Capital Relief Trades
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Full stack resilience
Volumes down, but not out
Full-stack significant risk transfer deal volume declined this year amid the Covid-19 fallout. Nevertheless, transactions have shown resilience in terms of performance.
Full-stack SRT transactions have a smaller range in terms of size - of between €500m to €1bn – compared to synthetic securitisations. Andrea Modolo, md at UniCredit, says: “Generally, synthetic transactions are around €2bn and this .......
News Analysis 17 December 2020
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Bellemeade 2020-4 comes in at $337m
3-tranche MILN has higher than usual LTV pool
Arch Capital has priced Bellemeade Re 2020-4, which entered marketing last week and will close next week, for a final issue size, in bonds, of $321.39m, confirms the borrower. The joint leads are Bank of America and Credit Suisse.
The mortgage insurance-linked note (MILN), the fourth Bellemeade deal of the year, comprises three tranches. These are, firstly, the $136.264m M-2A, rated Ba3 .......
News 16 December 2020
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STACR 2020-DNA6 prints
All tranches of new STACR print well inside guidance
Freddie Mac’s STACR 2020-DNA6 has now printed for a final deal size of $790m and comprises four tranches, all of which printed appreciably inside price guidance.
The $279m BBB+ M1 tranche pays SOFR plus 90bp compared to price guidance was SOFR plus 95bp-100bp. The weighted average life (WAL) is 2.13 years and credit enhancement (CE) is 200bp.
The $208m BB+ M2 tranches pays .......
News 15 December 2020
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CRT super spreader
Asset manager ArrowMark, a long-time investor in CRT, sees increased US usage
Despite the constraints imposed by Covid 19, this has been a banner year for the CRT market in the US, with headline-making deals from JP Morgan and Goldman Sachs while Citigroup, a longstanding user of the mechanism, has been rumbling along below the radar screen.
Kaelyn Abrell, a partner and portfolio manager at ArrowMark Partners, a $20bn asset manager based in Denver, .......
Talking Point 15 December 2020
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Bellemeade bonanza
The latest Arch trade covers the same insurance vintage as June's 2020-1
Arch Capital is in the market again with its latest mortgage insurance-linked note (MILN), designated Bellemeade 2020-4.The transaction entered marketing yesterday (December 10), is due to be priced next week and should close around December 22.
This is the fourth Bellemeade deal of the year, and the third since Arch re-opened the sector in late June with Bellemeade 2020-1 after the .......
News 11 December 2020
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Finish line
Trilogue agreement finalised
Negotiators from the European Parliament’s Economic and Monetary Affairs Committee (ECON) have reached an agreement with the European Council on targeted changes to the securitisation regulation and the CRR, with respect to the creation of an STS synthetics framework and changes pertaining to non-performing loan securitisations. The final text has not yet been disclosed, although official sources have confirmed .......
News 11 December 2020
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Risk transfer round up-December 9
CRT sector developments and deal news
Santander is believed to have postponed the pricing of Project Spitfire as the lender and the investors were reportedly not able yet to negotiate a pricing for the equity tranche. The synthetic securitisation is allegedly backed by UK auto loans. The transaction would be Santander’s first post-Covid synthetic auto ABS.
....... News 10 December 2020
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ESN debate
Could structures cannibalise true sale ABS?
The European Parliament recently called for legislation to establish European Secured Notes (ESNs) to facilitate SME funding. The EBA is also supportive of an ESN funding option, alongside traditional covered bonds, but there are concerns about the potential for the instrument to eclipse true sale securitisation issuance.
“ESNs are touted as dual-recourse instruments and are expected to largely .......
News Analysis 9 December 2020
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Morgan manoeuvres
JPM's heavier than most capital burden underpins its keenness for CRT
JP Morgan Chase has led the charge in the US CRT market in the last 12 months, but its urgency to make use of the mechanism has a lot to do with its specific and onerous regulatory capital burden, say market sources.
It is the biggest bank in the US with assets of around $2.7trn, almost $700bn more than its .......
News Analysis 8 December 2020
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High-quality counterparties
Insurer involvement in SRT on the rise
SCI publishes regular in-depth analysis of trends and developments across the capital relief trades market, in addition to our usual news output. In this latest CRT Premium Content article, we examine how insurers are gaining traction as high-quality counterparties to significant risk transfer transactions.
To upgrade your subscription to access all CRT premium content for a year, .......
News Analysis 4 December 2020
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STACR due
BofA and Wells Fargo to underwrite imminent STACR deal
Freddie Mac has mandated Bank of America and Wells Fargo as joint bookrunners for its imminent STACR REMIC 2020-DNA6, due to be priced in the week beginning December 14th, the GSE made known today.
This is the fifth STACR trade Freddie has brought to market since it re-opened the CRT market with its 2020-DNA3 in July. In fact, 3Q was its busiest .......
News 3 December 2020
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Covid communications
The pandemic has meant greater negotiation over terms between CRT buyers and sellers
Discussions between CRT issuers and potential investors have become more protracted in 2020 as a result of Covid 19, with borrowers more willing to give way on areas such as term sheets and credit exposure limitations, notes Kaelyn Abrell, a partner and portfolio manager at ArrowMark Partners, a $20bn asset manager based in Colorado.
“Negotiations have reached even higher levels of depth .......
News 2 December 2020
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Pre-pandemic trends persist for US CLOs
Sector developments and company hires
Pre-pandemic trends persist for US CLOs
Market Moves 2 December 2020
Pre-pandemic trends in US leveraged lending - including high leverage, weak covenants and declining recoveries - resumed by 3Q20 and should continue into 2021, absent a renewed downturn, according to Moody’s. Consequently, the agency expects that in 2021 US CLOs will include structural features for maintaining loan workout and trading flexibility to help manage .......
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Innovative SRT inked
Belgian synthetic RMBS finalised
AXA Bank Belgium has completed a synthetic RMBS that references a static €730m portfolio of Belgian prime mortgages. Dubbed CASPR-1, the significant risk transfer trade is unusual due to the underlying asset class and the amortisation structure.
Rated by Fitch and S&P, the transaction consists of a €23.575m AA/AA- rated class A tranche (which priced at three-month Euribor .......
News 2 December 2020
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Test case
JPMorgan CRT details revealed
Further details have emerged in connection with a corporate capital relief trade that was completed last month between JPMorgan and PGGM and Alecta (SCI 27 November). The transaction was motivated less by capital needs, given the US lender’s strong capital position, but more from a desire to test the trade from an efficiency standpoint.
The cash collateralised deal references .......
News 1 December 2020
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