A review of securitisation activity over the past seven days

Market commentary
The Dilosk No. 2 Irish legacy RMBS was in focus in the European primary market last week (SCI 6 November).

“It has been taking up all of my time because the extension risk is significant,” explained one trader. “The bonds are pricing with a set of discount margins, with the aim of mitigating extension risk.”

Initial price thoughts of 90bp-95bp DM were released for the transaction’s senior notes, which eventually printed at 90bp DM, with a three-month Euribor plus 75bp coupon.

Meanwhile, European CMBS issuance is expected to pick up in the coming months (SCI 5 November). Morgan Stanley is currently in the market with a Dutch deal named ELOC 32 (Oranje), while Blackstone’s Arrow CMBS 2018 is set to price this week.

“CMBS is a class that has been lagging behind the rest of the sector and we are now seeing a come-back in the last few months of the year,” another trader explains. “We are waiting to get some colour on where the main CMBS in Europe is at. These two deals will let me know if there is room for more new issues in the space.”

In the US, high new issue volumes continued in the CLO market, with managers paying more to get their deals away before year-end (SCI 8 November). BWIC activity also remained strong, in line with the market rally resulting from the US midterm election results.

One trader reported a divergence between primary and secondary spreads. “BWICs are doing quite well, but new issues are drifting wider than expected,” he noted.

The trader explained that the secondary market is well bid and it could either “follow new issues wider” or “just bounce around sideways” in the coming week.

Transaction of the week
The EBRD is boosting its foothold in the Greek non-performing loan market with co-investments in Piraeus Bank and Alpha Bank (SCI 8 November). The transactions are the first to be carried out under the bank’s NPL resolution framework.

The EBRD’s first transaction under its NPL resolution framework was a €25m co-investment in Alpha Bank. The EBRD invested alongside Waterfall Asset Management and B2Holding.

The initial NPL portfolio sale from Alpha Bank to B2Holding was announced in March as part of Alpha Bank’s efforts in meeting the non-performing exposure (NPE) reduction targets it had agreed with the Bank of Greece and the ECB’s Single Supervisory Mechanism (SSM).

In the Piraeus deal, the IFC, the EBRD, APS Delta and Balbec Capital are jointly investing €50m in an unsecured NPE portfolio. The EBRD’s portion is €15m.

The EBRD launched its €300m NPL resolution framework in November 2017 to support efforts aimed at resolving the persisting challenge of high levels of NPLs in many of its countries of operations. It invests alongside partners in central, eastern and south-eastern Europe, Greece, Cyprus and Turkey.

The facility allows the bank to acquire minority stakes in NPL servicers, invest in NPL portfolios and provide senior debt instruments to co-investors for the purchase of NPL portfolios. According to Andreea Moraru, head of NPL investments at the EBRD, all three types of investments would be right for the Greek market.

Other deal-related news

• Banca Popolare del Lazio has transferred €120.5m in non-performing loans to a securitisation vehicle called Pop NPLs 2018 (SCI 8 November). The senior notes are expected to be guaranteed under the GACS scheme.
• The trustee for the ACIS CLO 2013-1, 2014-3, 2014-4, 2014-5 and 2015-6 deals has filed proofs of claim on behalf of the secured parties in the Acis Capital Management bankruptcy case (SCI 2 November). Unless otherwise instructed prior to the close of business on 13 November, it does not intend to vote, object or submit pleadings with respect to the plan. However, Highland Capital Management has filed a motion for an order dismissing the debtors' Chapter 11 cases or, as an alternative, converting the cases to Chapter 7 for Cause (SCI 9 November).

Regulatory round-up

• The EBA’s recent stress tests point to a limited capital impact from the implementation of IFRS 9 (SCI 9 November). The negative impact of IFRS 9 first implementation on banks’ aggregate CET1 ratio is -20bp on a fully loaded basis and -10bp on a transitional basis, according to the stress tests. Individual bank figures range between negative 104bp to positive 97bp, with Hungarian, Irish, Italian and Polish banks experiencing the largest declines.
• The US Department of Justice has notified UBS that it intends to file a civil complaint against it related to UBS's issuance, underwriting and sale of legacy RMBS (SCI 8 November). UBS anticipates that the complaint will seek unspecified monetary civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) regarding RMBS transactions that date back to 2006 and 2007. The bank says that the DOJ’s claims are not supported by the facts or the law, and it will contest any such complaint vigorously because it was not a significant originator of US residential mortgages and suffered massive losses on its investments in US mortgage-related assets when the housing market collapsed.

Data

Pipeline composition by jurisdiction (as of 9 November)

Pricings
The primary US ABS market saw heightened activity last week, with about US$4bn pricing on 7 November alone. CLOs accounted for much of the remaining prints.

Non-auto related ABS made up the bulk of last week’s new issues: US$1.11bn DLL 2018-2, US$166.38m Fortiva Retail Credit Master Note Business Series 2018-One, US$315.47m Marlette Funding Trust 2018-4, US$275m Mariner Finance Issuance Trust 2018-A, €1.14bn Multi Lease AS, US$688.39m Navient Private Education Refi Loan Trust 2018-E, US$549m SoFi Consumer Loan Program 2018-4 and US$320m Wingstop Funding Series 2018-1. The auto-related new issues were: US$198.2m First Investors Auto Owner Trust 2018-2, US$1.13bn Ford Credit Floorplan Master Owner Trust A Series 2018-3 and US$573m World Omni Select Auto Trust 2018-1.

Last week’s CLO pricings included €409.5m Avoca CLO XIX, €411m Dryden 66 Euro CLO 2018, US$405.1m ICG US CLO 2018-3, US$817m Madison Park CLO XXXI, €412m OZLME V and US$153.7m Peaks CLO 3. There were a handful of CLO refinancings too: US$422m Octagon Loan Funding, US$581.4m OZLM VIII, US$140m TCI-Symphony CLO 2016-1 and US$618.97m THL Credit Wind River CLO 2015-1.

The sole RMBS print was €286m Dilosk RMBS No. 2.

BWIC volume

Source: SCI PriceABS

Conference
The speaker line-up is confirmed for SCI’s 4^th Annual Marketplace Lending Securitisation Seminar, which is being held on 14 November, at 250 West 55^th Street, New York. Hosted by Arnold & Porter, among the topics that the event will explore are how new technologies are impacting the ABS market, how marketplace ABS structures have evolved and relative value opportunities across the asset class. The keynote speaker is Senator Christopher J Dodd. Click here for more information and to register.