ABS
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Risk transfer round-up - 29 May
CRT sector developments and deal news
ABN AMRO is rumoured to be readying a corporate capital relief trade that is expected to close in 3Q20. The transaction would be the lender’s first post-crisis synthetic securitisation.
....... News 29 May 2020
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Pan-European guarantee fund launched
Sector developments and company hires
Pan-European guarantee fund launched
Market Moves 27 May 2020
The EIB board has approved a €25bn Pan-European Guarantee Fund (EGF) - which will be funded by EU member states pro rata to their shareholding in the bank – as part of its overall response to the Covid-19 crisis. By guaranteeing parts of portfolios, operations under the guarantee fund will free up capital for financial intermediaries .......
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Marketplace merit
Online lending resilient amid impairments
The performance of online lending platforms remains resilient, despite coronavirus-related pressures. Indeed, dv01 data suggests that total loan payment impairments are showing signs of slowing down, after peaking earlier this month.
Vadim Verkhoglyad, principal analyst at dv01, says: “It looks like total impairments peaked at last in the immediate term. There was a normal seasonal spike in early .......
News 27 May 2020
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Lift off
Francesco Di Costanzo, head of structured credit at Hoist Finance, answers SCI's questions
Q: How and when did you become involved with securitisation?
A: We are a licensed credit market institution, regulated as a bank, which gives us the advantage of low cost and consistent funding. However, this means, of course, that we are subject to bank capital requirements.
Over the years we have bought unsecured non-performing loan portfolios, to .......
The Structured Credit Interview 27 May 2020
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Persistent opportunity
Tor Trivers, md and head of the structured credit group at CDIB Capital, answers SCI's questions
Q: How and when did CDIB Capital become involved in the structured credit market?
The Structured Credit Interview 27 May 2020
A: CDIB Capital was established in 2006, as the private equity arm of China Development Financial, with the objective of deploying and diversifying the group’s proprietary capital outside of Taiwan. The firm has historically managed outside funds, but no credit-related assets until I joined in February .......
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Limited effect?
Performance trigger suspensions eyed
The Italian government last week passed the Decreto Rilancio, a decree that aims to restart the economy following the country's coronavirus-driven lockdown (SCI 15 May). The decree allows the Ministry of Finance to approve temporary suspensions of performance triggers that allow for the payment of special servicing fees for GACS guaranteed non-performing loan securitisations. If implemented, the change .......
News 22 May 2020
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CLO tender offer launched
Sector developments and company hires
CLO tender offer
Market Moves 22 May 2020
The Black Diamond CLO 2015-1 issuer has launched a tender offer to all noteholders of the €176.3m class A1 and the US$67.2m class A2 notes. The purchase price for any bonds tendered under the offer will equal 98.75% of the principal amount outstanding of each note. The offer expires on 2 June, with settlement due on 9 .......
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Risk transfer round-up - 22 May
CRT sector developments and deal news
Santander is rumoured to be readying its fourth SME significant risk transfer deal from the Magdalena programme for the second half of the year. Magdalena Three was finalised in June last year. The €342m ticket referenced Spanish SME loans (see SCI’s capital relief trades database).
....... News 22 May 2020
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CLO manager performance assessed
Sector developments and company hires
CLO manager performance assessed
JPMorgan has issued its latest CLO manager quarterly reports for both the US and Europe.72% of US CLOs are now failing their S&P triple-C test and 38% are failing their Moody’s Caa1 test, but there are still three managers passing both tests in all of their transactions: Blackrock, DFG/Vibrant, and Silvermine. Meanwhile, JPMorgan CLO .......
Market Moves 21 May 2020
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Moratoria mulled
Payment holidays set to test CRT provisions
Portfolios referencing loans subject to payment holidays may create a new sub-asset class within the capital relief trades market. Nevertheless, it remains to be seen whether provisions in outstanding synthetic securitisations will prevent lenders from being paid due to the implementation of moratoria.
Roberto Savina, head of structured risk solutions at AmTrust International, confirms that he has been .......
News Analysis 21 May 2020
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SRTs eyed
Pension funds target risk transfer
Pension funds are targeting capital relief trade opportunities as the coronavirus crisis renders pricing more attractive and other credit opportunities become scarcer. However, access remains a challenge, with some new pension fund investors using joint ventures with established investors as an alternative way for overcoming entry barriers.
According to IACPM data, pension funds represent 30.6% of the investors in .......
News Analysis 21 May 2020
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TALF subscription date announced
Sector developments and company hires
TALF subscription date announced
Market Moves 20 May 2020
The New York Fed has scheduled the first TALF ABS loan subscription date for 17 June, with the first loan closing date to be 25 June. On fixed days each month, borrowers will be able to request one or more three-year TALF loans. The Fed has published a Master Loan and Security Agreement, which provides further details on the terms .......
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Sponsor support
Credit card ABS fallout to be contained
Rising unemployment and constrained household expenditure, due to coronavirus stress, is likely to negatively impact UK credit card ABS payment rates. However, sponsor support is expected to protect credit card deals from the fallout.
Anthony Parry, svp at Moody’s, says: “The main protection [in credit card ABS structures] is sponsor support, as sponsors actively support trusts through the .......
News Analysis 20 May 2020
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Covid-19 relief initiative launched
Sector developments and company hires
Covid-19 relief initiative launched
Market Moves 19 May 2020
Community Capital Management has launched an initiative to invest US$100m of assets in Covid-19 relief efforts. The aim is to offer organisations that wish to contribute to the long-term US recovery post-pandemic an opportunity to complement their philanthropic and volunteer resources through a seasoned fixed income strategy designed to provide high current income consistent with the .......
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SME CLO, SRT PD adjustments mooted
Sector developments and company hires
SME CLO, SRT PD adjustments mooted
Market Moves 18 May 2020
DBRS Morningstar is considering additional adjustments to reflect expectations of a higher probability of default (PD) for borrowers underlying SME CLO and significant risk transfer deals operating in economic sectors considered to have a ‘mid-high’ or ‘high’ risk of experiencing higher levels of default, due to the coronavirus fallout. For borrowers in the ‘mid-high’ .......
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Conflict of interest charge settled
Sector developments and company hires
Conflict of interest charge settled
Market Moves 15 May 2020
The US SEC has charged Morningstar Credit Ratings for violating a conflict of interest rule designed to separate credit ratings and analysis from sales and marketing efforts. Morningstar has agreed to pay US$3.5m to settle charges including that from mid-2015 through September 2016, credit rating analysts in Morningstar’s ABS group engaged in sales and marketing .......
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Tortuous TALF 2.0
Markets question TALF usage
The Federal Reserve this Tuesday (May 12) published more details about the terms of its $100bn new emergency lending facility generally referred to as TALF 2, and while these details were welcomed there are a still a lot of questions in the market about how useful this programme will be.
The first of those questions revolves around relative value. The cost of .......
News Analysis 15 May 2020
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Waivers required
WBS covenant breaches eyed
The probability of covenant breaches within UK whole business securitisations has increased, due to coronavirus-related restrictions on businesses. However, covenant breaches do not necessarily result in negative rating actions.
There are multiple types of covenants and they provide protection for bondholders in different ways. George Abbatt, director, global infrastructure and project finance at Fitch, says: “One example is debt service .......
News 15 May 2020
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Unknown unknowns
Covid-19 modelling challenges persist
Banks are running simulations in an effort to address the credit risk modelling challenges of the coronavirus crisis (SCI 8 April). However, this is yet to clarify whether lenders can use both through-the-cycle (TTC) and point-in-time (PIT) modelling or merely point in time.
According to Martin Zorn, president and coo at Kamakura: “Stochastic modelling and stress testing is .......
News Analysis 15 May 2020
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SRTs unlocked
BMO launches capital relief trade
Bank of Montreal has finalised a US$132m five-year financial guarantee dubbed Manitoulin Muskoka Series 2020-1. The trade is the first transaction to close in the SRT space following the coronavirus outbreak.
The portfolio is believed to reference mid-market corporate loans, which wouldn’t be the first time BMO ventured into the asset class, after expanding its exposure to it .......
News 15 May 2020
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Auto ABS boost
European ABS market update
Yesterday’s print of BMW Bank’s latest auto loan ABS marks a significant step in the reopening of the primary European securitisation market. The STS transaction was placed with 33 accounts, with the final spread tightening to one-month Euribor plus 40bp at the senior level.
One European ABS trader suggests that there is a lot of confidence that Bavarian Sky German .......
Market Reports 15 May 2020