Capital Relief Trades
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Back into the fold
CRT returns to centre stage with FHFA changing of the guard
The appointment of Sandra Thompson as the new acting director of the Federal Housing Finance Authority (FHFA) following the dismissal of Mark Calabria signals a radical change of direction for the agency and one that is likely to mean an enhanced role for credit risk transfer (CRT) mechanisms, agree market sources.
Firstly, the Biden administration has made clear that extending affordable housing .......
News Analysis 25 June 2021
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Riding a wave
BNP Paribas executes capital call SRT
BNP Paribas has finalised a significant risk transfer transaction backed by capital call facilities. Dubbed Wagner 2021-1, the deal is the French lender’s first such transaction and is riding a wave of capital call SRTs.
Banks that have successfully executed such deals over the last 18 months include Credit Agricole, Standard Chartered, Citi and Societe Generale (SCI .......
News 25 June 2021
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US is coming
Stand by for more US regional bank deals, say panellists at IMN conference
Citigroup is currently having discussions with more US regional banks about issuing CRT transactions, following the lead established by the groundbreaking deal from Texas Capital Bank three months ago, it was revealed at the IMN risk transfer conference at the end of last week.
Seeing Texas Capital achieve regulatory appproval constituted a green light to other banks that have been hovering .......
News 23 June 2021
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Calabria exits
FHFA director removed, GSE stocks nosedive; Fannie comeback?
The Biden administration fired Federal Housing Finance Authority (FHFA) director Mark Calabria this afternoon (June 23) after the much-awaited Supreme Court ruling concerning the FHFA was delivered today.
Little time was wasted in getting rid of Calabria, a Trump appointee, after the Court decided that the FHFA was indeed structured unconstitutionally in that the director is insufficiently accountable to the executive, echoing .......
News 23 June 2021
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SRT debut
LBBW prints first capital relief trade
The EIB Group and LBBW have executed a €95m mezzanine guarantee that references a €1.8bn portfolio of SME and midcap loans. The transaction is the German lender’s first capital relief trade and will enable it to provide up to €570m of SME and midcap financing.
According to Rainer Bohn, head of structured finance at LBBW: ‘’The transaction is .......
News 22 June 2021
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Counting Calabria
The Supreme Court decision on the FHFA is eagerly awaited, but immediate impact may be limited
Market-watchers are still waiting with bated breath for the Supreme Court judgement on whether the executive can dismiss Mark Calabria from the Federal Housing Finance Authority (FHFA), but some say that even if the president is given the authority to appoint a new director things might not change all that much.
Firstly, there is a slew of agency appointments yet to be .......
News Analysis 18 June 2021
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SRT upgraded on CE build-up
Sector developments and company hires
SRT upgraded on CE build-up
Market Moves 18 June 2021
Scope Ratings has affirmed its single-A rating on the class C credit-linked notes issued by SSPAIN 2019-A and upgraded the class D to F notes to triple-B plus, triple-B minus and double-B plus respectively from triple-B minus, double-B and double-B minus. The transaction is a significant risk transfer deal, which closed on 28 June 2019 .......
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Pricing flurry
European ABS/MBS market update
Yesterday saw five new European ABS/MBS price in one of the busiest days the primary market has seen this year. However, volumes are still short of pre-Covid levels.
Despite the flurry of deals yesterday, paper throughout the stack saw strong demand. Indeed every offered tranche priced inside initial price talk.
“Across European ABS/MBS, sentiment has been pretty positive for .......
News 18 June 2021
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AutoNoria returns
BNP Paribas draws crowd
BNP Paribas has arranged a €1bn full-stack significant risk transfer transaction for Banco Cetelem. Dubbed AutoNoria Spain 2021, the Spanish auto SRT is the first post-Covid capital relief trade from the AutoNoria programme and attracted one of the largest order books for Spanish auto ABS following the 2008 financial crisis at over €2bn.
Rated by Fitch and Moody’s, .......
News 18 June 2021
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Triple-starred first for BMO
BMO brings innovative C$ CRT trade referencing Canadian CRE
A groundbreaking Canadian dollar denominated regulatory capital relief trade from Bank of Montreal (BMO) closed earlier today (June 15), say well-placed market sources.
Not only does the deal constitute the first Canadian dollar CRT trade, it will also be the first to reference a pool of Canadian commercial real estate (CRE) loans.
In another debut feature, the deal possesses a hybrid structure, incorporating .......
News 15 June 2021
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Super narrow Arch prices
New Bellemeade comes at spreads well inside previous CRT trade
Arch Capital has priced its latest Bellemeade CRT transaction at levels significantly tighter than the last such deal in March, and to a more broadly syndicated pool of investors than ever before, confirms evp, alternative markets Jim Bennison.
The deal, designated Bellemeade 2021-2, consisted of five tranches for a total value of $522.8m. In addition, $93m was placed in the reinsurance market, .......
News 14 June 2021
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Execution queries
Questions linger over funded insurer SRTs
Originators of significant risk transfer transactions have welcomed the trio of innovative funded insurer trades from Credit Risk Transfer Solutions (SCI 27 May). Even though all three deals were successfully executed, questions have been raised about the potential cost and pricing of future transactions, however.
CRTS’s deals are generally mezzanine trades and involve an investment platform managed by the broker .......
News Analysis 11 June 2021
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Arch markets MILN
Second Bellemeade deal of 2021 in the market, pricing soon
Arch is currently in the market its second mortgage insurance-linked note (MILN) of the year, and the trade is expected to price tomorrow or Friday, say sources.
The transaction, dubbed Bellemeade Re 2021-2, should close next week or the week after.
Overall deal size is expected to be around $500m, and it will consist of five tranches: the M-1A M-1B, M-1C, .......
News 9 June 2021
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Positive prospects
Rating upgrades boost default outlook
The number of ‘weakest links’ – issuers rated single-B-minus or lower with negative outlooks or ratings on credit watch with negative implications – decreased to 353 as of 30 April 2021 and is nearing pre-pandemic levels of 282, according to a new report from S&P. Indeed, accommodative financing and an economic recovery contributed to an increase in positive rating .......
News 9 June 2021
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Pandemic hedges
CRT solutions for pandemic events mulled
Munich Re’s Epidemic Risk Solutions (ERS) unit is targeting credit risk transfer solutions that incorporate pandemic events, although the initiative remains in its early stages and coverage will for now amount to only an economic hedge without capital benefit.
The latter is currently not available to banks under existing Basel rules, but this could change as the ESG agenda across credit markets .......
News 4 June 2021
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Capital cushions
Buoyant CET1 levels explain CRT reluctance
Dealers agree that this year has been quieter in the CRT market in USA and Canada than had been anticipated - with the honourable exception of the ground-breaking Texas Capital Bank deal in March.
“It is a very strange time. It feels like a lot of banks are on the sidelines,” says a source in the US.
The renaissance of the North .......
News Analysis 3 June 2021