ABS
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CLO ETF prepped
Sector developments and company hires
CLO ETF prepped
Market Moves 29 July 2020
Janus Henderson Investors has filed a preliminary registration statement with the US SEC in connection with the Janus Henderson AAA CLO ETF (JAAA), which is expected to launch on 22 October and will be offered to US investors. The fund will be managed by portfolio managers John Kerschner and Nick Childs, while Jessica Shill will serve as .......
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SRT boost
BMO launches capital relief trade
Bank of Montreal (BMO) has completed a five-year financial guarantee that references US and Canadian senior secured and senior unsecured corporate loans. Dubbed Manitoulin Muskoka series 2020-2, the transaction is the bank’s third significant risk transfer deal this year. All three trades bring BMO’s total SRT tranche notional issuance so far in 2020 to US$494m, the Canadian lender’s largest .......
News 29 July 2020
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ILS issuance remains resilient
Sector developments and company hires
ILS issuance remains resilient
Market Moves 28 July 2020
US$2.8bn of property catastrophe bond limit was placed in 2Q20, bringing the total issued year-to-date to US$6.5bn, according to Aon Securities’ latest ILS Update report. In comparison, 2019 saw a total of US$5.4bn in property cat bond limit placed for the entire year. The total amount of property cat bonds outstanding is marginally down on 2019 .......
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CLO equity defies predictions
Sector developments and company hires
CLO equity defies predictions
Market Moves 27 July 2020
US CLO equity cashflow performance is defying pessimistic predictions, according to a new report from JPMorgan CLO research analysts. As of 23 July reporting, US CLO equity on average paid 8% cashflow year to date (based on 842 tranches or circa 70% of the universe) and the report estimates 89% of equity is paying, compared to .......
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'Switch' success
Aussie non-bank issuance on the rise
The Australian securitisation market has seen a rise in non-bank issuance post-coronavirus. Such activity has benefited from an adjustment to the AOFM’s Structured Finance Support Fund (SFSF) that funnelled secondary sellers into new primary deals.
Martin Jacques, director, head of securitisation and covered bond strategy at Westpac Institutional Bank, says: “Since the onset of the pandemic, all of .......
News Analysis 27 July 2020
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'Quick fix' for NPE, synthetic securitisation
Sector developments and company hires
‘Quick fix’ for NPE, synthetic securitisation
The European Commission has adopted a capital markets recovery package, as part of its overall coronavirus recovery strategy. The measures aim to make it easier for capital markets to support European businesses to recover from the crisis via targeted changes to capital market rules.Building on recent work by the EBA, the proposals .......
Market Moves 24 July 2020
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Funding diversity
Non-bank lending 'credit neutral' for SME ABS
Moody’s suggests that the emergence of non-bank lenders – such as Paypal, Amazon and Klarna – in Europe is credit neutral for SME securitisations because although they broaden funding sources, this is at the expense of increasing borrowers’ overall debt burden. Additionally, while technology-driven underwriting facilitates quick credit decisions and transparency, the use of alternative data is relatively untested .......
News 24 July 2020
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Qualitative approach?
Covid complicating CRT analytical processes
The Covid-19 fallout has complicated further the analytical process in connection with capital relief trades, given that the pandemic is having a skewed impact on different sectors of the economy. Against this backdrop, qualitative modelling approaches are gaining traction.
Whether a CRT issuer uses EBA, CCAR or their own internal scenarios, the impact of Covid-19 on stress tests .......
News Analysis 24 July 2020
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Issuance boost
Full-stack SRTs unlocked
BBVA and Santander have reopened the full-stack significant risk transfer market with the issuance of an auto ABS apiece in June and July respectively. However, full-stack securitisations widely syndicated to private investors and referencing Northern European exposures remain to be seen post-coronavirus. Consequently, arrangers are looking to Chenavari’s recently priced Aurorus 2020 consumer ABS for guidance (SCI 21 July).
News Analysis 24 July 2020
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Italian trades inked
Unicredit completes NPL pair
Unicredit has sold two predominantly unsecured SME non-performing loan portfolios for a total of €1.54bn. The move comes as Italian banks step up their loan loss provisions to cover an anticipated rise in NPLs following the coronavirus crisis.
The first batch of Unicredit NPLs was sold to Banca Ifis, Guber and Barclays for €840m, with Guber and Barclays .......
News 23 July 2020
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ReoCo restructuring in the works
Sector developments and company hires
ReoCo restructuring in the works
Market Moves 23 July 2020
The Leviticus SPV issuer is set to implement a ReoCo structure, having appointed Credito Fondiario as the servicer to carry out all core ReoCo activities. The main purpose of the ReoCo is to encourage third-party acquisitions at auctions above auction base prices or to repossess real estate assets at otherwise empty auctions and re-sell them .......
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Canadian CMBS forbearance highlighted
Sector developments and company hires
Canadian CMBS forbearance highlighted
As of the June 2020 remittance reports for the Canadian conduit CMBS sector, 48 loans totalling C$559.9m were on the servicer's watchlist for coronavirus-related relief, according to DBRS Morningstar. In most of these instances, the servicer’s commentary confirmed that borrowers were granted loan modifications and/or forbearances.The majority of these loans are secured by retail .......
Market Moves 22 July 2020
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Positive pick-up
European ABS market update
The positive tone across the European securitisation market appears to be continuing this week, following one that saw rare Dutch consumer (Aurorus 2020) and Portuguese auto (Silk Finance No. 5) paper placed. Indeed, two more relatively rare mandates were announced yesterday (20 July) – a new UK prime RMBS master trust and the first post-coronavirus UK CMBS.
One .......
Market Reports 21 July 2020
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Carrots and sticks
'Wide-ranging and ambitious' recommendations welcomed
The recommendations put forward by the High Level Forum on Capital Markets Union (CMU) last month have been welcomed by the European securitisation industry (SCI 11 June). However, while these measures – if implemented – should provide the necessary framework for a healthy and robust ABS market, they are far from being a silver bullet.
The High .......
News Analysis 21 July 2020
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UK Mortgages offer disclosed
Sector developments and company hires
UK Mortgages offer disclosed
Market Moves 20 July 2020
M&G Investment Management (MAGIM), on behalf of one of its managed funds - M&G Specialty Finance Fund (£) SCSp – has disclosed that it has made several approaches to the board of UK Mortgages Limited (UKML) with a view to making a recommended cash offer for UKML, all of which have been rejected. The most recent approach .......
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Euro CLO par burn rises
Sector developments and company hires
Euro CLO par burn rises
Market Moves 16 July 2020
After a relatively stable Q1, European CLO managers burnt an average -19bp of par in Q2 (compared to -3bp in Q1), according to JPMorgan’s latest report on the sector. Among 44 European managers, 14 managers built par in 2020 YTD by an average +19bp, while the remaining 30 managers burnt par by an average -41bp. .......
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Pandemic protections?
Structural features mitigate auto ABS risks
Structural features are overall mitigating Covid-19-related risks in auto ABS transactions, thanks to credit enhancement and other protections that largely offset any deterioration in collateral performance. However, delinquencies and defaults are expected to rise further, albeit not exponentially.
According to Moody’s: “Most auto ABS deals that we rate have substantially deleveraged and have significant credit enhancement, especially among .......
News 16 July 2020
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Seeking clarity
Call to reassess repo language
The AG MIT CMO versus Royal Bank of Canada case, which recently settled (SCI 3 June), highlights how Covid-19 disruption has caused confusion over what constitutes a ‘recognised market’ for the purpose of selling securities. Indeed, the lawsuit underscores the need for greater clarity in securitisation repurchase agreements.
In the case, AG Mortgage Investment Trust argued that RBC .......
News 16 July 2020
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Conflict-free trading
Benjamin Arnold, founding partner and ceo of Meraki Global Advisors, answers SCI's questions
Q: How and when did Meraki Global Advisors become involved in the securitisation market?
A: Meraki Global Advisors was founded with the rebellious determination to deliver conflict-free trading to asset managers. Meraki is a global multi-asset outsourced trading and operations firm that was launched in April 2019.We identified a need among the more sophisticated multi-asset hedge fund community .......
The Structured Credit Interview 16 July 2020
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October cliff edge looms
The apparent recovery of many parts of the MBS market may be a false dawn
Mortgage-backed securities have in general rebounded with confidence in recent weeks, but there is an undercurrent of alarm in the market that the resurgence might have over-reached itself. Despite the last non-farm payroll report, much economic data is still extremely sobering and a shock in Q4 could be on the cards, say analysts.
For example, seven credits of the 100 constituent credits .......
News Analysis 15 July 2020
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Risk transfer round up - 15 July
CRT sector developments and deal news
Credit Agricole is rumoured to be readying a corporate capital relief trade that is expected to close in 2H20. The French lender’s last risk transfer trade was closed in March 2018 with the IFC (see SCI’s capital relief trades database).
....... News 15 July 2020