SCI Start the Week - 16 April

Category: ABS CLOs CMBS


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

Pipeline
The newly-announced transactions remaining in the pipeline at the end of last week comprised ABS and RMBS. The ABS deals were backed by auto, equipment and whole business collateral.

The auto ABS were: US$611m Canadian Pacer Auto Receivables Trust 2018-1, US$1.1bn CarMax Auto Owner Trust 2018-2, €488m Driver Italia One, Exeter Automobile Receivables Trust 2018-2, US$1.06bn Ford Credit Auto Lease Trust 2018-A and MBARC Credit Canada 2018-A. The equipment ABS included US$333.1m Ascentium Equipment Receivables 2018-1 Trust and C$390m CNH Capital Canada Receivables Trust Series 2018-1, while US$825m Domino's Pizza Master Issuer series 2018-1 and US$250m Driven Brands Funding Series 2018-1 accounted for the whole business securitisations.

Finally, the newly-announced RMBS consisted of: US$342.8m Citigroup Mortgage Loan Trust 2018-RP2, Flexi ABS Trust 2018-1, US$381.65m Mill City Mortgage Loan Trust 2018-1, £761m Paragon Mortgages No. 25, US$338.67m Sequoia Mortgage Trust 2018-4, US$140.13m SG Residential Mortgage Trust 2018-1 and £308.7m Tower Bridge Funding No. 2.

Pricings
ABS also dominated last week’s pricings. A couple of RMBS and a CMBS rounded out the issuance.

The US$1bn Chesapeake Funding II Series 2018-1, US$201.82m CPS Auto Receivables Trust 2018-B, €761m FCT Cars Alliance Auto Loans 2018-1 (re-offer), US$1.22bn GM Financial Consumer Automotive Receivables Trust 2018-2, US$873.2m Hyundai Auto Receivables Trust 2018-A and US$1.01bn Santander Drive Auto Receivables Trust 2018-2 made up last week’s auto ABS issuance. The US$104.66m Dividend Solar Loans 2018-1, US$200m ELFI Graduate Loan Program 2018-A, US$235.25m Mosaic Solar Loan Trust 2018-1, US$213m OnDeck Asset Securitization Trust II Series 2018-1, US$200m PFS Financing Corp Series 2018-C and US$300m Series 2018-D, and US$680.6m SoFi Consumer Loan Program 2018-2 also priced. Meanwhile, the RMBS were A$501m Light Trust 2018-1 and US$339.97m Tricon American Homes 2018-SFR1, and the CMBS was €531m FROSN 2018.

Editor’s picks
Mortgage 'institutionalisation' gains traction: The Dutch mortgage market continues to receive high levels of interest from investors, but RMBS faces stiff competition from other funding options like covered bonds and whole loan strategies. However, securitisation remains well-suited to funding the development of the fast-growing buy-to-let sector in the Netherlands, due to its lack of homogeneity and current light-touch regulatory regime…
Microfinance ABS regroups after defaults: A number of Indian microfinance loan securitisations recently defaulted, halting a trend of strong performance and steady growth in the asset class. While demonetisation is partly to blame, lender overexpansion and the introduction of a competing credit instrument also took their toll…
Provisioning impact muted: The ECB and European Commission have both put forward new rules for minimum loss coverage, which are a step towards improving provisioning practices across Europe and avoiding future unreserved non-performing loan build up. Although having two different sets of rules may create regulatory uncertainty across the banking sector, the impact for NPL securitisation seems muted…

Deal news

  • Loosening documentation and a greater proportion of income being distributed to subordinate noteholders have sparked concern that US CLOs are becoming too equity-friendly. Nevertheless, headwinds may be approaching for equity investors as a result of a Libor mismatch.
  • Build America Mutual Assurance Company (BAM) is in the market with what is believed to be the first ILS to transfer the risk of loss on a portfolio of financial guarantees. The Fidus Re Series 2018-1 transaction features US$100m twelve-year class A notes, with a five-year par call.
  • Non-performing loan securitisation volume has outpaced outright sales in Italy, as banks seek to benefit from the GACS guarantee scheme. The trend is expected to continue this year, thanks to a strong track record over the last 12 months and an investment shift towards Southern Europe.
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