CLOs
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QM price-based approach mooted
Sector developments and company hires
QM price-based approach mooted
Market Moves 23 June 2020
The CFPB has issued two notices of proposed rulemaking (NPRMs) to address the impending expiration of the GSE patch, which is scheduled to expire in January 2021 (or when the GSEs exit conservatorship, if that happens first). The bureau estimates that, absent regulatory action, approximately 957,000 mortgage loans would be affected by the expiration of the .......
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Test case scenario?
US bankruptcy dispute could provide a template for CLO managers
US-based marketing firm Acosta's bankruptcy filing and resultant disagreement between its loan investors could prove to be a test case for how both CLO managers and distressed funds approach such situations. If nothing else, if defaults continue their expected rise as the Covid crisis plays out it should provide valuable lessons for all loan market participants.
“Bankruptcy administration .......
News Analysis 23 June 2020
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MILN market set to reopen
Sector developments and company hires
MILN market set to reopen
Market Moves 22 June 2020
Arch has returned to the market with Bellemeade Re 2020-1, after it was pulled in March amid the Covid-19 fallout (SCI 29 May). Moody's has upgraded from A3 to A1 and from Baa3 to Baa1 the provisional ratings of the mortgage insurance credit risk transfer deal’s respective class M1A and M1B notes and assigned provisional .......
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Time cut
Post-crisis CLOs continue to feature short non-call/reinvestment periods
New issue CLOs either side of the Atlantic have adapted to the post-pandemic world by introducing shorter time horizons. Equally, sizes and leverage in European deals have been cut.
All three European CLOs that priced last week – BBAM European CLO I, OCP Euro CLO 2020-4 and GoldenTree Loan Management EUR CLO 4 – featured a short non-call/reinvestment .......
News 22 June 2020
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CMBS scores in first TALF window
Sector developments and company hires
CMBS scores in first TALF subscription
Market Moves 18 June 2020
Investors requested US$252m in loans under the first TALF 2.0 subscription window. Of this total, US$145m was for CMBS purchases, with the remainder almost evenly split between premium finance and small business deals. Wells Fargo CMBS analysts note that although wider spreads in the CMBS sector relative to the ABS sector may continue to .......
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Structural hurdles
US CLO managers face restructuring challenges
Restructurings and workouts are an increasing focus for US CLO managers as credit deterioration continues and defaults rise. However, they face significant structural hurdles that restrict their involvement in the process.
“There are two main issues standing in the way of CLO managers fully participating in restructurings and workouts,” says Craig Stein, partner at Schulte Roth & Zabel. .......
News Analysis 18 June 2020
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Next step
Debut CLO part of platform roll-out
BlueBay Asset Management priced its first CLO on Monday inside recent primary tights and despite the then stalled secondary market rally. The European deal is the next step in the roll-out of the firm’s long-term global structured credit strategy (SCI 31 January).
“The obviously challenging market conditions meant that we were especially pleased to so successfully execute .......
News Analysis 17 June 2020
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Older CLOs underperforming
Sector developments and company hires
Older CLOs underperforming
A significant proportion of all the US BSL CLOs S&P has on negative watch closed in 2015 or before. The rating agency reports that such deals also experienced a steeper average decline in OC cushion, falling by 3.23%, and their average junior OC cushion is now approaching 0%.Of the 410 currently reinvesting deals within the .......
Market Moves 16 June 2020
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Californian auto loans eyed
Sector developments and company hires
Californian auto loans eyed
Market Moves 12 June 2020
The Westlake Automobile Receivables Trust 2020-2 issuer has disclosed that the state of California is considering new legislation - Assembly Bill No. 2501 (AB 2501) - that could significantly impact auto loan securitisations with high concentrations of Californian loans. S&P notes that in its current form, if this legislation is enacted, it could require servicers of .......
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Synergy search
CLO manager consolidation to stay sporadic?
There have been a flurry of CLO manager mergers and transfers recently (SCI passim). However, the need for the right synergies and difficult market conditions makes it likely that such deals will remain sporadic.
“There are maybe a few consolidation candidates out there – a few of the smaller firms with only a handful of CLOs and who .......
News Analysis 11 June 2020
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Resolve and resilience
Content sponsored by Ocorian
James Maitland, regional head of Americas, Bermuda & Caribbean, and global head of capital market services at Ocorian, spoke to SCI about how resilience is benefiting the industry and his firm
With the traditional office environment disappearing almost overnight and widespread personal restrictions, we have seen a smooth transition and incredible resilience both within our own firm and across the .......
Talking Point 10 June 2020
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NCSLT consent judgment denied
Sector developments and company hires
NCSLT consent judgment denied
Fitch has affirmed 37 notes and maintained its rating watch negative placement on nine notes from 12 National Collegiate Student Loan Trust (NCSLT) securitisations. The move follows Delaware District Judge Maryellen Norieka’s decision last month not to approve a consent judgment proposed by the CFPB and purportedly agreed to by the NCSLTs.The judgment was .......
Market Moves 9 June 2020
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Changing focus
US CLO primary garners more attention
Retracement in the US CLO secondary market has been rapid. Now, bolstered by the belief, misguided or otherwise, in a v-shaped economic recovery, attention is shifting to the primary market.
“The CLO debt rally has been strong – the secondary market has been in the green for more than a week,” says Daniel Wohlberg, director at Eagle Point .......
News Analysis 9 June 2020
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Spread compression
European ABS market update
The rally in broader risk assets and the lack of new supply has boosted demand for paper in the European ABS secondary market. An increasingly acute supply/demand imbalance is expected to be supportive of valuations over the near term, however.
“We have been on a bit of tear over the last week and a half,” says one European ABS trader. .......
News 9 June 2020
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CLO business integrated
Sector developments and company hires
CLO business integrated
RBC’s US-based CLO management business is being integrated into BlueBay’s CLO management platform. Sid Chhabra, who joined BlueBay – which is owned by RBC - in 2018 to build the firm’s structured credit and CLO capabilities, will lead this team. The US-based team includes four experienced individuals and the US$500m CLOs they manage.In other news…
Market Moves 8 June 2020
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Conduit CMBS on watch
Sector developments and company hires
Conduit CMBS on watch
Market Moves 4 June 2020
S&P has placed its ratings of 96 classes from 30 US conduit CMBS on credit watch (CW) with negative implications, reflecting the bonds' exposure to the adverse impact of Covid-19 on the lodging and retail sectors, and the related uncertainty about the duration of the demand disruption. The agency says it will resolve or update the .......
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Experience counts
CLO managers surveyed
Manager differentiation remains a key issue in the CLO market, with many investors focusing on individual experience of past crises. A new survey of CLO managers by Fitch provides some reassurance in this regard.
"Whether portfolio managers have experienced a full credit cycle or two, and evaluating workloads amid the added pressures of credit quality deterioration are real .......
News 4 June 2020
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Long road ahead
CLO secondary pricing action premature?
Sentiment in the CLO secondary market is overwhelmingly positive, which is showing up in recent pricing levels. While such sentiment is hopefully not misplaced, it is perhaps somewhat premature.
“Markets are priced to perfection, which is reflected in the rally, particularly at the top of the stack,” says Laila Kollmorgen, md and CLO tranche portfolio manager at PineBridge Investments. “Clearly .......
News Analysis 3 June 2020
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More Euro CLOs on review
Sector developments and company hires
More Euro CLOs on review
Market Moves 3 June 2020
Moody’s has put a further 234 tranches from 77 European BSL CLOs on review for possible downgrade. The securities involved are rated Baa2 to B1 and below. The action brings the total number of European CLOs Moody’s has under negative review to 351, representing around 16% by count, or 6.5% by balance, of its rated .......
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New paradigm?
Trustee discretion required in virtual environment
The coronavirus crisis ushered in a new paradigm for securitisation noteholder communication and documentation processes, as remote working was enforced. This change has demanded flexibility from trustees and agents amid the uncertainty.
Morgan Krone, partner and head of the global corporate trust and agency practice at Allen & Overy, says: “I think trustees and agents have done extremely .......
News Analysis 2 June 2020
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Managers measured
CLO manager pandemic performance quantified
US CLO managers have worked harder than ever before to reduce triple-C exposure and build par in unprecedented circumstances since the start of March. Now, as rating downgrades appear to have plateaued it can be seen that their industry has met with some success, according to a new report from S&P.
“The credit profile of US CLO collateral .......
News 2 June 2020