CLOs
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Uncertain ratios
OC senior test failures accelerate, but options remain for some CLO managers to cure breaches
As the April reporting season gets underway in earnest, the number of US CLOs failing their OC tests is accelerating and breaches are now also moving up the capital stack. However, despite difficult market conditions, some managers still have some ability to cure breaches.
“Some deals have already started reporting late March/early April reports and some deals are .......
News Analysis 15 April 2020
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TALF sparks rally
US CLO seniors tighten, but Fed support may not be enough
The end of last week saw US triple-A CLO bonds tighten in the secondary market, partly in response to the expansion of TALF to include the asset class (SCI 9 April). There was little price movement yesterday as a result of a quiet day due to the bank holiday in Europe, but suggestions are that TALF alone is .......
News Analysis 14 April 2020
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TALF 2.0 eligibility expanded
Sector developments and company hires
TALF 2.0 eligibility expanded
Market Moves 9 April 2020
The US Fed has expanded the range of assets that are eligible collateral for TALF 2.0 to include the triple-A rated tranches of both legacy conduit CMBS and newly issued static CLOs. The size of the facility will remain US$100bn and it will continue to support the issuance of ABS that fund a wide range of .......
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Mixed results
Coronavirus consequences for European CLOs examined
Outstanding European CLO transactions are expected to remain resilient despite downgrades and defaults being seen in lower-rated tranches. Equally, a trend towards diversification could help.
A new report from Scope Ratings, ‘Covid-19: short and medium-term consequences for the European CLO market’, observes that a deep euro area recession is likely to lead to a wave of corporate defaults .......
News 9 April 2020
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EIF calls for guarantee applications
Sector developments and company hires
EIF calls for guarantee applications
Market Moves 8 April 2020
The European Commission has unlocked €1bn from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the EIF and allow it to issue special guarantees to incentivise lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, .......
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CLO stress scenario updated
Sector developments and company hires
CLO stress scenario updated
Market Moves 7 April 2020
Fitch is set to apply an updated stress scenario to all CLO portfolios involving issuers with greater vulnerability to disruptions caused by coronavirus. The agency’s previous scenario focused on seven industries vulnerable to impacts from the pandemic, but will be expanded to include issuers with loans in CLOs from the automobile industry, as well as all .......
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Negative outlook for asset performance
Sector developments and company hires
Negative outlook for asset performance
Market Moves 6 April 2020
Fitch is updating its rating assumptions for all global structured finance sectors to incorporate the economic impact of the coronavirus and related mitigation measures. The agency expects the global pandemic to result in an unprecedented economic contraction and while the rating effects will vary meaningfully across asset classes, asset performance deterioration is anticipated in almost .......
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Statics deployed
Simpler CLO structure in vogue, but creates its own challenges
The first US CLO to price since the Covid-19-driven market collapse utilises a static structure and similar deals are expected to follow. However, such transactions could suffer greater ratings volatility than those with revolving portfolios.
On Thursday, 2 April, Blackstone/GSO CLO Management priced the first new CLO in weeks – the static Stratus CLO 2020-1. The US$315m class .......
News 6 April 2020
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Credit challenges
CLOs show resilience in stress scenarios
Central bank and government countermeasures are likely only able to offer short-term liquidity support to businesses during the coronavirus crisis. If the circumstances continue for a lengthy period of time, credit quality could experience significant pressure, says S&P.
In a recent scenario analysis, S&P applied 10 hypothetical stress scenarios of varying severity to a typical European CLO to .......
News 2 April 2020
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CRR compliance for NHG guarantee
Sector developments and company hires
EMEA
Market Moves 1 April 2020
Addleshaw Goddard has hired structured finance partner Rachel Kelly from McDermott Will & Emery. Kelly has three decades of experience at major international law firms, including as a partner at both Clifford Chance and Macfarlanes. Her work has been across the full spectrum of structured finance and debt capital markets transactions, public and private, national and international, advising the full .......
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Advancing assistance programme prepped
Sector developments and company hires
Advancing assistance mooted
Market Moves 31 March 2020
Ginnie Mae is tailoring the existing disaster pass-through assistance programmes to more suitably scale to the needs of mortgage issuers in response to the Covid-19 liquidity squeeze (SCI 30 March). The GSE anticipates implementing within the next two weeks - via an All Participants Memorandum (APM) - a Pass-Through Assistance Program (PTAP), through which issuers with .......
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Pressure drop
European CLO market update
Margin call pressures on European CLO warehouses appear to be subsiding. However, pricing levels remain volatile.
The leveraged loan market experienced a sharp repricing in recent weeks, due to coronavirus disruption. As of last week, European loan prices had dropped by circa 20% on average, while the percentage of distressed loans trading less than 90% and less than .......
Market Reports 31 March 2020
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Basel 3 implementation deferred
Sector developments and company hires
APAC fund launch
Market Moves 30 March 2020
Pierfront Capital Fund Management has been awarded its capital market services license for fund management by the Monetary Authority of Singapore. It has also announced the first close of the Keppel-Pierfront Private Credit Fund, which aims to provide debt solutions to corporates or projects predominantly in the real asset sectors of the Asia-Pacific region. Sponsored by Pierfront .......
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Capacity constraints
Covid-19 not yet posing solvency issues
Government and central bank actions have kept both the financial system and the real economy afloat in the short-term, amid the coronavirus disruption. The severity of this crisis for company and household finances will depend on the length of the current outbreak and political will, however.
According to Rabobank credit analysts: “Covid-19 is now an imminent issue for .......
News Analysis 30 March 2020
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Euro CLO coronavirus exposure mitigated
Sector developments and company hires
Euro CLO coronavirus exposure mitigated
A portion (15%) of European CLO collateral is derived from the industries most vulnerable to the coronavirus pandemic, according to Moody’s. However, the agency says that the relatively few near-term maturities of affected issuers will help mitigate the negative impact.The European CLOs that Moody’s rates have a median exposure of 14.7% to the sectors most .......
Market Moves 27 March 2020
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Research head named
Sector developments and company hires
North America
Market Moves 24 March 2020
David Walker has joined CIFC as head of research, responsible for leading the firm’s US credit research platform and overseeing its team of 20 research analysts. Based in New York, he reports to CIFC ceo and cio Steve Vaccaro. With over 30 years of experience in debt and equity research in North America and Europe, Walker previously served .......
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EIB mulls SME ABS purchase plan
Sector developments and company hires
Dealer credit facility launched
Market Moves 18 March 2020
The US Fed has established a Primary Dealer Credit Facility (PDCF) available from 20 March, which will offer overnight and term funding with maturities up to 90 days. The facility will be in place for at least six months and may be extended as conditions warrant. Credit extended to primary dealers under the facility may be .......
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SCI Start the Week - 16 March
A review of securitisation activity over the past seven days
SCI NPL Securitisation Awards 2020
News 16 March 2020
As a result of COVID-19, the SCI NPL Securitisation seminar has unfortunately had to be postponed and along with it the inaugural SCI NPL Securitisation Awards ceremony. Nominations remain open and a revised deadline for them will be announced in due course. Further information and details of how to pitch can be found here.
This week's stories
AMC .......
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Native blockchain securitisation debuts
Sector developments and company hires
Ares facility inked
Market Moves 13 March 2020
Non-Standard Finance (NSF) has entered into a new six-year securitisation facility totalling £200m, at pricing that is more favourable than its existing facility and is expected to result in a pre-tax saving of approximately £1m in the year ended 31 December 2020. On satisfaction of certain conditions, the new facility – which is provided by credit funds .......
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Definition debate
Call for coalescence around ESG standards
Impact is still being defined in the capital markets, both at a conceptual level and in terms of general product development. The terms ‘ethical’, ‘ESG’, ‘impact’ and ‘responsible’ mean different things to different participants. To avoid fragmentation and misunderstandings, the securitisation industry therefore needs to coalesce around specific ESG definitions and performance standards.
Amitji Odedra, associate director at .......
News Analysis 12 March 2020
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AXA IM creates two key units
Sector developments and company hires
AXA IM restructuring
Market Moves 11 March 2020
AXA Investment Managers intends to create a new €137bn business unit - called AXA IM Alts - as part of a wider restructuring of the business into two key divisions, with the aim of creating a simplified and more focused organisation. The other new business unit would be known as AXA IM Core. Under the leadership of .......