SCI Start the Week - 12 March

Category: ABS CDO CLOs


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A look at the major activity in structured finance over the past seven days.

Upcoming event

SCI Risk Transfer & Synthetics Seminar – Tomorrow (13 March), New York

SCI’s Synthetic Securitisation Seminar provides an in-depth exploration of how synthetic securitisation is being utilised to transfer risk, achieve capital relief and create bespoke investment opportunities in the post-financial crisis environment. Panels cover capital relief trade structuring and regulatory considerations, issuance trends, index tranches and mortgage credit risk transfer.

Pipeline

Pipeline activity accelerated sharply last week as market participants returned from their desks after the industry conference in Las Vegas. There were 19 ABS and also an ILS, as well as six CLOs, five CMBS and two RMBS.

The ABS were: US$251.3m American Credit Acceptance Receivables Trust 2018-1; Bavarian Sky France Auto Leases 3; BL Cards 2018; US$1.052bn Capital Auto Receivables Asset Trust 2018-1; US$233.75m CommonBond Student Loan Trust 2018-A-GS; US$750.2m Enterprise Fleet Financing 2018-1; US$805m Ford Credit Floorplan Master Owner Trust A Series 2018-1; US$345m Ford Credit Floorplan Master Owner Trust A Series 2018-2; US$278.2m Foursight Capital Automobile Receivables Trust 2018-1; US$192.5m JG Wentworth XLI Series 2018-1; A$523.56m Latitude Australia Credit Card Loan Note Trust Series 2018-1; US$263.19m OneMain Financial Issuance Trust 2018-2; €598m Quarzo CQS 2018; US$850m Santander Retail Auto Lease Trust 2018-A; US$768.4m Sapphire Aviation Finance I; US$147m Skopos Auto Receivables Trust 2018-1; US$675.7m SoFi Professional Loan Program 2018-B; US$250m Triton Container Finance VI Series 2018-1; and VCL 26. The ILS was US$360.75m Radnor Re 2018-1.

The CLOs were: US$409.5m AIMCO CLO Series 2018-A; US$714m Ares XLVII CLO; €370.4m Carlyle Euro CLO 2018-1; €488m Dryden 59 Euro CLO 2017; US$564m Galaxy XX CLO; and US$512m Venture 31 CLO.

The CMBS were: Bancorp Commercial Mortgage 2018-CRE3 Trust; US$405m CGGS Commercial Mortgage Trust 2018-WSS; US$887.1m GSMS 2018-GS9; US$165m Ready Capital Mortgage Trust 2018-4; and US$722.448m WFCM Trust 2018-C43. The RMBS were European Residential Loan Securitisation 2018-1 and US$444m Nationstar HECM Loan Trust 2018-1.

Pricings

As several deals arrived in the pipeline, so several went the other way. There were 10 ABS prints along with four CLOs, four CMBS and six RMBS.

The ABS were: US$625m Discover Card Execution Note Trust Class A 2018-1; US$550m Discover Card Execution Note Trust Class A 2018-2; US$480m DT Auto Owner Trust 2018-1; US$504m ECMC Group Student Loan Trust 2018-1; US$437m NextGear Floorplan Master Owner Trust Series 2018-1; £1.224bn Private Driver UK 2018-1; RMB2.79bn Rongteng 2018-1; US$600m Trillium Credit Card Trust II 2018-1; US$1.18bn Verizon Owner Trust 2018-1; and US$800.57m World Omni Automobile Lease Securitization Trust 2018-A.

The CLOs were: US$463m AMMC CLO 2018-22; US$650m Carlyle Global Market Strategies 2014-1R; US$510.68m Octagon Investment Partners 36 CLO 2018-1; and US$510m TICP CLO X 2018-10.

The CMBS were: US$475m Hilton Orlando Trust 2018-ORL; US$210m Natixis Commercial Mortgage Securities Trust 2018-PREZ; US$179m Natixis Commercial Mortgage Securities Trust 2018-RIVA; and US$1.35bn RETL 2018-RVP.

The RMBS were: US$1bn CAS 2018-C02; €500m EDML 2018-1; A$550m Firstmac Mortgage Funding Trust No. 4 1-2018; US$1.8bn Freddie Mac SCRT Series 2018-1; US$1.364bn-equivalent Holmes 2018-1; and £388m Precise Mortgage Funding 2018-2B.

Editor's picks

Euro CLO manager behaviour 'deserves scrutiny': A recent issuer consent payment provides another example of European CLO manager behaviour increasingly favouring equity to the detriment of noteholders. As risk retention dominates thoughts on both sides of the Atlantic, recent actions in the European market, where underwriting standards are loosening, point to a weakening alignment of manager and investor interests…

Efficiency drive: Credit Suisse is pioneering the re-tranching of capital relief trades, following the implementation of the new securitisation framework in Switzerland (SCI 9 February). However, more widespread re-tranching activity is expected to emerge over the next 24 months, as issuers seek to retain the efficiency of their transactions…

Predicted Euro CMBS pickup awaited: There has been plenty of speculation that European CRE is in the late-cycle stage, and retail exposure has also prompted concerns. With last month's ECB announcement that CMBS is no longer repo eligible, a weak reception for the latest deal and the increasing use of untranched bonds, the market's future is uncertain…

Cyber tops ILS agenda: The insurance sector continues to push the boundaries of innovation, with new product offerings in terror and nuclear risk already structured and a cyber risk ILW said to be in the pipeline. There are also hopes that cyber and terror ILS products may lead to repeat issues and so buck the trend for one-offs in the sector…

CRE CRTs pick up: Synthetic securitisations referencing commercial real estate are attracting more investor interest, following the issuance of three transactions at the end of last year (see SCI’s capital relief trades database). Representing the first post-crisis synthetic CRE deals, issuance is being driven by high risk weights for specialised lending and investor step-in rights…

Deal news

  • Permira Debt Managers last week priced Providus CLO I, representing its first CLO 2.0 deal and the beginning of a new CLO management platform. The €362.5m transaction is also one of the first European CLOs to adhere to ESG eligibility criteria, including restrictions on the nature of industries in which the fund will invest and a commitment to assess ESG issues ahead of the investment decision.
  • Two innovative US RMBS transactions are marketing from both sides of the agency/non-agency divide. AIG has brought its debut self-sponsored deal to the market, while Fannie Mae is preparing a US$1.007bn CAS transaction, with notable departures from previous offerings.

Regulatory update

  • Germany’s Federal Administrative Court has ruled that cities in Germany can impose restrictions on diesel vehicles. The ruling has the potential to lead to diesel car bans throughout the country, with a potential impact on German auto ABS transactions.
  • The new Basel 4 capital framework (SCI 14 December 2017) is expected to increase Dutch bank RWAs by approximately 25%, on a pro forma basis, equivalent to around 300bp of CET1. However, the impact is expected to be manageable, considering strong capitalisation and profitability levels, as well as the long implementation timeframe.
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