SCI Start the Week - 2 December

Category: ABS Capital Relief Trades CLOs

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A review of securitisation activity over the past seven days

Transaction of the week
Credit Agricole is marketing a securitisation of Dutch consumer loans originated via subsidiaries of Credit Agricole Consumer Finance Nederland (CACF NL). Dubbed Magoi, the transaction references a €418m eight-month revolving pool of 23,282 unsecured, fixed-rate personal loans and displays several differences compared to previous transactions from the firm.
This ABS is also structured to meet the STS criteria, marking the first Dutch STS deal that isn't an RMBS, and the full stack is also being offered to investors. The transaction is only the second publically offered deal from the seller with their previous transaction, Matsuba, having launched in October 2016, according to analysts at Rabobank. (See SCI 29 November for more)

Stories of the week
Indian innovation
Diverse Indian ABS market sees growing, global investor base
Italian SRT inked
UBI Banca seals the triple

Other deal-related news

  • The World Bank has issued the first cat bond transaction to provide natural disaster cover to the Philippines and the first cat bond listed on the Singapore Exchange. The transaction features two tranches of cat bonds to provide the Philippines with financial protection of up to US$75m for losses from earthquakes and US$150m against losses from tropical cyclones for three years (SCI 25 November).
  • Provident Funding Associates, a non-bank mortgage lender, has prepped its inaugural securitisation of residential mortgages, marking the first post-crisis, private label securities (PLS) transaction backed entirely by agency conforming consumer-purpose residential mortgage loans. Dubbed Provident Funding Mortgage Trust 2019-1, the US$338m transaction is the first in which Provident Funding is the sole originator and servicer and is backed by 947 agency-eligible mortgage loans (SCI 27 November).
  • Recent market developments in in the Cessione del Quinto (CDQ) and Delegazione di Pagamento (DP) loan market are credit positive for ABS, according to structured finance analysts from Moody's. The analysts add that increasing regulatory scrutiny limits the risk of poor underwriting, while lower capital requirements support further loan growth (SCI 27 November).
  • The US OCC and Federal Deposit Insurance Corporation are proposing a rule to clarify the law around interest rates state banks may charge their customers, still unresolved since the Madden vs Midland case. The rule would help to provide clarification when a national bank or savings association sells, assigns or otherwise transfers a loan, interest permissible prior to the transfer continues to be permissible following the transfer (SCI 27 November).
  • Following publication of the Delegated Regulation (EU) 2019/1851 in the Official Journal of the European Union on 6 November 2019, it is now entering into force as of 26 November 2019. The overarching objective of the homogeneity requirement is to enable investors to assess the risks of the underlying pool of assets on the basis of common points of comparison (SCI 27 November).
  • Nodax Bank subsidiary, Svensk Hypotekspension, has prepared a 48-year, non-call 4-year, SEK-denominated senior secured bond for the purpose of refinancing of Svensk Hypotekspension Fond 3 AB (publ), subject to market conditions. The bond will be backed by a portfolio of equity release mortgages originated by Svensk Hypotekspension (SCI 27 November).
  • Fitch has upgraded several tranches of multiple Finsbury Square UK RMBS transactions. The upgrades are a result of new rating criteria, deal deleveraging and the completion of the prefunding period (for FSQ 2019-1) as reasons behind the upgrades (SCI 28 November).


BWIC volume

Secondary market commentary from SCI PriceABS
26 November 2019

With markets gearing up for the Thanksgiving break, with no lists expected (as of now) tomorrow we observed 16 covers today – 9 x AAA, 1 x A and 6 x BB rated.  With all but one of today's AAAs with a WAL of >4y, they traded in a 122dm-138dm range (all 2022/2023 RP profiles) which is fairly representative of our latest generic >4y AAA spread levels of 127bps, especially when we omit the obvious outlier from today which is a 2023 RPE MP11 2017-2A A (Marble Point) which covers 138dm / 4.9y WAL – this has a lo-MVOC 145.2, lo-MVAP 31.1 whilst deal metrics are weak (sub80 assets 9%, WARF 2917, diversity 71 and 37bps of defaults). When you compare this to the tight end of the range PLMRS 2018-2A A1A (Palmer Sq) covers 122dm / 5.4y WAL which has a 157.1 MVOC, 36 MVAP and much stronger deal metrics (sub80 asset 2%, WARF 2623, 78 diversity for instance).

The single-A trade of the day was GALXY 2017-23X C1 (PineBridge) which is a 2021 RP profile which covers 269dm / 5.7y WAL (note week MVOC 116.3 / par build -0.37), which is tight to our single-A generic spreads 280bps but interesting to note this is the first single-A 2021 RP profile trade of this month to date, with 2022 RPEs trading 260dm-272dm with a 315dm outlier in VENTR 2017-29A C whilst the only 2020 RP profile trading 230dm 2 days ago.  In a month that we have seen heavy BB supply, especially over the past week, the BB trades today were from 2020-2024 RP profiles.  A less frequent 2024 RP profile BB tranche from a recently closed Oak Tree Capital deal, tight end of this month's 723dm-992dm range covers at 783dm / 10y WAL today.

Today's BBs in aggregate traded in a 200bps range, 639dm-839dm, with an interesting dynamic as the explanation for the 200bps swing.  The 2020 RP profiles traded at the tight and wide end, at the tight end was APID 2015-21A DR (CVC) 639dm / 6.2y WAL (MVOC 104.4, hi-diversity 91, 2828 WARF, 4.9% sub80 assets, par build -0.36, strong Jnr OC cushion 4%) whilst at the wide is SNDPT 2016-1A ER (Sound Point) with a cover of 839dm / 6y WAL (MVOC 104.2, lo-diversity 75, 2506 WARF, 4% sub80 assets, par build -0.34, Jnr OC cushion 4.6%) so not much between the two from a fundamentals point of view, however upon analyses of the managers there are differences in profile – CVC has a better annual default rate (39bps) than peer managers (69bps average), strong par build (+0.08) than the same cohort (-0.18)  and stronger avg interest diversion test 3.8% v 3% cohort.  Sound Point on the other hand has a weaker annual default rate (58bps) than CVC, weaker par build (-0.71) than CVC and weaker avg interest diversion test 2.6% v 3.8% for CVC – careful assessment of Manager metrics at this end of the rating scale certainly have more of a bearing given the proximity to loss and successful management of OC.

A number of mezzanine trades today. There is a single A, fixed rate, Finnish auto trade at S+94. There are French autos: AA at 88dm & BBB at 136dm. AA Italian auto at 108dm. BB French consumer loan at 136dm. Single A Dutch prime RMBS at 146dm. AA Irish Non-conforming RMBS at 147dm. AA French prime RMBS at 84dm and finally a pre-crisis Spanish RMBS which is now rated AA+ at 78dm.

3 x AAA, 1 x AA, 2 x A & 2 x B today. All 3 AAAs traded at a discount price and have been priced to maturity. All of them also closed in 2018. There was very consistent pricing with all 3 trading between 124dm and 125dm for WALs around 4.3yrs. This is around the AAA spreads we were seeing before, perhaps a little firmer. ACCUN 3X A traded on 20 Nov at 136dm / 4.23yr for a similar WAL and TIKEH 2X AR traded at 123dm / 2.92yr for a shorter WAL on 8 Nov. The AA trade is BABSE 2018-2X B1A which traded at 197dm / 5.82yr. Again, if anything, this is a very slight firming eg SPAUL 3RX B1R traded at 200dm / 5.45yr on 20 Nov.

In the single As DRYD 2018-66X C traded at 99.52 / 274dm / 6.9yr. HARVT 21X C traded at 100.16dm / 294dm to mat / 6.9yr. This bond is not callable for another 1.4yrs and it's DM to call is around the same as to mat. These spreads are unchanged from previous single A spreads. The single B trades were CORDA 7X FR (CVC) at 965dm / 8.13yr and NEWH 2X FR (Bain) at 971dm / 6.93yr. Both these bonds have similar OC levels.

The equity trade is OHECP 2015-3X SUB (Oak Hill) which traded at 45.00 / 18.84% / 4.17yr. Its NAV is 39. This deal was reset in 2017 and has been callable since July 2019. With the AAA paying a margin of 90bps this is potentially possible. We estimate the refi uplift to be worth around 1.5pts. The deal is performing adequately; WARF is above average at 2986, defaults are higher than average at 0.76%, Junior OC cushion is below average at 3.73% but Return on Equity has been above average at 18%.There are 2 defaulted assets in the pool: New Look (29) and Lecta (41). In addition there are some other distressed names eg L1R HB & La Financiere Atalian.

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