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Powersports ABS Issuances Expected to Slow, Morningstar Says

  • Natalie Mattila
  • February 27, 2017
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canstockphoto16004835Powersports lenders are likely to securitize at a slower pace this year — the select few who are looking into ABS issuances — as revenue growth has slowed due to turmoil in the oil and agriculture industry, Jaime Katz, equity analyst for Morningstar Inc., told Powersports Finance.

ThunderRoad Financial issued its first-ever securitization in April 2016 — the second powersports lender to enter the ABS market after Harley-Davidson Financial Services.

ThunderRoad is looking to issue a second securitization and HDFS will likely issue at least one ABS issuance this year. However, the lack of comparable data for ABS issuances has made it difficult for other powersports companies to securitize, Katz said.

Additionally, the volume of snowmobiles sold — from 2015, just before the slowdown in the oil and ag industry, until today — is around 150,000 units. The number of off-road vehicles sold is around 800,000 for the same time period. These sales reveal that securitizations would be “fairly small in size,” which makes it difficult to attract big bank-type buyers, she added.

“There aren’t many issuances to compare to outside of Harley, and ThunderRoad is pretty tied to the motorcycle business, so it’s a like-for-like comparison,” Katz said. “I’m not sure the mix would be the same from the other public providers we follow. The percentage of sales from ATVs, snowmobiles, motorcycles, and personal watercraft vary by manufacturer and would change the risk profile, limiting an apples-to-apples comparison.”

As ThunderRoad went to market, a lot of new questions were asked by investors since the lender does not finance just Harley-Davidson motorcycles, but Japanese and European metrics as well, Founder and Chief Executive Donal Hummer told Powersports Finance in October. “So, people didn’t really know what to do with us,” he said. “It was interesting to go through that process, lay out how these loans perform, get the metrics, and get them [investors] comfortable.”

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