The threat of significant losses has sparked concern that the US subprime auto ABS sector could see pre-emptive legal actions emerging. With spreads continuing to tighten in the face of increasing delinquencies, investors may start to question whether they are being adequately compensated for the risks involved.
Joe Cioffi, partner at Davis and Gilbert, says that while losses in subprime auto ABS have yet to "flow through to investors", they may start to look more closely at these transactions and ask whether they are appropriately priced for the risks involved.
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