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SCI Start the Week - 25 January

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A review of securitisation activity over the past seven days

Last week's stories
CMBS sailing
Stormy waters ahead and astern, but the US CMBS market has avoided the iceberg
Eviction limitations extended
New law poses risk for Spanish asset quality
Issuer substitutions
VAT reversal results in redomiciled CLOs
Italian green SRT debuts
GARC programme broadened further
Libor lives on
Likely postponement of USD Libor expiry gives structured finance market breathing space
Litigation on the cards?
SLABS default rates causing concern
Risk transfer return
Commerzbank inks private SME SRT
Italian SRTs finalised
Third-party risk-sharing prospects raised
The EIF has completed two synthetic securitisations with Banca Monte dei Paschi di Siena (BMPS) and Banco BPM (BBPM). The transactions were the last significant risk transfer trades to be carried out with the supranational as the Juncker plan came to end in December 2020. Consequently, this opens the junior tranche segment to private investors and hence the possibility of more risk-sharing transactions (SCI 9 January 2019).

The BMPS trade is a €100m guarantee that references a €1.5bn portfolio, with tranches that amortise over a three-year WAL and a time call that can be triggered after the WAL. According to Nils Boesel, structurer at the EIF: "Our guarantee for MPS is under the SME initiative, so it covers virtually the whole stack - including the mezzanine and junior tranche - while MPS retains the senior. This enables substantial lending to SMEs, since it reduces the margin for SME loans in Italy. However, close to 30% to around 40% of the portfolio is subject to payment holidays and that was something that our SME approach had to adjust for."

Meanwhile, Banco BPM's €76m mezzanine trade references a static €1.8bn Italian SME portfolio that amortises over a two-year portfolio WAL and features a time call that can be exercised after the WAL has run its course. Further features include synthetic excess spread and a 1% retained first loss tranche.

Karen Huertas, structured finance analyst at the EIF, comments: "Unlike the MPS trade, the BBPM transaction doesn't fall under the SME initiative but under the Juncker plan, so it only covers a mezzanine tranche and does feature excess spread in line with most of the more traditional EIF SRTs. According to the terms of the agreement, the bank will have to originate new loans at six times the size of the mezzanine tranche. Most of the additional lending will go to the most Covid-affected Italian regions, such as Lombardy."

The transaction was arranged by UniCredit. Banco BPM has only issued two capital relief trades until now and both have been with the EIF, although it has confirmed that it is open to transactions with private investors.

A bank source notes: "We are open to transactions with private investors, although the extent to which we will tap the market will depend on market conditions. According to our capital management plan, we intend to issue more than one synthetic securitisation over the next three years."

Looking ahead, Giovanni Inglisa, structured finance manager at the EIF, concludes: "The Juncker plan has come to an end in December 2020, so now we aren't in a position to do single-B deals, but only double-B transactions. Nevertheless, this opens the junior segment to private investors. I would expect more risk-sharing deals this year, where we guarantee an upper mezzanine tranche, but a private investor takes on the junior or lower mezzanine piece."

Stelios Papadopoulos

Other deal-related news

  • Annualised equity dividend yields across European CLOs averaged 12.9% in 2020, down from 15.1% in 2019 and below the 15% yearly average for the 2014-2020 2.0 era, according to research from Bank of America (SCI 18 January).
  • Moody's has upgraded the ratings of two CLNs and three credit protection deed tranches of Santander's UK synthetic auto securitisation Motor Securities 2018-1, reflecting increased levels of credit enhancement for the affected notes (SCI 18 January).
  • The EIB Group has guaranteed a mezzanine tranche of a synthetic securitisation issued by Bank für Tirol and Vorarlberg (SCI 20 January).
  • Morgan Stanley is in the market with an Irish RMBS that securitises a portfolio of 2,405 owner-occupied and buy-to-let predominantly reperforming loans. Dubbed Shamrock Residential 2021-1, the €425.4m deal features an innovative yield supplement overcollateralisation of 4% that is included to mitigate the low weighted average rate of 1.7% on the loans (SCI 20 January).
  • The IHS Markit CMBX.14 index is expected to launch on 25 January, uniquely referencing 25 conduit CMBS issued between September 2019 and December 2020 (SCI 21 January).
  • Castlelake has priced Castlelake Aircraft Structured Trust 2021-1, its seventh aircraft ABS and the first such transaction to be completed since the beginning of the Covid-19 pandemic (SCI 21 January).

Company and people moves

  • Jennifer Law has joined Aon's Asia Pacific capital advisory unit within its reinsurance solutions business (SCI 18 January).
  • Loomis Sayles has promoted Kyra Fecteau to portfolio manager for securitised credit strategies managed by its mortgage and structured finance team, which helps oversee US$30.4bn in securitised investments across both dedicated mandates and as part of broader investment strategies (SCI 18 January).
  • Fidelity International has established a new private credit capability with experienced hires from AnaCap-owned MeDirect Bank (SCI 20 January).
  • Integral ILS has received a cornerstone investment from New Holland Capital. Integral has now secured US$600m of signed commitments for its new dedicated ILS strategy (SCI 20 January).
  • LendingClub has signed a definitive agreement to acquire Radius Bancorp and its wholly owned subsidiary Radius Bank in a cash and stock transaction valued at US$185m (SCI 20 January).
  • New York finance partner Bonnie Neuman has been appointed head of Cadwalader's real estate finance practice (SCI 20 January).
  • Jan Petersen is set to succeed Michael Curtis as head of corporate credit at MeDirect Bank, based in its London office (SCI 21 January).
  • Varagon Capital Partners has named Edward Kung as an md in the business development and investor relations team (SCI 21 January).
  • Lionheart Strategic Management has entered into a loan acquisition agreement with Schroder Investment Management North America, targeting US$250m in transitional and distressed real estate credit investments (SCI 21 January).


Recent research to download
CLO Case Study Autumn 2020
Autumn 2020 CRT Report

Upcoming events
SCI's 2nd Annual Middle Market CLO Seminar
25 February 2021, Virtual Event
SCI's 5th Annual Risk Transfer & Synthetics Seminar
March 2021, Virtual Event
SCI's 3rd Annual NPL Securitisation Seminar
May 2021, Virtual Event