Subprime auto bondholders in a bind

Borrowers have been falling behind on payments, and Citigroup believes that some of the riskiest parts of three different asset-backed deals could fail to return principal to investors. — Bloomberg

NEW YORK: The collapse of two US auto dealers and a growing pile of delinquent car loans are threatening to deliver losses in a corner of Wall Street that, until now, has been a sea of calm: the asset-backed securities (ABS) market.

Bonds backed by car loans made by US Auto Sales and American Car Centre (ACC), two used-car dealers that shut their doors earlier this year, have been veering into distress in recent weeks.