The powersports industry can expect to see more ABS issuances, especially as captives continue to emerge, said Donal Hummer Jr., president and chief executive of ThunderRoad Financial LLC.
At some point though, even larger companies are going to have to securitize, Hummer told Powersports Finance, because “you can only grow so much before you have to start selling those assets to keep your capital stream coming in.”
The reason why there are not more securitizations in powersports is because “most of the other players out there are large finance companies that are associated with banks, so they can fund loans with deposits and CDs,” he said. “And if you can do that, with such a low cost of funds, it wouldn’t make much sense [to securitize.]”
The larger finance companies can often make “a lot more money not securitizing,” he added. “As long as you can keep growing your deposit base, it wouldn’t make sense to issue a securitization, because you’ve got such large spreads on these loans.”
Overall, securitizing “worked great for us,” Hummer said, “and we plan on doing more of them because as an independent lender like ourselves, it’s a great way to capitalize.”
ThunderRoad issued its first securitization in April — a $59.7 million transaction backed by prime and subprime motorcycle retail installment loans– and has plans to issue a second sometime in the first quarter of 2017, Hummer said.
ThunderRoad’s Hummer will speak on the “Keys to Successful Subprime Lending” panel at the upcoming PowerSports Finance 2016 conference on Oct. 5 at the Bellagio Las Vegas. For more information, visit www.go.powersportsfinance.com, or click here to register.