Capital Relief Trades
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New deals surge
Quarterly SCI data update
2Q19 saw a surge in new issuance volume across securitisation markets either side of the Atlantic. The second quarter typically sees an uptick over the previous quarter (SCI 11 April 2019), but this year's boost in European volumes was a reflection of greater regulatory certainty as the new STS rules bedded in and pent-up supply met pent-up demand.
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News Analysis 10 July 2019
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SRT trio
Santander expands SME foothold
Santander has completed three SME significant risk transfer transactions that total €940.6m of tranche notional. This represents Santander’s largest total annual SME synthetic securitisation placement to date (see SCI’s capital relief trades database).
Jeremy Hermant, structurer at Santander, notes: “We continue to grow our SME issuance, while keeping the size of the balance sheet and the CET1 .......
News 9 July 2019
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Auto SRT completed
Innovative direct CLN structure debuts
Santander has completed its first synthetic significant risk transfer transaction that references a portfolio of US auto loans (SCI 2 July). Dubbed Santander Synthetic Prime Auto Issuance 2019-A, the US$1.38bn transaction features a novel CLN structure, whereby notes are issued directly by Santander rather than through an SPV.
Steve Gandy, md and structurer at Santander, notes: “We completed two .......
News Analysis 5 July 2019
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Helping hand
Refugee risk-sharing facility inked
Dutch development bank FMO has signed a pilot bilateral risk-sharing facility under its NASIRA programme, which guarantees portfolios of loans to vulnerable, underserved entrepreneurs in sub-Saharan Africa and countries neighbouring Europe. The agreement is with Jordanian microfinance institution (MFI) Tamweelcom and will support access to finance for Syrian refugee entrepreneurs.
Jordanian banks have historically refrained from providing financing to Syrians .......
News Analysis 4 July 2019
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Increasing capacity
Bridging the CRT gap for insurers
Greater involvement from insurers in capital relief trades should improve any capacity constraints the market faces. However, while banks are seeking alternative pockets of demand in which to place their risk and insurers are seeking to diversify and achieve scale, their approaches to any transaction will be different and that difference needs to be managed.
At present, capacity .......
News Analysis 3 July 2019
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Rarely-seen synthetic securitisation revealed
Transaction references unusual pool of US auto loans
Santander has issued a rare synthetic securitisation referencing a collateral pool of US prime auto loans. Dubbed Santander Synthetic Prime Auto Issuance 2019-A, the deal comprises credit-linked notes (CLNs) referencing the performance of a static US$1.381bn portfolio of 59,771 auto loans made to high-quality borrowers across the US, for the purchase of new and used vehicles.
DBRS and Scope .......
News 2 July 2019
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Guarantee inked
Banco BPM prints first capital relief trade
The EIF is taking on the risk of Banco BPM’s €55m mezzanine guarantee in connection with the Italian lender’s first capital relief trade, referencing a portfolio of midcap corporate loans. The regulatory capital that will be released is enough to fund €330m of SME lending.
The new loans are intended for SMEs (accounting for up to 30% of the .......
News 28 June 2019
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Compliance challenges
STS requirements raise regulatory liability concerns
The securitisation market now appears to be embracing the new Securitisation Regulation and adapting to the regime, following uncertainty over technical standards in Q1. Nevertheless, market participants are still grappling with practical challenges, whose solution remains elusive.
According to Salim Nathoo, partner at Allen & Overy: “Filling in the CRE and residential templates is hard because it’s not .......
News Analysis 28 June 2019
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Corporate ramp-up
Standard Chartered steps up corporate CRT issuance
Standard Chartered has completed a risk transfer transaction that references a US$1bn portfolio of corporate revolvers. Dubbed Chakra 3, the US$90m CLN is the third in a series of programmatic corporate CRTs, as the bank builds up the corporate and institutional banking (CIB) business in the US and Europe while managing concentration risks through the credit cycle.
According .......
News 21 June 2019
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Risk transfer round-up - 14 June
CRT sector developments and deal news
Standard Chartered is believed to have priced a corporate capital relief trade this week. The bank’s last corporate CRT was completed in June 2018. Dubbed Sumeru 3, the US$285m CLN paid 7.70% (see SCI’s capital relief trades database).
Sumeru 3 coincided with a resurgence in Standard Chartered’s risk transfer issuance, following a three-year gap. Last year the .......
News 14 June 2019
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Risk transfer round-up - 7 June
CRT sector developments and deal news
Santander is believed to be readying three SME significant risk transfer transactions, along with a rumoured auto deal. The Spanish lender’s last SME SRT closed in July. Dubbed FT Pymes Magdalena, the €166.3m CLN pays 8.85% and references a €2.5bn Spanish SME portfolio (see SCI’s capital relief trades database).
....... News 7 June 2019
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MRT potential
Reinsurer opportunities eyed
The mortgage risk transfer (MRT) programme in the US has the potential to rival natural catastrophe reinsurance, given the significant capacity required by insureds and insurance firms’ appetite for diversification. Until now, the most common way that reinsurers have entered the space is via the GSE credit risk transfer aggregate excess of loss programmes, but other opportunities are emerging.
News Analysis 6 June 2019
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SCI podcast - episode 7 now live
All the most pressing topics in structured finance discussed
The latest edition of the SCI podcast is now live. This month, we take a look at servicing within subprime auto ABS and also how consolidation is becoming a running theme, with several acquisitions of smaller, regional issuers’ portfolios having been witnessed recently.
As well as this, the podcast explores the student loan crisis in the US, asking the question, will servicers .......
News 30 May 2019
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Interpretation issues
Credit Suisse completes capital relief trade
Credit Suisse has completed its first capital relief trade of the year, dubbed Elvetia Finance series 2019-1. The Sfr336m eight-year CLN references a Sfr5.6bn Swiss SME portfolio and is a replacement trade for Elvetia Finance series 2016-1, following the call of the transaction in May (see SCI’s capital relief trades database).
The deal attracted healthy investor interest .......
News 29 May 2019
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STS SRTs pending
EBA to publish discussion paper on synthetic criteria
The EBA is set to publish a discussion paper on STS criteria for synthetic securitisations in September, which is expected to further facilitate significant risk transfer through provisions for excess spread and triggers from pro-rata to sequential amortisation (SCI 22 June 2018). However, uncertainty over the risk weights for retained tranches persists.
EBA sources believe that the .......
News Analysis 29 May 2019
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Risk transfer round-up - 24 May
CRT sector developments and deal news
Santander is believed to be readying a capital relief trade consisting of auto loans for 2Q19. The Spanish lender’s last auto risk transfer transactions were closed in November and December of last year (see SCI’s capital relief trades database).
In November 2018, the bank completed KIMI 7, a €665.3m true sale securitisation of Finnish auto loans. In December, Santander .......
News 24 May 2019
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Goodwill hunting
Higher recoveries from Interserve insolvency expected
Interserve became the second UK outsourcer to suffer a credit event in a risk transfer transaction, following Carillion's liquidation last year (SCI 27 March). The former company's recoveries are expected to be higher than the latter's, given that it is in administration and owns some profitable subsidiaries. Nevertheless, both insolvencies raise questions as to how capital relief trade market .......
News Analysis 20 May 2019
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Promising prospect
Synthetic UTPs contemplated as IFRS 9 hedge
Synthetic securitisations referencing unlikely-to-pay loans are a more promising prospect than synthetic securitisations of NPLs, given their potential as an IFRS 9 hedge, according to panellists at SCI’s recent NPL securitisation seminar in Milan. However, regulatory challenges and the issue of defining UTPs and credit events remain open questions.
One regulatory challenge is that, under current regulations, synthetic .......
News Analysis 17 May 2019
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Seeking refuge
NPL securitisation disclosed
Hoist Finance has confirmed in its latest 2019 interim report that it will securitise part of its non-performing loans, due to regulatory demands for higher risk weights for purchased defaulted assets. The securitisation option is unusual for debt collectors, given that they have to surrender some of the upside on their defaulted assets to third-party investors and - unlike .......
News Analysis 16 May 2019
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Risk transfer round-up - 16 May
CRT sector developments and deal news
Caixabank has completed a synthetic securitisation of Spanish SMEs with the European Investment Fund. Dubbed Gaudi Synthetic III, the €100m mezzanine guarantee is for an existing loan portfolio and will enable the Spanish lender to mobilise up to €600m of additional financing to Spanish SMEs and mid-caps.
The deal is the first guarantee for a mezzanine tranche of .......
News 16 May 2019
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Risk transfer round-up - 10 May
CRT sector developments and deal news
Credit Suisse’s Magnolia Finance V 2015-3 has been de-listed from the Cayman Islands stock exchange following full redemption of the notes. The US$75.23m eight-year CLN was completed in 2015 and references US and Swiss corporate loans (see SCI’s capital relief trades database).
According to SCI’s capital relief trades database, the last Magnolia V transaction was inked in .......
News 10 May 2019