Capital Relief Trades
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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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Double trouble
Two - not one - JP Morgan corporate loan CRT trades have been in the market
A CRT transaction between JP Morgan and a club of investors referencing corporate loans, believed to be chiefly SME-related assets, is poised to close imminently, say well-placed market sources.
This trade is in addition to the bilateral corporate loan CRT deal involving Dutch asset manager PGGM and co-investor Alecta, a Swedish pension provider, which also closed recently. The .......
News 27 November 2020
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Excess spread harmonised
EBA's SRT recommendations released
The EBA’s long-awaited final report on significant risk transfer details a set of recommendations to the European Commission regarding the harmonisation of practices and processes applicable to the assessment of SRT transactions (SCI 23 November). Most notably, the report harmonises the regulatory treatment of excess spread, ending a three-year uncertainty over the use of the structural feature in .......
News Analysis 27 November 2020
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EBA SRT report released
Sector developments and company hires
EBA SRT report released
Market Moves 23 November 2020
The EBA has published its long-awaited report on significant risk transfer in securitisations, which includes a set of detailed recommendations to the European Commission on the harmonisation of practices and processes applicable to the SRT assessment. The EBA proposals aim to enhance the efficiency, consistency and predictability of the supervisory SRT assessment within the current securitisation .......
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Greek synthetics eyed
Alantra targets CRTs, new jurisdictions
Alantra has evolved to become one of the premier players in the non-performing loan markets by utilising a combination of services, including credit portfolio advisory and asset management. However, following the recent hiring of Francesco Dissera (SCI 3 November), the arranger is now eyeing capital relief trades, including in the currently untapped Greek market.
Alantra’s services .......
News Analysis 20 November 2020
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Capital headache
The finalized GSE capital rules give with one hand whilst the other takes
The finalized capital rule for the GSEs, released yesterday afternoon (November 19) by the Federal Housing Finance Agency (FHFA), increases the amount of dollar relief afforded by CRT mechanisms from that envisaged by the rules released in May, but the effect is offset by higher overall risk weightings the amended rules impose, observe sources.
“CRT is more effective because the .......
News 19 November 2020
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Synthetic RMBS priced
Lloyds finalises Syon transaction
Lloyds has priced the third transaction from its Syon programme. The seven-year significant risk transfer trade is motivated by prudent risk management within the context of providing support to first-time buyers, in line with the bank’s Helping Britain Prosper Plan. After withdrawing high LTV mortgage products in March 2020, the UK lender is now seeking to re-enter that market .......
News 19 November 2020
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Democrats and CRT
Banks, GSEs eye Washington for policy clues
It is, probably, a reasonable assumption that US President-elect Joe Biden has never given a second thought to credit risk transfer mechanisms. But for this market and particularly the GSEs, the new administration represents a sea-change in philosophy and policy.
The potential extent of any legislative innovation depends, firstly, on whether the Senate will approve or block action .......
News Analysis 19 November 2020
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APAC capital advisory formed
Sector developments and company hires
APAC capital advisory formed
Aon has launched an Asia Pacific Capital Advisory unit to deliver a holistic approach to capital optimisation for re/insurers. The initiative follows Aon’s launch of similar units in the UK and US.At the same time, actuary Seewon Oh has joined the unit from Smartkarma Innovations, where she was an analyst researching the insurance sector across Asia Pacific. .......
Market Moves 18 November 2020
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