Debtwired! From Data Centers to Solar ABS – Inside Esoteric ABS with Conning’s Nowakowski
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Apr 30, 2025 
Mike Nowakowski, Head of Structured Products at Conning, shares his insights on the intriguing world of esoteric asset-backed securities (ABS). With esoteric ABS now making up over 30% of total issuance, he explains the allure of unique assets like shipping containers, data centers, and music royalties. Dive into the benefits of these investments compared to traditional ones, and discover how institutional investors are shifting focus. Plus, explore the evolving solar ABS market and the impact of tariffs on big players like Microsoft and Amazon.
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Esoteric ABS Defined
- Esoteric ABS are structured similarly to traditional ABS but use less familiar collateral like data centers or music royalties.
- Investors get the same credit enhancements and payment priority despite the unconventional asset types.
Structural Protections in Esoteric ABS
- Esoteric ABS offers strong structural protections such as over-collateralization and subordination.
- These features shield investors from losses by prioritizing payments and enabling collateral liquidation recovery.
Market Impact on Esoteric ABS
- Esoteric ABS has faced volatility mostly due to broad market beta moves, notably impacting container ABS from tariffs.
- Some discretionary subsectors may see rising delinquencies if inflation and consumer spending worsen, but early performance remains stable.