Cap Markets

Federal Deposit Insurance Corp. sales from the portfolios of failed Silicon Valley Bank and Signature could be complete by September, according to a report published Tuesday by FHN Financial.

For large banks, the agencies wanted to go above the global standards for residential mortgages, as well as some business loans, to avoid giving those lenders a competitive advantage over smaller peers, according to another person familiar with the proposal.

The companies are both tapping the U.S. investment-grade primary market, kicking off a potential deluge of fresh bank bonds in the wake of second-quarter earnings.

The group of banks would pay $68 million to settle the lawsuit, which originally estimated damages at $340 million.

Tesla, which started its ABS program in early 2018, is repackaging a pool of leases on new electric vehicles manufactured by Tesla and originated through Tesla Finance into the securities.

The six biggest banks in the U.S. are expected to sell between $28 billion and $32 billion of new bonds after they report quarterly earnings, and regional banks — seeking to raise more capital — could be right behind them.

The plaintiff that brought the case on behalf of the state says the banks inflated interest rates through a private, invitation-only VRDO index that influenced SIFMA's weekly index.

Resetting allows CLOs to essentially cut the costs at which they borrow, leaving more money for holders of the riskiest and highest-returning part of the structure, the equity portion, after other note holders have been paid.

Bonds backed by car loans made by U.S. Auto Sales and American Car Center, two used-car dealers that shut their doors earlier this year, have been veering into distress in recent weeks. Meanwhile, borrowers have been falling behind on payments.

New loan acquisitions fell to their lowest level since 2020, but companies also grew shares of residential securities noticeably over the past three years, S&P Global Market Intelligence said.