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Securitization Frenzy! Wall Street Repackaging Of Loans, Franchise Agreements, Royalties Surging As Alarm Sounds For Commercial Retail

by confoundedinterest17

Alarm!

I remember the surge in securitization of loans, receivables, etc during the housing bubble of the mid-to-late 2000s. Today seems like 2007 all over again.

(Bloomberg) — Bankers are repackaging everything from fast food franchises to fitness-center fees into bonds at the fastest clip since the global financial crisis as investors chase yield and inflation protection.

This year’s sales of U.S. asset-backed securities have already surpassed $300 billion, according to data compiled by Bloomberg — and more is expected by year-end. Post-crisis issuance records have also been set in private-label commercial mortgage bonds and collateralized loan obligations, which are also seen accelerating.

“Solar, consumer loans, container lease and whole business transactions to some degree all offer attractive yields and spreads,” said Dave Goodson, head of securitized credit at Voya Investment Management. “These so-called esoteric sectors remain well supported with plenty of money to invest.” 

On Monday, Self Esteem Brands, a franchiser of businesses including its flagship gyms Anytime Fitness, priced a $505 million ABS that was backed by franchise agreements, royalties and fees. In whole business securitizations like these, companies mortgage virtually all their assets.

Securitization Frenzy! Wall Street Repackaging Of Loans, Franchise Agreements, Royalties Surging As Alarm Sounds For Commercial Retail

Last month, fried chicken restaurant chain Church’s Chicken sold a $250 million securitization backed by franchise and royalty collateral. Golden Pear Funding recently securitized litigation fees related to financial settlements on everything from personal injury cases to wrongful convictions. And Oasis Financial priced a similar deal linked to payments on medical liens.

Then we have this headline that will send chills through the CMBS market for retail space, particularly at a time when commercial real estate (particularly RETAIL) are trying to recover from COVID lockdowns and the growth of online shopping.

“Retailers Sound Alarm on Organized Theft as States Warn of Rise”

Retailers say shoplifting is getting more brazen in the U.S.: A California Nordstrom store was recently hit by a flash mob of more than 80 people who made off with designer goods, while more than a dozen people pilfered from a Louis Vuitton location in a suburb of Chicago. 

On Tuesday, the impact of shoplifting reached Wall Street, with Best Buy Co. shares plunging after the electronics retailer said widespread theft contributed to a decrease in one gauge of profitability. Last month, Walgreens said it would close five San Francisco stores after theft rates there spiked.

Securitization Frenzy! Wall Street Repackaging Of Loans, Franchise Agreements, Royalties Surging As Alarm Sounds For Commercial Retail

Seemingly, no one learns from history. Or as the zen master Yogi Berra once said “It’s like déjà vu all over again.”

Or “You better cut the pizza in four pieces because I’m not hungry enough to eat six.”

Securitization Frenzy! Wall Street Repackaging Of Loans, Franchise Agreements, Royalties Surging As Alarm Sounds For Commercial Retail

 

 














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