SRT market update

As the SRT market heats up for a busy year end, SCI hears that UK banks, NatWest and Lloyds, are preparing trades.

A NatWest corporate trade is reportedly in the market, with the bank also preparing another project finance infrastructure trade from its Nightingale programme. There are further rumours it could also issue a leveraged loans deal, although sources suggest this transaction is in an earlier stage of development.

Meanwhile Lloyds has also been looking at gearing up its SRT issuance. Fontwell (SCI, 3 July) is thought to be imminent with the 2016 debut of the agricultural loans referencing programme due to mature this year. An additional Salisbury transaction may also be in the works. This would be at least the eight transaction from its established UK SME programme (SCI, 5 December 2023).

Other programmes in the market include Cedar, the global corporate loans programme from Credit Agricole which already issued an iteration, Cedar 7, in March this year.

Additionally, Banks in the Gulf are also reportedly showing an interest in SRT transactions, with a government-owned bank in Kuwait and a Saudi bank lending to the Vision 2030 projects reportedly showing interest. A realistic timeline however for such potential transactions to take place, would be years and not months.

In other news…

Market tightening continues with multi-strategy funds needing to deploy funds. This, and the supply and demand imbalance in the market, has resulted in spreads which may be as much as plus 400-500bp lower compared to last year, and an erosion of relative value in the asset class compared to other forms of securitisation.

The recent Loft transaction, which is expected to price this month (SCI, 6 September), has been described as a “game changer” by one market insider. Loft’s 2024 transaction will price plus 850bp tighter than the previous iteration two years ago.

SCI previously reported there are multiple investors on the deal however now understands one took half the allocation. Such allocation is rumoured to have brought spreads even tighter. With such a large share taken by one investor, expect ripple effects across the whole market. “I think there will be a lot of transactions, but they will be overbid,” one source says.

Capital calls are another indicator of this trend with Goldman Sachs and another US bank offering CRT transactions which will price even tighter than other recent transactions which were in the 500s. While it is historically a low-loss asset class, one source says such a small coupon means deals are pricing very close to the return of the underlying asset class.

Joe Quiruga