ABS
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Strategic review
Direct lending JV formed
Newly established investment manager KKV Investment Management has finalised investment management agreements with two UK secured loan funds – SQN Asset Finance Income Fund and SQN Secured Income Fund - whose NAV is in excess of £425m and will be renamed KKV Secured Loan Fund. Specialising in direct lending and alternative credit, KKV is a joint venture between its .......
News 12 June 2020
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Addressing inconsistencies
Performance metrics switched
Metrics that assess the level of portfolio interest and principal cashflows have become more reliable performance indicators than traditional default and delinquency metrics in the wake of coronavirus-driven moratoria. Moody’s notes that the need for more reliable metrics for the ABS and RMBS it rates is driven by inconsistent reporting on the proportion of portfolios under payment holidays.
News 12 June 2020
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Risk transfer rebound
Deutsche Bank completes SRT
Deutsche Bank has completed a US$325m CLN that references a disclosed US$5bn global portfolio of large corporate revolvers. Dubbed CRAFT 2020-2, the transaction is the lender’s first capital relief trade following the Coronavirus crisis and the second post-Covid SRT to be issued after Bank of Montreal’s trade last month (SCI 15 May).
News Analysis 12 June 2020
Yuri Greenfield, head of risk and portfolio .......
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Euro ABS 'game changer' recommended
Sector developments and company hires
Euro ABS ‘game changer’ recommended
Market Moves 11 June 2020
The European High-Level Forum (HLF) on the capital markets union (CMU) has published its final report, which proposes 17 inter-connected “game changers” – measures that the EU needs to implement to remove the biggest barriers in its capital markets. The European Commission stresses that completing the CMU has become particularly urgent in order to speed .......
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LCR eligibility eyed
Final credit mapping framework awaited
Prime Collateralised Securities last week withdrew several liquidity coverage ratio assessments on double-A rated STS securitisation bonds. The move was in connection with an EBA Q&A that includes a temporary mapping, in which the credit quality step (CQS) 1 corresponds with triple-A ratings only.
Ruben van Leeuwen, head of credit strategy and regulation at Rabobank, says: “The interpretation .......
News 10 June 2020
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Risk transfer round-up - 10 June
CRT sector developments and deal news
Santander has exercised a 10% clean-up call for its Red-1 Finance CLO 2017-1 transaction. The UK commercial real estate capital relief trade was structured in 2017 with a June 2022 maturity (see SCI’s capital relief trades database).
....... News 10 June 2020
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Resolve and resilience
Content sponsored by Ocorian
James Maitland, regional head of Americas, Bermuda & Caribbean, and global head of capital market services at Ocorian, spoke to SCI about how resilience is benefiting the industry and his firm
With the traditional office environment disappearing almost overnight and widespread personal restrictions, we have seen a smooth transition and incredible resilience both within our own firm and across the .......
Talking Point 10 June 2020
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NCSLT consent judgment denied
Sector developments and company hires
NCSLT consent judgment denied
Fitch has affirmed 37 notes and maintained its rating watch negative placement on nine notes from 12 National Collegiate Student Loan Trust (NCSLT) securitisations. The move follows Delaware District Judge Maryellen Norieka’s decision last month not to approve a consent judgment proposed by the CFPB and purportedly agreed to by the NCSLTs.The judgment was .......
Market Moves 9 June 2020
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Spread compression
European ABS market update
The rally in broader risk assets and the lack of new supply has boosted demand for paper in the European ABS secondary market. An increasingly acute supply/demand imbalance is expected to be supportive of valuations over the near term, however.
“We have been on a bit of tear over the last week and a half,” says one European ABS trader. .......
News 9 June 2020
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Perfect storm
Hertz bankruptcy to reshape auto ABS?
Hertz’s recent bankruptcy is one casualty of a perfect storm caused by a drop in used vehicle prices, increased reliance on its securitisation programme and the effects of the coronavirus crisis on Americans’ mobility (SCI 1 June). Similar to the large mortgage lender bankruptcies marking the 2008 financial crisis, the outcome for Hertz could reshape the auto ABS market .......
News Analysis 9 June 2020
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CLO business integrated
Sector developments and company hires
CLO business integrated
RBC’s US-based CLO management business is being integrated into BlueBay’s CLO management platform. Sid Chhabra, who joined BlueBay – which is owned by RBC - in 2018 to build the firm’s structured credit and CLO capabilities, will lead this team. The US-based team includes four experienced individuals and the US$500m CLOs they manage.In other news…
Market Moves 8 June 2020
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HAPS ABS debuts
Eurobank finalises Cairo transaction
Eurobank has finalised the first non-performing loan securitisation under the Hercules Asset Protection Scheme. Dubbed Cairo, the €7.5bn deal was sealed alongside the lender’s Project Europe, the sale of the bulk of its servicing unit to doValue.
The Cairo securitisation consists of a €2.4bn senior tranche, a €1.5bn mezzanine tranche and a €3.6bn junior tranche. The transaction involves .......
News 8 June 2020
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May payments slump
Forbearances are down for the first time since CARES, but payments by borrowers in forbearance slump
Last week saw the first net fall in US mortgage forbearances since the beginning of the Covid 19 crisis, according to Black Knight data released this morning, but this encouraging news hides other more disquieting information, say market experts.
While welcoming the decline in forbearances, Black Knight ceo Anthony Jabbour notes that “far fewer homeowners in forbearance remitted .......
News 5 June 2020
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Capital trouble
GSEs stare down the barrel of reduced capital relief for CRT deals
The re-proposed capital rules for the GSEs before they exit conservatorship, released by the Federal Housing Finance Authority (FHFA) on May 20, add further doubts to the future of the credit risk transfer market, according to market opinion.
Compared to the rules released in 2018, the new iteration cuts in half the credit relief afforded by CRT deals. .......
News Analysis 5 June 2020
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Senators seek TALF expansion
Sector developments and company hires
Senators seek TALF expansion
Market Moves 5 June 2020
US Senators Jerry Moran, Martha McSally and Thom Tillis sent a letter to Fed chairman Jerome Powell and Treasury secretary Steve Mnuchin requesting that TALF be expanded to accept ABS backed by assets from all essential lending sectors as eligible collateral. The letter specifically urges personal instalment loans and non-agency RMBS be included as eligible collateral .......
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First steps
STS synthetics paper receives qualified welcome
The EBA’s final framework for STS synthetic securitisations has received an overall positive reception from the capital relief trades market (SCI 7 May), although questions remain regarding the limitation of preferential capital treatment to the senior retained tranches. More saliently, concerns have been raised related to ERBA portfolios and the prudential criteria for obtaining preferential capital treatment.
Overall, market .......
News Analysis 5 June 2020
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Risk transfer round-up - 5 June
CRT sector developments and deal news
Sabadell is rumoured to be readying an SME significant risk transfer deal for the second half of the year. The lender launched its first risk transfer trade in September 2019 in full stack form (see SCI’s capital relief trades database).
....... News 5 June 2020
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Repricing of risk?
Funded, unfunded investor collaboration to rise
The outlook for the significant risk transfer market appears to be positive, at least in the short term. Not only is the instrument likely to play a role in the post-coronavirus economic recovery, but it could also help bridge a gap left by the repricing of risk.
Perceptions of risk have changed following the coronavirus outbreak, with CRT .......
News Analysis 5 June 2020
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Collection hitch
Italian NPL ABS suffer Covid setback
The Covid-19 pandemic has severely hit Italian non-performing loan securitisations. Since April, the volume of gross collections has decreased by about 46% relative to the January-February average. Low collection levels are likely to persist for the rest of this year, as Italy’s economy is not expected to recover before 2021.
According to Scope Ratings, the drop in collections .......
News 5 June 2020
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Conduit CMBS on watch
Sector developments and company hires
Conduit CMBS on watch
Market Moves 4 June 2020
S&P has placed its ratings of 96 classes from 30 US conduit CMBS on credit watch (CW) with negative implications, reflecting the bonds' exposure to the adverse impact of Covid-19 on the lodging and retail sectors, and the related uncertainty about the duration of the demand disruption. The agency says it will resolve or update the .......
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More Euro CLOs on review
Sector developments and company hires
More Euro CLOs on review
Market Moves 3 June 2020
Moody’s has put a further 234 tranches from 77 European BSL CLOs on review for possible downgrade. The securities involved are rated Baa2 to B1 and below. The action brings the total number of European CLOs Moody’s has under negative review to 351, representing around 16% by count, or 6.5% by balance, of its rated .......