Take Notes

European Structured Finance Mid-Year Update: Issuance Is Strong, But Performance Concerns Remain

While European Structured Finance issuance has been strong in the first half of the year, some investors believe that deteriorating macro fundamentals and geopolitical risks are not being sufficiently priced in. We touch on the evolving European investor sentiment over the last few months, the growth of private credit markets (and increasing focus on asset-based finance), and our expectations for the second half of 2025 (in overall issuance, regional growth, regulations, etc.). Related: * S&P Global Ratings' European Structured Finance Conference 2025 [https://events.spglobal.com/event/0625edd1-7903-4e4f-8474-f639746ca56e/summary?RefId=lnkdn&utm_campaign=sfconf2025&utm_content=Oktopost-linkedin&utm_medium=social&utm_source=linkedin]

Airline Loyalty ABS Have Lift Off

Loyalty programs have turned out to be highly profitable for airlines, as for some, they generate more cash flow than flight operations. Indeed, we believe that without a loyalty program, certain major U.S. airlines' earnings would be decidedly weaker in the current economic environment. We discuss how these loyalty programs work, their resiliency in tough times while other airline assets remain idle, how airlines generate financing from these programs by securitizing future loyalty revenue streams (and by proxy, the different types of ABS securitizations), and just how they've become core financial assets in general. Related Article: * ABS Frontiers: Airline Loyaly ABS Have Lift Off [https://www.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/13501000]

How ETFs Are Enabling The Transformation Of Capital Markets

Exchange traded funds (ETFs)--in particular, CLO ETFs--are providing a vehicle for retail investors to adapt to new financial innovations in capital markets, such as private credit (lending directly between a lender and a borrower) and tokenization (taking a real world asset and representing it as a "token" on a blockchain). While they offer access to parts of the capital markets that might have been previously inaccessible, there are risks, such as mismatched liquidity. We also look at the potential investor landscape from an Indices point of view. Related Article: * ABS Frontiers: How The Burgeoning CLO ETF Sector Could Impact The Broader CLO Market [https://www.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/13336227]

Consumers Facing Inflation And Affordability Challenges Despite Low Unemployment

Recent data regarding consumer credit--especially auto ABS collateral data--are showing signs of deteriorating performance. Moreover, we've seen some indication that consumer distress is spreading to higher credit score and income cohorts, despite a relatively low unemployment rate. An unforeseen increase in the unemployment rate over our base case could lead to further distress for consumers who are already facing a myriad of financial challenges. We deep dive into the data and detail more of our observations and what we're attributing this to. Related Article: * Inflation and Affordability Challenges Remain For Consumers Despite Low Unemployment [https://www.spglobal.com/ratings/en/research/articles/250319-sf-credit-brief-inflation-and-affordability-challenges-remain-for-consumers-despite-low-unemployment-13446293]

The Impact Of The LA Wildfires On California's Property Insurance, Housing Finance, And State Creditworthiness

We discuss the cross-sector impact of the Los Angeles wildfires on California's property insurance, housing finance, and state creditworthiness. As the wildfires are expected to result in substantial losses for insurers, we discuss how carriers are expected to raise rates and/or reduce coverage options in California and other at-risk areas; and how the FAIR Plan, an insurer of last resort, could exacerbate that. We also detail how the fires could cause downward pressure on home prices in California's housing market. Finally, we discuss how the rising insurance costs and mounting affordability challenges could weigh on the creditworthiness of the state of California over time