ABS
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SRT debut
Sabadell completes first synthetic securitisation
Sabadell has completed a €96m mezzanine guarantee with the EIF. The transaction references a €1.6bn Spanish SME portfolio and is the Spanish lender’s first synthetic securitisation.
The guarantee will enable the issuer to provide €576m of financing, primarily to self-employed, SME and mid-cap borrowers. The structure comprises senior and mezzanine tranches that amortise on a pro-rata basis, and .......
News 18 June 2020
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Bridging gaps
Linking SRT originating banks with insurance partners
Texel is aiming to help insurers and banks bridge gaps in their understanding of how each sector approaches significant risk transfer transactions. With insurers expected to become more active in the capital relief trades market, the firm’s structured and bespoke solutions group last month recruited former Qbera Capital securitisation advisory head Paul Petkov (SCI 15 May), who .......
Market Moves 17 June 2020
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Risk transfer round-up - 17 June
CRT sector developments and deal news
Credit Suisse is rumoured to be readying a capital relief trade from the Elvetia programme that is scheduled to close in 2Q20. The Swiss lender’s last Elvetia SRT was closed in May 2019 and referenced SME loans. Elvetia transactions are typically backed by Swiss corporate and SME loans (see SCI’s capital relief trades database).
....... News 17 June 2020
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Older CLOs underperforming
Sector developments and company hires
Older CLOs underperforming
A significant proportion of all the US BSL CLOs S&P has on negative watch closed in 2015 or before. The rating agency reports that such deals also experienced a steeper average decline in OC cushion, falling by 3.23%, and their average junior OC cushion is now approaching 0%.Of the 410 currently reinvesting deals within the .......
Market Moves 16 June 2020
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Take-up rates
Significant variations across European moratoria
Payment holidays have so far assisted in deterring defaults during the coronavirus crisis. However, borrowers who have suffered severe financial difficulties are nevertheless expected to eventually experience defaults.
Antonio Tena, vp-senior analyst at Moody’s, says: "The more stringent a jurisdiction's eligibility criteria, the more moratorium levels will correlate with defaults, given that the profiles of eligible borrowers are .......
News 15 June 2020
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Californian auto loans eyed
Sector developments and company hires
Californian auto loans eyed
Market Moves 12 June 2020
The Westlake Automobile Receivables Trust 2020-2 issuer has disclosed that the state of California is considering new legislation - Assembly Bill No. 2501 (AB 2501) - that could significantly impact auto loan securitisations with high concentrations of Californian loans. S&P notes that in its current form, if this legislation is enacted, it could require servicers of .......
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Strategic review
Direct lending JV formed
Newly established investment manager KKV Investment Management has finalised investment management agreements with two UK secured loan funds – SQN Asset Finance Income Fund and SQN Secured Income Fund - whose NAV is in excess of £425m and will be renamed KKV Secured Loan Fund. Specialising in direct lending and alternative credit, KKV is a joint venture between its .......
News 12 June 2020
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Addressing inconsistencies
Performance metrics switched
Metrics that assess the level of portfolio interest and principal cashflows have become more reliable performance indicators than traditional default and delinquency metrics in the wake of coronavirus-driven moratoria. Moody’s notes that the need for more reliable metrics for the ABS and RMBS it rates is driven by inconsistent reporting on the proportion of portfolios under payment holidays.
News 12 June 2020
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Risk transfer rebound
Deutsche Bank completes SRT
Deutsche Bank has completed a US$325m CLN that references a disclosed US$5bn global portfolio of large corporate revolvers. Dubbed CRAFT 2020-2, the transaction is the lender’s first capital relief trade following the Coronavirus crisis and the second post-Covid SRT to be issued after Bank of Montreal’s trade last month (SCI 15 May).
News Analysis 12 June 2020
Yuri Greenfield, head of risk and portfolio .......
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Euro ABS 'game changer' recommended
Sector developments and company hires
Euro ABS ‘game changer’ recommended
Market Moves 11 June 2020
The European High-Level Forum (HLF) on the capital markets union (CMU) has published its final report, which proposes 17 inter-connected “game changers” – measures that the EU needs to implement to remove the biggest barriers in its capital markets. The European Commission stresses that completing the CMU has become particularly urgent in order to speed .......
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LCR eligibility eyed
Final credit mapping framework awaited
Prime Collateralised Securities last week withdrew several liquidity coverage ratio assessments on double-A rated STS securitisation bonds. The move was in connection with an EBA Q&A that includes a temporary mapping, in which the credit quality step (CQS) 1 corresponds with triple-A ratings only.
Ruben van Leeuwen, head of credit strategy and regulation at Rabobank, says: “The interpretation .......
News 10 June 2020
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Risk transfer round-up - 10 June
CRT sector developments and deal news
Santander has exercised a 10% clean-up call for its Red-1 Finance CLO 2017-1 transaction. The UK commercial real estate capital relief trade was structured in 2017 with a June 2022 maturity (see SCI’s capital relief trades database).
....... News 10 June 2020
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Resolve and resilience
Content sponsored by Ocorian
James Maitland, regional head of Americas, Bermuda & Caribbean, and global head of capital market services at Ocorian, spoke to SCI about how resilience is benefiting the industry and his firm
With the traditional office environment disappearing almost overnight and widespread personal restrictions, we have seen a smooth transition and incredible resilience both within our own firm and across the .......
Talking Point 10 June 2020
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NCSLT consent judgment denied
Sector developments and company hires
NCSLT consent judgment denied
Fitch has affirmed 37 notes and maintained its rating watch negative placement on nine notes from 12 National Collegiate Student Loan Trust (NCSLT) securitisations. The move follows Delaware District Judge Maryellen Norieka’s decision last month not to approve a consent judgment proposed by the CFPB and purportedly agreed to by the NCSLTs.The judgment was .......
Market Moves 9 June 2020
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Spread compression
European ABS market update
The rally in broader risk assets and the lack of new supply has boosted demand for paper in the European ABS secondary market. An increasingly acute supply/demand imbalance is expected to be supportive of valuations over the near term, however.
“We have been on a bit of tear over the last week and a half,” says one European ABS trader. .......
News 9 June 2020
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Perfect storm
Hertz bankruptcy to reshape auto ABS?
Hertz’s recent bankruptcy is one casualty of a perfect storm caused by a drop in used vehicle prices, increased reliance on its securitisation programme and the effects of the coronavirus crisis on Americans’ mobility (SCI 1 June). Similar to the large mortgage lender bankruptcies marking the 2008 financial crisis, the outcome for Hertz could reshape the auto ABS market .......
News Analysis 9 June 2020
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CLO business integrated
Sector developments and company hires
CLO business integrated
RBC’s US-based CLO management business is being integrated into BlueBay’s CLO management platform. Sid Chhabra, who joined BlueBay – which is owned by RBC - in 2018 to build the firm’s structured credit and CLO capabilities, will lead this team. The US-based team includes four experienced individuals and the US$500m CLOs they manage.In other news…
Market Moves 8 June 2020
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HAPS ABS debuts
Eurobank finalises Cairo transaction
Eurobank has finalised the first non-performing loan securitisation under the Hercules Asset Protection Scheme. Dubbed Cairo, the €7.5bn deal was sealed alongside the lender’s Project Europe, the sale of the bulk of its servicing unit to doValue.
The Cairo securitisation consists of a €2.4bn senior tranche, a €1.5bn mezzanine tranche and a €3.6bn junior tranche. The transaction involves .......
News 8 June 2020
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May payments slump
Forbearances are down for the first time since CARES, but payments by borrowers in forbearance slump
Last week saw the first net fall in US mortgage forbearances since the beginning of the Covid 19 crisis, according to Black Knight data released this morning, but this encouraging news hides other more disquieting information, say market experts.
While welcoming the decline in forbearances, Black Knight ceo Anthony Jabbour notes that “far fewer homeowners in forbearance remitted .......
News 5 June 2020
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Capital trouble
GSEs stare down the barrel of reduced capital relief for CRT deals
The re-proposed capital rules for the GSEs before they exit conservatorship, released by the Federal Housing Finance Authority (FHFA) on May 20, add further doubts to the future of the credit risk transfer market, according to market opinion.
Compared to the rules released in 2018, the new iteration cuts in half the credit relief afforded by CRT deals. .......
News Analysis 5 June 2020
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Senators seek TALF expansion
Sector developments and company hires
Senators seek TALF expansion
Market Moves 5 June 2020
US Senators Jerry Moran, Martha McSally and Thom Tillis sent a letter to Fed chairman Jerome Powell and Treasury secretary Steve Mnuchin requesting that TALF be expanded to accept ABS backed by assets from all essential lending sectors as eligible collateral. The letter specifically urges personal instalment loans and non-agency RMBS be included as eligible collateral .......