ABS
-
Grandfathering for Dutch CLO issuers
Sector developments and company hires
Grandfathering for Dutch CLO issuers
Market Moves 23 April 2020
The Dutch tax authorities have provided written confirmation to CLO issuers domiciled in the Netherlands that their recently revised position on the VAT exemption (SCI 10 March) will not apply with retroactive effect. Further, the VAT exemption will continue to apply to transactions for a grandfathering period until 1 January 2021. Issuers are continuing a .......
-
GSE advancing obligations aligned
Sector developments and company hires
GSE advancing obligations aligned
Market Moves 22 April 2020
The US FHFA has aligned Fannie Mae's and Freddie Mac's policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. Once a servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. When a mortgage loan is in an .......
-
Accessing liquidity
Christoph Gugelmann, co-founder of Tradeteq, highlights the...
Access to liquidity is becoming more important than ever; many businesses – both large and small – need support in order to maintain exporting obligations. However, even if the global economy was not currently wrestling with the impact of Covid-19, there would still be a US$1.5trn trade finance gap between what banks can loan versus what businesses need.
Talking Point 22 April 2020
-
Interest rate mismatches eyed
Sector developments and company hires
Interest rate mismatches eyed
Market Moves 17 April 2020
Moody’s suggests that loan repricing will increase interest rate mismatches for Chinese structured finance deals, posing a higher risk for RMBS than auto ABS, given the longer loan terms and the greater share of floating-rate loans. All Chinese financial institutions must reprice outstanding floating-rate loans to either loan prime rate (LPR)-indexed floating rates or fixed rates .......
-
Coverage cleared
Debut programmatic ILW trade executed
Tremor last week executed what is believed to be the first programmatic ILW trade via an online auction. A US$50bn US wind and earthquake contract cleared at a rate on line (ROL) of 12.25% through the platform, having traded at a ROL of 12.5% before brokerage.
Tremor opened its weekly online ILW auctions on 2 April to provide .......
News 16 April 2020
-
CMBS secured, unsecured sub debt weighed
Sector developments and company hires
CMBS secured, unsecured sub debt weighed
Market Moves 16 April 2020
Senior US CMBS loans with unsecured subordinate debt (such as mezzanine or preferred equity) show significantly lower default rates than senior loans with secured subordinate debt (such as B-notes) at comparable leverage points, according to Fitch. The agency evaluated the performance of 1,001 senior CMBS conduit loans with subordinate debt in place, issued between 2003 .......
-
Discounted opportunities
Insurers target SRT secondary market
Insurers are now targeting the capital relief trades secondary market in search of discounted opportunities with an attractive risk profile following the coronavirus crisis. Secondary trades offer diversification and an existing track record of performance, although insurers are primarily eyeing mezzanine and senior tranches jointly with hedge funds, who will be in a position to gain junior exposure.
News 16 April 2020
-
Auto ABS rating withdrawn
Sector developments and company hires
Auto ABS rating withdrawn
Fitch has withdrawn the expected ratings of Swiss Car ABS 2020-1 (SCI 9 April). The rating agency notes that the debt issue is “no longer expected to proceed as previously envisaged”.EMEA
Market Moves 15 April 2020
Reed Smith has appointed Baptiste Gelpi as a partner in its financial industry group, based in Paris. Gelpi joins the firm from Hogan .......
-
Bilateral activity
Opportunistic capital redeployment underway
The European ABS market appears poised to diverge between central bank-eligible issuance and opportunistic capital. Risk-off sentiment dominates, but pockets of bilateral activity are occurring.
“It's an interesting market at the moment. But quite different to the early global financial crisis in that because the central banks reacted so quickly and strongly, there is a sense that some .......
News Analysis 15 April 2020
-
REMIC tax status clarified
Sector developments and company hires
REMIC revenue procedure
Market Moves 14 April 2020
The US Internal Revenue Service has issued a revenue procedure that permits loans subject to certain forbearances and related modifications as a result of the Covid-19 pandemic to be contributed to, and held in, REMICs and grantor trusts without jeopardising the tax status of these vehicles. Cadwalader notes that under the revenue procedure: a mortgage loan’s LTV does .......
-
Risk transfer reboot
Large corporate SRTs prepped
Capital relief trade issuance is set for a comeback in 2Q20 as a handful of banks are readying large corporate transactions. The reboot in issuance is largely driven by government and central bank programmes and the need to manage bank capital as companies draw down their revolvers.
According to one SRT investor: “Large corporate deals are easier to .......
News Analysis 14 April 2020
-
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 .......
-
HAPS halt?
Greek NPE ABS plans disrupted
The non-performing exposure reduction plans of the four systemic Greek banks are expected to be delayed by deteriorating market conditions. The banks had been ramping up preparations to execute around €32.5bn of securitisation volume in the coming quarters via the Hercules Asset Protection Scheme (HAPS).
The NPE securitisation plans announced by Alpha Bank, Eurobank, National Bank of Greece .......
News 9 April 2020
-
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, .......
-
Modelling delinquency deluge
Mortgage market advisers and consultants are struggling to f...
“Our clients are modelling a range of scenarios but are preparing themselves for the worst case including sustained levels of unemployment. Hopefully it won’t be that bad, but they need to prepare themselves,” says Bernadette Kogler, chief executive officer of RiskSpan, a Washington, DC-based analytics and modelling firm which has particular expertise in mortgage markets.
Riskspan clients include .......
News 8 April 2020
-
Stochastic modelling
IFRS 9 challenges persist amid pandemic
Supervisors have advised banks to embed the effects of government programmes, such as payment moratoriums, when determining whether assets can be moved from stage one to stage two under IFRS 9. The move has been welcomed by capital relief trade issuers, since it means that payment holidays may not necessarily translate into credit events in transactions. Nevertheless, accounting and .......
News Analysis 8 April 2020
-
Logistical challenges
Container ABS disruption weighed
The marine container industry is facing substantial logistical challenges due to the impact of Covid-19 on multiple aspects of global trade. The impact of stress in the supply chain on container ABS is expected to vary, depending on the concentrations of container types in the collateral pools, as well as the types and tenor of the underlying lease contracts.
News 8 April 2020
-
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 .......
-
Improving sentiment
European ABS market update
European ABS secondary market sentiment improved last week, with the return of investor appetite, and spreads across most sectors stabilised or tightened. However, the primary market remains on hold, with no new publicly distributed transactions sold or added to the pipeline.
“Spreads are much tighter than they have been since late-February. It does present a pretty interesting opportunity .......
Market Reports 7 April 2020
-
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 .......
-
ESG catalyst?
Positive impact SRTs gaining traction
Significant risk transfer is primarily associated with achieving favourable capital treatment. However, the utility of the instrument as a catalyst for ESG/positive impact financings - by enabling banks to redeploy capital from legacy ‘dirty’ assets into new ‘clean’ assets - is gaining traction, according to SCI’s latest CRT Research Report.
“The capital relief trade market has a .......
News Analysis 3 April 2020