley Lee | Published: 20 Aug 2014

A flurry of Chinese auto asset-backed securitisation (ABS) deals has sparked renewed enthusiasm for structured finance in the jurisdiction.

Chinese authorities have been encouraging the growth of a securitisation market to discourage the sale of informally securitised products. Collateralised loan obligations (CLOs) comprise the vast majority of the market, but auto ABS may soon become more important.

And foreign issuers who have received a quota are completing deals. Volkswagen’s Driver China One Trust, sold in June, was the first to receive an international rating. Five other auto ABSs have been announced; four of those are by global auto manufacturers.

Market participants have praised China’s pilot programme. Auto companies want a conduit-type structure where they can move loans off their balance sheets to a captive company which then securitises...