Monday 20 January 2020 11:37 London/ 06.37 New York/ 19.37 Tokyo

A review of securitisation activity over the past seven days

Stories of the week
Consumer boost
Santander completes innovative SRTs
Under pressure
US student loan ABS holding firm so far

Other deal-related news

  • ISDA, Clifford Chance, R3 and the Singapore Academy of Law have published a new whitepaper that provides analysis on the legal issues relating to the use of smart derivatives contracts on distributed ledger technology (SCI 13 January).
  • Swiss Re has closed Sierra 2020-1 on behalf of Bayview's MSR Opportunity Fund. The US$225m catastrophe bond is the first to be issued under Rule 144A with a parametric trigger that is designed to cover mortgage default risk caused by earthquakes in California, Oregon, Washington and South Carolina (SCI 13 January).
  • The Asia-Pacific Structured Finance Association, the Hong Kong Institute of Bankers and the Asian Academy of International Law have jointly published a report offering specific recommendations on how to enhance Hong Kong's financial ecosystem to deliver institutional investment capital through securitisation to key sectors of the economy, such as infrastructure and SMEs (SCI 14 January).
  • The SFA has joined the Education Finance Council (EFC) in calling for wholesale legislation to smoothly transition FFELP student loans and the related subsidy away from Libor, to avoid potential disruption to over US$277bn of loans spread across 13 million borrowers. The EFC is working on a legislative solution that would transition the subsidy - called the Special Allowance Payment - paid to lenders on student loans originated under FFELP away from Libor (SCI 16 January).
  • A new Moody's report suggests that structured finance markets are transitioning from Libor to a new set of global reference rates, which are less volatile in stressed credit environments but can be affected by the supply of and demand for collateral. However, it notes that markets are moving at different speeds (SCI 16 January).
  • ESMA has published a consultation paper that aims to help market participants and securitisation repositories understand its expected maximum use of 'No Data' options contained within a securitisation data submission (SCI 17 January).

Data

BWIC volume

Secondary market commentary from SCI PriceABS
17 January 2020
USD CLO
A quiet end to a busy week as expected with the holiday weekend anticipated. There were four reported covers today, all BBB rated. There has not been a 2022 RP profile trade this week but today Blue Mountain's BLUEM 2017-2A C BBB covers 315dm / 7.4y WAL. The 3 x 2023 RP profile BBBs trade in a 279dm-310dm range, whilst this profile has traded 300-early 300s DM this week the MAGNE 2015-15A DR (Blackrock) outperforms the tightest comparable trade (OCT17 2013-1A DR2 from Octagon at 295dm / 7.6y WAL).
In terms of generic spread migration this week, the AAAs have widened 5bps to 120dm mainly due to a trade in a very inexperienced manager Five Arrows OCTR 2019-7A A1 at 136dm (2022 RP profile). Double-As have tightened into 161dm from 171dm at the turn of the year. Single-As have widened 24bps to 241dm with 16m of liquidity versus 9m last week.
BBB generic levels have widened 16bps to 352dm this week, despite 2023 RP profiles tightening 13bps to 323dm there was 17.5m of liquidity in 2021 RP profiles that traded in 409dm context versus 346dm last week which has driven generic BBBs wider this week. BB liquidity was 170m versus 209m last week with generic levels widening 16bps to 682dm across all RP profiles - breaking these down the 2021 RP profiles firmed 11bps to 692dm, 2022 RP profiles softened 24bps to 696dm and 2023 RP profiles softened 24bps to 697dm. There were no single-B trades to report on this week.
EUR CLO
7 x BBB, 2 x BB & 2 equity today. There is quite a spread of DMs between the BBB trades. They range from 281dm to mat to 425dm to mat. The reason for this is that the trades at the tight end have low stated margins and so would be discount price trades but the chance of a refi/reset drags their price up and lowers the DM. On the other hand the higher DM trades have higher stated margins and would be premium priced trades but the risk of a refi/reset keeps the premium down and widens their DMs.
The tightest trade is DRYD 2017-59X D1 which traded at 98.56 which is 281dm to mat or about 19% to next call date and has a 240bps stated margin. The widest trade is DRYD 2019-73X DE which traded at 101.03 which is 425dm to mat and 410dm to call and has a 425bps stated margin. This follows the pattern for BBBs which have been pricing in a range from 300dm to 400dm already in Jan.
The BBs traded in a much tighter range. Since they were both at a discount price the effect of a possible refi or reset worked in the same way for them both and in fact is not a likely outcome anyway. The range for the BBs was between 552dm and 546dm and followed their term structure.
In equity DRYD 2016-48X SUB traded at 69.55 / 13.82%. It has a NAV of 58. It just got reset in Oct 2019 so cannot be called again Oct 2021. The collateral pool contains Galapagos (German company which makes Heat Exchangers) and is severely distressed. ACLO 4X SUB traded at LM92h / 12.82%. It has a NAV of 72. It becomes callable in Jul 2020 but since the AAA is paying a margin of 75bps it does not look like there are easy gains for equity there. Interestingly ACLO 4X SUB is a more levered equity piece than DRYD 2016-48X SUB. Looking at their MVAP and MVAP (see archive for details) it can be seen that ACLO is 9.1% of the collateral pool whereas DRYD is 10.7% but to offset this ACLO attaches higher.
EUR/GBP ABS/RMBS
A bunch of ABS/RMBS today. In autos we see GBP AAA autos (COMP 2019-UK1 A) at 49dm. Italian autos at AA level traded at 35dm and German autos, also at AA, at 73dm. There are a few legacy deals. CHAPE 2007 A2 (Dutch RMBS) traded at 38dm, BCJAM 3 A2 (Spanish RMBS) at 29dm and GRIF 1 A (Greek RMBS) at 123dm. A AAA Dutch RMBS (TULP 2019-1 A) traded at 46dm and AAA French RMBS (HFHL 2019-1 A) at 32dm and 23dm (HLFCT 2019-1 A). A BBB Italian consumer loan deal (BRICO 2019-1 B) traded at 107dm.

SCI proprietary data points on NAV, CPR, Attachment point, Detachment point & Comments are all available via trial, go to APPS SCI + GO on Bloomberg, or contact us for a trial direct via SCI

 


×