Winner: Retiro Mortgage Securities

Innovation in securitisation doesn’t always represent an overt major leap forward; much like the market itself, nuance is often the key. The seemingly simple advance of structuring a 144A deal and making it the first European non-performing loan securitisation readily accessible to US investors has won Innovation of the Year as hopefully the precursor to a vastly expanded market through a broader potential investor base.

The €470m Retiro Mortgage Securities deal – sponsored by Oaktree Capital Management and arranged by Morgan Stanley – features a vertical structure for the management of four sub-portfolios, with a mortgage lender, an SPV with credit rights over the loan collateral and a respective propco with security rights over the REO assets.

At closing, the NPL collateral calculated at 30 November 2020 had a total current balance of €678.4m and the REO assets were valued at €396.2m. The four sub-portfolios - Wind, Tag, Normandia and Tambo - were acquired between 2015 and 2017 by OCM Luxembourg OPPS X, which operates as sponsor and retention holder in the transaction.

The assets were originated by Banco Sabadell, Bankia, Caja De Ahorros De Valencia, Castellon Y Alicante (Bancaja), Caja De Ahorros Layetana, Caja De Ahorros La Rioja, Caixa D´Estalvis Laietana and Deutsche Bank. The portfolio is composed of senior secured loans (accounting for 94.5% of current balance), junior secured loans and REO assets. The portfolio is highly seasoned, with the weighted average time since default close to 11 years.

The underlying properties are mainly residential (77.8% of indexed property value) and concentrated in Valencia (27.1%), Catalonia (26.3%) and Andalucía (14.2%). The majority (66.9%) of borrowers are corporates or SMEs.

To ensure the flow of transaction-related funds between the various SPVs, a number of loan agreements were entered into by the issuer and the mortgage lenders, as well as the mortgage lenders and their respective propcos. Under these agreements, at the closing date, the issuer made advances to the mortgage lenders (using note proceeds) and the mortgage lenders used these funds to make advances to the respective propcos. Portfolio collections, as well as principal and interest payments under each mortgage lender/propco loan agreement are used to repay the principal and interest due on the issuer/mortgage lender loans.

Retiro Mortgage Securities was the first public Spanish NPL securitisation since Prosil Acquisition (SCI 10 July 2019). The portfolio is serviced by Redwood MS (as master servicer), VicAsset Holdings (as master servicer and REO servicer), Redwood Real Estate Spain (as REO servicer) and RTA Management Gestion Integral de Activos (as loan servicer).