ABS
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Economically efficient
Study supports reduction of PD estimates
A new study undertaken by Open Source Investor Services (OSIS) suggests that capital relief trades are a good alternative to traditional issuance of new capital in the majority (75%) of cases reviewed and in 40% of cases the instrument works well during a downturn scenario, even if investors are compensated for higher losses. The research investigates whether and when .......
News Analysis 20 March 2020
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Credit event definitions
UTP category brings less uniformity
The EBA’s guidelines on default definitions have brought less uniformity to credit event determinations in synthetic securitisations, despite the benefits of subsequent procedures such as principal adjustments for investors. However, from an issuer perspective, the key concern is maintaining protection for restructured loans.
According to David Wainer, partner at Allen & Overy: “We have observed a shift away from the relative standardisation of Article 216 of .......
News Analysis 20 March 2020
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Close relationship
CRT documentation should evidence intentions
When structuring a capital relief trade, the documentation should evidence the intentions of the parties. Given the risk-sharing nature of such transactions, investors benefit from forming a close relationship with the originating bank and being comfortable with its governance, risk management and flow of assets.
“To really share the risks of the underlying assets’ and the overall bank’s .......
News 20 March 2020
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Further central bank support unveiled
Sector developments and company hires
Bridging loan deal inked
Market Moves 19 March 2020
UK challenger lender Glenhawk has closed a private revolving securitisation of bridging loans, with senior funding provided by JPMorgan. Glenhawk offers short-term property development and homeowner loans, and has recently been authorised by the FCA. The new capital will support Glenhawk’s growth into the UK homeowner market. The facility represents the first time that JPMorgan has .......
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Short-term volatility
SRTs on hold, although 2H20 rebound expected
Capital relief trade issuance has been postponed until the second half of the year due to the coronavirus crisis, as market participants expect disruption to be relatively short-lived. Nevertheless, more targeted government and central bank action towards consumers and SMEs is desired.
According to one SRT investor: “In the near term, it’s going to be very difficult to .......
News Analysis 19 March 2020
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Risk off
Securitisation markets seize up
Amid a global sell-off, securitised asset classes where liquidity is scarce and asymmetry of positions particularly acute have suffered grievously. The FOMC decision to increase TBA purchases has so far eased only the agency RMBS sector (SCI 17 March).
“I spoke to an executive committee about a month ago and you know what I told them? I .......
News 19 March 2020
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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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Pandemic response
DNB lowers bank buffers amid outbreak
Dutch central bank DNB has lowered the capital buffers for Dutch banks and postponed the introduction of the risk weight floor for mortgages, following ECB action on the Coronavirus crisis. Combined, these measures will free up €8bn in capital and will allow banks to continue their lending activities in the face of rising losses.
According to a DNB .......
News 18 March 2020
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Even playing field?
Reg AB relaxation set to release RMBS
The relaxation of FDIC rules regarding bank compliance with SEC Regulation AB when issuing RMBS (SCI 4 March) evens the playing field between bank and non-bank issuers. The move is expected to clear the way for greater bank-sponsored issuance to emerge.
The FDIC’s decision to drop the requirement for banks to comply with Regulation AB was underpinned .......
News Analysis 18 March 2020
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Fed rolls out CPFF
Sector developments and company hires
CMB purchase programme
Market Moves 17 March 2020
The Bank of Canada has announced that it stands ready, as a proactive measure, to provide support to the Canada Mortgage Bond (CMB) market to ensure that it continues to function well. This would include, as required, purchases of CMBs in the secondary market through a competitive tender process. As a starting point, the bank will target .......
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Liquidity concerns
European ABS pipeline coming to a halt
The European ABS primary market is grinding to a halt amid coronavirus-related volatility, with many transactions postponed. Among the relief measures implemented by the Bank of England and the ECB last week, the new UK Term Funding Scheme for SMEs (TFSME) could inhibit UK RMBS volumes further.
“Spread levels are difficult to predict in the current environment,” says .......
News Analysis 17 March 2020
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Greencoat liquidator appointed
Sector developments and company hires
EMEA
Ocorian has appointed Abigail Holladay as director of transaction management. Based in London, Holladay will manage restructuring transactions across Europe. She has previously held senior positions at Law Debenture and Deutsche Bank. Holladay has experience covering waivers, defaults, delegate/successor trusteeships and complex debt restructurings.Greencoat winding up
Market Moves 16 March 2020
In connection with the BUMF 4, 5, 6 and 7 CMBS, the .......
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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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AMC uncertainty
Trade deal clouded by uncertainties for NPLs
The US-China trade deal now finally allows foreign investors to acquire coveted local AMC licences that will in turn allow them to buy non-performing loans directly from banks. However, foreign investors remain in the dark about whether foreign-owned AMCs will be able to engage in the same activities as domestic ones.
According to King & Wood Mallesons (KWM), compared .......
News 13 March 2020
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Multi-tranching?
Investor diversification raises triple-tranche prospects
Seer Capital sees a future for triple tranche structures in significant risk transfer transactions. One driver is the market’s need to further diversify the investor base.
According to Richard d’Albert, co-cio and cro at Seer Capital: “We are going to see more dual- and multi-tranche structures. It’s just a more efficient way for banks to execute thicker hedges .......
News Analysis 13 March 2020
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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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Regulatory events
Standard Chartered amends Gongga SRT terms
Standard Chartered has amended the regulatory event definitions for the class A notes of a corporate SRT dubbed Gongga that was finalised last year (SCI 2 August 2019). The amendments exclude any reference to any requirement to disclose information about the underlying borrowers as per ESMA’s securitisation disclosure requirements, where doing so would be impossible or result .......
News 12 March 2020
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Mortgage moratoriums
Impact of payment suspensions to be limited
The Italian government and a trio each (at the time of writing) of lenders in Ireland and the UK are set to temporarily suspend mortgage payments for certain borrowers amid the disruption caused by COVID-19. The impact of these moratoriums is expected to be limited for RMBS bondholders, however, unless more sweeping or long-lasting programmes are introduced.
In .......
News 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 .......
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Dutch VAT grace period mulled
Sector developments and company hires
Alhambra missed payment
Market Moves 10 March 2020
A borrower of a €10m loan securitised in the Alhambra SME Funding 2019-1 transaction has missed its February interest payment. The servicer says it is in “close contact” with the borrower and does not believe it is a defaulted loan, as defined in the prospectus. The borrower expects to receive funds in the coming weeks, which will .......