Monday 14 October 2019 11:42 London/ 06.42 New York/ 19.42 Tokyo

A review of securitisation activity over the past seven days

SCI CRT Seminar
The line-up for SCI's 5th Annual Capital Relief Trades Seminar on 17 October has been finalised. Hosted by Allen & Overy, the event will take place at One Bishops Square, London and features for the first time an industry awards ceremony. Other highlights include a fireside chat between Clifford Chance's Jessica Littlewood and the EBA's Christian Moor, as well as a PwC workshop on Basel 4 capital floors. For more information on the event or to register, click here.

Transaction of the week
JPMorgan Chase Bank is marketing what is believed to be the first rated synthetic mortgage risk transfer transaction originated by a US bank - Chase Mortgage Reference Notes 2019-CL1. The deal utilises tranched CDS documentation to transfer credit risk to noteholders, with principal payments based on the actual payments received from a reference pool consisting of 979 prime-quality residential mortgage loans with a total balance of US$757.23m.
The Chase 2019-CL1 capital structure comprises seven classes notes: US$696.65m class AR1s; US$35.97m M1s; US$10.22m M2s; US$6.82m M3s; US$3.41m M4s; US$1.14m M5s; and US$3.03m Bs. Fitch expects to rate the class M notes double-A, single-A, triple-B, double-B and double-B minus respectively. See SCI 10 October for more

Stories of the week
Framework focus

EBA synthetics paper welcomed, despite concerns
Opening up
Platform hopes to securitise global banks' trade finance assets
Performance hurdles
Loan sell-offs hampering US CLOs

Other deal-related news

  • China's plan to establish a comprehensive, nationwide credit information system by 2020 is credit positive for the country's structured finance deals, because this system will reduce the risk of loan defaults and bolster recovery prospects, according to Moody's. The rating agency says this development will also help break down credit information barriers in China, which will improve the quality of loan underwriting, thereby reducing the risk of defaults in loans backing structured finance deals (SCI 9 October).
  • Lloyds' bondholders recently approved the conversion of covered bond Series 2018-3 from Libor to Sonia - the first UK covered bond or structured finance note to do so. Moody's comments that the bondholder approval is credit positive for the issuer's covered bonds and other Libor linked covered bond and structured finance securities (SCI 9 October).
  • S&P has lowered its credit rating on Intu Metrocentre Finance fixed-rate secured notes to triple-B plus from single-A. The CMBS closed in November 2013, and is secured by a single loan backed by a UK regional shopping centre (SCI 10 October).
  • Moody's has upgraded from Baa3 to Baa1 the US$375m C tranche of HSBC's capital relief trade Metrix Portfolio Distribution and affirmed the US$1.46bn (current balance) A and US$450m B tranches at Aaa and Aa1 respectively (SCI 10 October).
  • The EBA has published its 2020 agenda, detailing its work activities for the coming year. On the securitisation side, its work will mainly be focused on STS-related mandates. In 4Q20, the authority plans to publish recommendations regarding significant risk transfer practices, as well as the hierarchy of approaches for calculating CRR risk weights (SCI 11 October).

Data

BWIC volume

Secondary market commentary from SCI PriceABS
11 October 2019
US CLO
A quieter end to the week with 13 covers today - 2 x AAA, 2 x AA, 2 x A and 7 x BBB.  The >4y WAL AAAs traded in a 126dm-130dm range today, furthermore this week has seen a lot more supply week on week (23m last week) in >4y WAL AAA US CLO with around $117m of supply of 1st pay AAA but dm's on these widened 7bps on the week to 124dm, mainly due to a wide 158dm trade on ZAIS7 2017-2A A on Monday.  Ignoring this trade spreads tightened 2bps on the week to 115dm.
The AA trades today were 2 clips of OCT38 2018-1A A3A (Octagon) which traded at 185dm / 6.9y WAL, double-A BSL CLOs have traded in a 175dm-192dm range this month so today's trade sits nicely in the middle of this range. The single-A trades were two clips of VOYA 2017-3A B that traded at 260dm / 6.4y WAL, note Single-As have traded in a 252dm-290dm range so today's trade is at the tighter end of the range.  The BBBs traded in a 389dm-428dm range today whilst month to date we have observed a range of 320dm-477dm for BBBs.  Although no BB trades today, we have observed 16bps compression in BB spreads down to 732dm across 32m of supply (vs 43m last week).  Please refer to your SCI Sales representative for further details.

EUR CLO
There are 6 x AAA CVRs and 1 x BB with disclosed prices today. The AAA spreads range from 122dm to 132dm. The tight end of the range is ALME 4X AR managed by Apollo and the wide end are HARVT 17X A (Investcorp) and DRYD 2017-56X ANV (PGIM). These spreads look like a further firming in AAA levels. On 8 Oct we saw a number of AAAs trade with spreads in the range 125dm to 141dm but the majority were around 137dm. The BB is AVOCA 14X ER which traded at 100.12 / 501dm. This bond traded at M90s / 601dm on 10 Oct. BB trades on 10 Oct were in the range 600dm to 670dm so this looks like an outlier. We'll have to see if this level is maintained.

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


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