Peter Cecchini, Principal and Head of Research at Axonic Capital, was featured in Bloomberg’s September 11 coverage on the recent bankruptcy of subprime auto lender Tricolor and its implications for the asset-backed securities (ABS) market.
Cecchini noted that demand from ABS investors has fueled rapid growth in subprime auto loan origination, often at the expense of underwriting discipline. “ABS market participants are creating incredible demand for subprime auto loans, and this is resulting in loose, and sometimes even reckless, underwriting,” he said.
He added that while the Tricolor collapse may appear isolated, it raises broader concerns about market stability. “While the Tricolor bankruptcy may seem isolated and idiosyncratic, one would be remiss not to ask whether or not it’s a canary in a coal mine for subprime auto lending.”
Axonic’s research continues to monitor the convergence of deteriorating consumer credit fundamentals with weaker underwriting standards, dynamics that may heighten risks for both lenders and investors in securitized products.
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