Complete news archive
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Bright spot?
European logistics gaining momentum
The logistics sector is set to be a bright spot in European commercial real estate post Covid-19. Coronavirus impacts represent one of six fundamental factors behind the sector’s momentum, according to Scope Ratings, alongside growth in e-commerce, end-customer demands, supply chain optimisation, a supply-demand/supply imbalance and new urban developments.
The agency suggests that these factors are strongly supportive .......
News 20 April 2020
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SCI Start the Week - 20 April
A review of securitisation activity over the past seven days
Last week's stories
News 20 April 2020
Bilateral activity
Opportunistic capital redeployment underway
Coverage cleared
Debut programmatic ILW trade executed
Discounted opportunities
Insurers target SRT secondary market
Forbearance foreseen
Euro CMBS cash-trap thresholds eyed
Forbearance risks
Pre-2015 GSE deals could suffer losses
Price volatility
Liquidity constraints hit credit risk transfer
Risk transfer reboot
Large corporate SRTs prepped
Second wave
Widespread CLO rating downgrades add further uncertainty
TALF sparks rally
US CLO seniors .......
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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 .......
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Forbearance risks
Pre-2015 GSE deals could suffer losses
As the coronavirus spreads and servicers offer mortgage forbearance plans to struggling obligors, certain pre-2015 credit risk transfer (CRT) fixed severity deals are set to sustain losses without action from Fannie Mae and Freddie Mac. In contrast, actual loss CRT deals do not automatically suffer losses from credit events, but are exposed to risks from rate reductions, permanent principal .......
News 17 April 2020
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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
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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 .......
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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
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Second wave
Widespread CLO rating downgrades add further uncertainty
Extensive CLO downgrades are expected to follow the widespread pandemic-driven negative rating actions already seen on underlying loans. Any such second wave is likely to hamper the market’s tentative early stage recovery and increase uncertainty and concerns over the future.
The second wave is inevitable, asserts one CLO trader. “You have to expect to see further downgrades of CLOs themselves, .......
News Analysis 16 April 2020
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Unified approach
Canadian CMBS servicing challenges surveyed
The Canadian CMBS market is expected to be more resilient to the coronavirus fallout than its US counterpart. Although tenant defaults and loan delinquencies are similarly likely to spike into 3Q20, to date Canadian servicers have seen relatively few borrower relief requests.
Unique to the Canadian CMBS market, borrower requests for relief are initially reviewed by the subservicer .......
News 16 April 2020
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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 .......
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Price volatility
Liquidity constraints hit credit risk transfer
Acute losses have been suffered in the US credit risk transfer market over the last few weeks, as prices on many classes of bonds have executed a vertiginous descent. But the price action does not tell the whole story, and it is too early to say that investors will be cleaned out.
Covid-19 and the virtual cessation of .......
News Analysis 15 April 2020
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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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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
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Forbearance foreseen
Euro CMBS cash-trap thresholds eyed
Three UK hotel CMBS and three Italian retail CMBS, representing just under £1bn and just over €1bn of securitised debt respectively, could become subject to cash-trapping if their LTV ratios are tested during the Covid-19 outbreak. However, should loan defaults occur, special servicers are likely to exercise forbearance while conditions improve.
The three hotel CMBS – Helios (ELoC .......
News Analysis 14 April 2020
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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 .......
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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
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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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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
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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, .......