Capital Relief Trades
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MRT potential
Reinsurer opportunities eyed
The mortgage risk transfer (MRT) programme in the US has the potential to rival natural catastrophe reinsurance, given the significant capacity required by insureds and insurance firms’ appetite for diversification. Until now, the most common way that reinsurers have entered the space is via the GSE credit risk transfer aggregate excess of loss programmes, but other opportunities are emerging.
News Analysis 6 June 2019
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SCI podcast - episode 7 now live
All the most pressing topics in structured finance discussed
The latest edition of the SCI podcast is now live. This month, we take a look at servicing within subprime auto ABS and also how consolidation is becoming a running theme, with several acquisitions of smaller, regional issuers’ portfolios having been witnessed recently.
As well as this, the podcast explores the student loan crisis in the US, asking the question, will servicers .......
News 30 May 2019
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Interpretation issues
Credit Suisse completes capital relief trade
Credit Suisse has completed its first capital relief trade of the year, dubbed Elvetia Finance series 2019-1. The Sfr336m eight-year CLN references a Sfr5.6bn Swiss SME portfolio and is a replacement trade for Elvetia Finance series 2016-1, following the call of the transaction in May (see SCI’s capital relief trades database).
The deal attracted healthy investor interest .......
News 29 May 2019
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STS SRTs pending
EBA to publish discussion paper on synthetic criteria
The EBA is set to publish a discussion paper on STS criteria for synthetic securitisations in September, which is expected to further facilitate significant risk transfer through provisions for excess spread and triggers from pro-rata to sequential amortisation (SCI 22 June 2018). However, uncertainty over the risk weights for retained tranches persists.
EBA sources believe that the .......
News Analysis 29 May 2019
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Risk transfer round-up - 24 May
CRT sector developments and deal news
Santander is believed to be readying a capital relief trade consisting of auto loans for 2Q19. The Spanish lender’s last auto risk transfer transactions were closed in November and December of last year (see SCI’s capital relief trades database).
In November 2018, the bank completed KIMI 7, a €665.3m true sale securitisation of Finnish auto loans. In December, Santander .......
News 24 May 2019
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Goodwill hunting
Higher recoveries from Interserve insolvency expected
Interserve became the second UK outsourcer to suffer a credit event in a risk transfer transaction, following Carillion's liquidation last year (SCI 27 March). The former company's recoveries are expected to be higher than the latter's, given that it is in administration and owns some profitable subsidiaries. Nevertheless, both insolvencies raise questions as to how capital relief trade market .......
News Analysis 20 May 2019
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Promising prospect
Synthetic UTPs contemplated as IFRS 9 hedge
Synthetic securitisations referencing unlikely-to-pay loans are a more promising prospect than synthetic securitisations of NPLs, given their potential as an IFRS 9 hedge, according to panellists at SCI’s recent NPL securitisation seminar in Milan. However, regulatory challenges and the issue of defining UTPs and credit events remain open questions.
One regulatory challenge is that, under current regulations, synthetic .......
News Analysis 17 May 2019
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Seeking refuge
NPL securitisation disclosed
Hoist Finance has confirmed in its latest 2019 interim report that it will securitise part of its non-performing loans, due to regulatory demands for higher risk weights for purchased defaulted assets. The securitisation option is unusual for debt collectors, given that they have to surrender some of the upside on their defaulted assets to third-party investors and - unlike .......
News Analysis 16 May 2019
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Risk transfer round-up - 16 May
CRT sector developments and deal news
Caixabank has completed a synthetic securitisation of Spanish SMEs with the European Investment Fund. Dubbed Gaudi Synthetic III, the €100m mezzanine guarantee is for an existing loan portfolio and will enable the Spanish lender to mobilise up to €600m of additional financing to Spanish SMEs and mid-caps.
The deal is the first guarantee for a mezzanine tranche of .......
News 16 May 2019
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Risk transfer round-up - 10 May
CRT sector developments and deal news
Credit Suisse’s Magnolia Finance V 2015-3 has been de-listed from the Cayman Islands stock exchange following full redemption of the notes. The US$75.23m eight-year CLN was completed in 2015 and references US and Swiss corporate loans (see SCI’s capital relief trades database).
According to SCI’s capital relief trades database, the last Magnolia V transaction was inked in .......
News 10 May 2019
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Risk transfer opportunity?
Failed merger talks raise CRT prospects
Deutsche Bank’s capital relief trade (CRT) issuance could witness a boost following the failed merger talks with Commerzbank, given the challenge of generating capital organically. However, future issuance will depend on whether the bank can meet cost and revenue targets.
The bank’s 1Q19 results show a healthy CET1 ratio equal to 13.7% but it’s likely to face headwinds .......
News Analysis 9 May 2019
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Challenges persist
Structuring issues put shipping SRTs on hold
Capital relief trades referencing shipping loans have long been discussed and planned by a small number of issuers and arrangers. However, low performing portfolios and structural complexities pertaining to mixed portfolios that include shipping loans pose challenges that are constraining volumes.
Nord LB, for one, has allegedly attempted a shipping SRT that was set to close in .......
News Analysis 3 May 2019
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Risk transfer round-up - 3 May
CRT sector developments and deal news
Santander is rumoured to be readying an SME transaction from its Magdalena programme for 2Q19.The transaction would be the issuer’s third-ever Magdalena deal.
The second Magdalena deal, dubbed FT Pymes Magdalena, was completed last August. The €166.3m CLN referenced a €2.5bn Spanish SME portfolio and paid 8.85% (see SCI’s capital relief trades database).
....... News 3 May 2019
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Risk transfer round-up - 26 April
CRT sector developments and deal news
The second quarter of this year is expected to be more active in terms of capital relief trade issuance, compared to previous years, as banks adapt to ESMA’s securitisation disclosure requirements and many uncompleted deals slated for 4Q18 move to this year. Among these transactions are said to be four SME and two leveraged loan risk transfer trades targeted .......
News 26 April 2019
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Rating agency names managing director
Sector developments and company hires
EMEA
Scope has named Guillaume Jolivet as md. He joins the firm’s management board, alongside Torsten Hinrichs, coo of the Scope Group. With more than 18 years of experience in credit analysis and ratings, Jolivet joined Scope in 2013 and held several senior positions at Moody’s and UBS before that.New York University’s Stern School of Business finance professor .......
Market Moves 25 April 2019
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CLO manager denied incentive fee
Sector developments and company hires
Incentive fee ruling
Market Moves 18 April 2019
The High Court in London has ruled that Barings (UK), as collateral manager, was not entitled to an incentive fee at the expense of junior bondholders following the optional redemption of the Duchess VI CLO. Part 8 proceedings were brought by Deutsche Trustee Company, to determine the correct interpretation of the bond documentation in which Barings (UK) .......
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Risk transfer round-up - 18 April
CRT sector developments and deal news
Credit Suisse is believed to be readying a corporate capital relief trade from its Elvetia programme that is expected to close in June. The Swiss lender’s previous Elvetia trade closed in November last year (SCI 30 November 2018).
Another risk transfer transaction that is reportedly in the pipeline for this year is a commercial real estate deal from Raiffeisen. ......
News 18 April 2019Premium Content
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BWIC boom
Quarterly SCI data update
The first quarter of a year is usually quieter than the previous quarter and, for the most part, 1Q19 saw reduced activity over 4Q18 (SCI 24 January 2019). The notable exception was CLO secondary markets, where BWIC volumes boomed for the second quarter in a row, according to SCI data.
....... News Analysis 11 April 2019
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Risk transfer round-up - 3 April
CRT sector developments and deal news
Deutsche Bank has completed its first capital relief trade for the year. Dubbed CRAFT 2019-1, the US$382.5m nine-year CLN pays a coupon of 10.3%. The transaction features a seven-year WAL and a two-year non-call period.
The German lender’s last CRAFT transaction was inked in June 2018. Dubbed CRAFT 2018-2, the US$210m CLN paid Libor plus 10% (see SCI’s capital relief ......
News 3 April 2019Premium Content
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CRT credit event
Company hires and sector developments
CRT credit event
HSBC’s Metrix series 2015-1 CLN has suffered another credit event. The issuer received a credit event notice confirming that a bankruptcy credit event occurred on 15 March with respect to a reference entity that is believed to be Interserve, which was recently sold out of administration after shareholders rejected a rescue deal for the company. .......
Market Moves 27 March 2019
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Goals aligned
Insurers target dual-tranche CRTs
Insurance firms are targeting mezzanine tranches in dual-tranche capital relief trades as banks warm up to unfunded insurance structures, given the lower cost of protection and the relative safety of the mezzanine tranches in these deals (SCI 10 January). Indeed, benchmark unfunded trades have already been completed, raising the prospects of further credit insurance deals going forward.
"The second-loss ......
News Analysis 22 March 2019Premium Content