Capital Relief Trades
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CRTs in the air
Another two warehouse loan banks said circling the market
Two unnamed US regional banks are currently in the throes of putting together new capital relief trades and issuance is tentatively expected in Q1 or maybe Q2 2022, say well-placed market sources.
The issuers are looking to securitize warehouse loans, as did debutant Texas Capital Bank (TCBI) in March and then Western Alliance Bancorporation (WAL) at the end of June.
Both .......
News 29 September 2021
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Freddie prints again
The seventh STACR of 2021 and third HQA prices
Freddie Mac has priced its latest STACR deal, designated 2021-HQA3 and worth $1.07bn, via Morgan Stanley and Citi. This is its seventh STACR of the year and, is common, will likely be accompanied by an ACIS transaction.
The trade is the last STACR of Q3, and is the third HQA deal – which signify higher LTVs – of the year.The GSE .......
News 28 September 2021
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Mobilising capital
Call for risk transfer adoption in development finance
Aid agencies, development finance institutions (DFIs) and multilateral development banks (MDBs) must make development finance work harder to achieve impact, according to a new OECD policy briefing. Entitled ‘Making blended finance work for sustainable development: the role of risk transfer mechanisms’, the report calls for the adoption of portfolio approaches that connect large-scale commercial finance supply with small-scale borrower .......
News 28 September 2021
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Fraud charges for Honor Finance pair
Sector developments and company hires
Fraud charges for Honor Finance pair
Market Moves 24 September 2021
The US SEC has announced fraud charges against James Collins and Robert DiMeo, the former principals of Honor Finance, for misleading investors about the subprime automobile loans that backed its US$100m offering. The SEC's complaint, filed in US District Court for the Northern District of Illinois, alleges that the pair were responsible for false .......
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Fannie is back
New capital rules bring Fannie Mae in from the cold
Fannie Mae is back in the market only five days after the Federal Housing Finance Authority (FHFA) released a proposal to significantly alter the capital treatment of CRT debt
The GSE has announced that it will recommence issuance of CAS bonds next month after an absence of 19 months.
CAS issuance will be accompanied by credit insurance risk transfer (CIRT) deals and .......
News 20 September 2021
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Pagaya goes public via SPAC
Sector developments and company hires
Pagaya goes public via SPAC
Fintech securitisation issuer Pagaya Technologies and EJF Acquisition Corp (EJFA), a publicly traded SPAC, have entered into a definitive business combination agreement. As a result of the transaction, which values the combined company at an estimated enterprise value of approximately US$8.5bn at closing, Pagaya will become a publicly listed entity.Founded in 2016 by .......
Market Moves 20 September 2021
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CRT love
FHFA promotes CRT usage and tempts Fannie back into the mix
The Federal Housing Finance Agency (FHFA) hopes to both lure Fannie Mae back to the CRT market and increase access to affordable housing with its proposed amendments to the Enterprise Regulatory Capital Framework (ECRF) unveiled two days ago, suggest sources.
By replacing the fixed leverage buffer with a dynamic leverage buffer, it becomes more likely that risk-based capital will become the binding constraint .......
News Analysis 17 September 2021
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Tight pricing
Santander sets post-Covid record
Santander has completed a €580.8m 14-year full-stack significant risk transfer transaction that references a portfolio of Spanish auto loans. Dubbed SC Spain Auto 2021, the transaction’s first loss tranche achieved the tightest print at that level for a full-stack SRT following the onset of the coronavirus crisis, as pre-pandemic dynamics return to the ABS market (SCI 15 September).
News 17 September 2021
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NPR issued on GSE capital framework
Sector developments and company hires
NPR issued on GSE capital framework
Market Moves 16 September 2021
The FHFA is seeking comment on a notice of proposed rulemaking that would amend the Enterprise Regulatory Capital Framework (ERCF) for Fannie Mae and Freddie Mac. The proposed amendments would refine the prescribed leverage buffer amount (PLBA) and the capital treatment of credit risk transfers (CRT) to better reflect the risks inherent in the .......
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SRT debut
First Nordic green synthetic executed
Nordea and the EIF have finalised a significant risk transfer transaction that references a €1.8bn portfolio of corporate and SME loans (SCI 23 July). The deal will free up capital for green lending to Swedish and Finnish firms, rendering it the first such deal from a Nordic bank.
The transaction features tranches that amortise on a pro-rata .......
News 16 September 2021
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Tender pick-up
Buyback value depends on specifics of each bondholder
Freddie Mac broke new ground with its tender offer last week, but there is some doubt about how many investors will be interested in surrendering their by now valuable paper, say market experts.
The average coupon of the eight tranches on offer is 3.85%, and the range is between 2.43% and 4.88%. This, in a low rate environment, is relatively attractive.
Moreover, .......
News 14 September 2021
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Love me tender
STACR tender shows validity of CRT and salience of capital efficiency
The significance of Freddie Mac’s STACR tender offer, announced earlier this week, should not be underestimated, say market insiders.
The tender shows, on the one hand, that the GSE is acutely conscious of the demands of greater capital efficiency, they say.
But it also demonstrates that it places continued faith in the CRT mechanism.
“By this tender offer, Freddie shows that there is .......
News Analysis 10 September 2021
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JP Morgan into fifth gear
Third CLN in 2021 to cover auto loan losses soon to print
JP Morgan Chase is to price its second auto loan-linked CLN deal in two months, its third of the year and its fifth in just over 12 months as the auto loan book become the clear favourite for the bank’s use of the CRT mechanism.
Designated Chase Auto Credit Linked Notes, Series 2021-3 (CACLN 2021-3), the note transfers risk to noteholders via .......
News 9 September 2021
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WAL enters CRT space
CRT trade covers first losses on warehouse loans
Western Alliance Bancorporation (WAL), a $35bn western US lender headquartered in Phoenix, Arizona, completed a $242m 144a credit linked note (CLN) sale at the end of June to cover first losses on $1.9bn reference pool of mortgage warehouse loans.
This constitutes another capital relief trade brought to the market by a US regional following the lead of Texas Capital Bank six .......
News 9 September 2021
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Tender Freddie
GSE has commenced a debut buyback scheme to retire old STACR issuance
Freddie Mac yesterday (September 7) inaugurated its first-ever tender offer programme to buy back STACR notes to reduce indebtedness, the agency told SCI last night.
The tender offer period will run until midnight EDT on October 4 and will be managed by co-managers Barclays Capital and Bank of America. Freddie will buy back up to $650m in aggregate original principal amount, targeting .......
News 8 September 2021
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High LTV Italian SRT inked
Intesa executes capital relief trade
Intesa Sanpaolo has finalized a significant risk transfer (SRT) transaction from the GARC programme that references a €1.3bn portfolio of high loan-to-value (LTV) residential mortgages.
The deal is the first high LTV mortgage SRT in the Italian market. The mortgages in the pool have a LTV ratio that is 80% or higher.
The trade features a €33.3m upper junior tranche (1.5%-4%), a €70.6m .......
News 3 September 2021
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Ready to launch
Norway readies SRT take off
The Norwegian banking market is getting ready for a pick-up in significant risk transfer (SRT) issuance next year following the pending incorporation into law of the new Securitisation Regulation, say market experts.
Nevertheless, the first deals are expected to be relatively simple vanilla structures, given the scepticism of local supervisors.
The Norwegian market has been slow to adopt the SRT mechanism for .......
News Analysis 3 September 2021