Monday 20 April 2020 10:59 London/ 05.59 New York/ 18.59 Tokyo

A review of securitisation activity over the past seven days

Last week's stories
Bilateral activity

Opportunistic capital redeployment underway
Coverage cleared
Debut programmatic ILW trade executed
Discounted opportunities
Insurers target SRT secondary market
Forbearance foreseen
Euro CMBS cash-trap thresholds eyed
Forbearance risks
Pre-2015 GSE deals could suffer losses
Price volatility
Liquidity constraints hit credit risk transfer
Risk transfer reboot
Large corporate SRTs prepped
Second wave
Widespread CLO rating downgrades add further uncertainty
TALF sparks rally
US CLO seniors tighten, but Fed support may not be enough
Uncertain ratios
OC senior test failures accelerate, but options remain for some CLO managers to cure breaches
Unified approach
Canadian CMBS servicing challenges surveyed

Other deal-related news

  • The US Internal Revenue Service has issued a revenue procedure that permits loans subject to certain forbearances and related modifications as a result of the Covid-19 pandemic to be contributed to, and held in, REMICs and grantor trusts without jeopardising the tax status of these vehicles (SCI 14 April).
  • Orrick has advised the noteholders in the third rated securitisation of oil and gas wellbore interests, this transaction being the second for Diversified Gas & Oil. Fitch has assigned a triple-B rating to the US$200m 5.25% notes issued by Diversified ABS Phase II (SCI 14 April).
  • All conditions necessary to trigger the World Bank's Pandemic Emergency Financing Facility catastrophe bonds have been met, except for a positive growth rate of Coronavirus cases in International Development Association and International Bank Reconstruction and Development countries (SCI 14 April).
  • Ginnie Mae has introduced a new version of the existing Pass-Through Assistance Program (PTAP) for use by issuers facing a temporary liquidity shortfall directly attributable to the Covid-19 national emergency (SCI 14 April).
  • Fitch reports that it is making assumptions for Covid-19 related payment holidays to test cashflow adequacy for timely payment of interest to the US RMBS triple-A and double-A notes it rates, using Hurricane Maria as a proxy for the potential spike in delinquencies (SCI 15 April).
  • Senior US CMBS loans with unsecured subordinate debt (such as mezzanine or preferred equity) show significantly lower default rates than senior loans with secured subordinate debt (such as B-notes) at comparable leverage points, according to Fitch (SCI 16 April).
  • Fitch is requesting feedback on an exposure draft of its US RMBS coronavirus-related analytical assumptions criteria that will be used during the duration of the current economic crisis when rating US RMBS (SCI 16 April).
  • Moody's suggests that loan repricing will increase interest rate mismatches for Chinese structured finance deals, posing a higher risk for RMBS than auto ABS, given the longer loan terms and the greater share of floating-rate loans (SCI 17 April).
  • Following a recommendation by the Eurogroup on 9 April, the EIB has backed the creation of a €25bn European Covid-19 guarantee fund, which should enable the bank to increase its support for European companies up to an additional €200bn - with a focus on SMEs (SCI 17 April).
  • The EBA has published an opinion responding to the European Commission's intention to amend the EBA's final draft RTS on assigning risk weights to specialised lending exposures before endorsing them (SCI 17 April).

SCI NPL Securitisation Awards 2020
Award nominations remain open and have a revised deadline of 24 April. Further information and details of how to pitch can be found here.

Data

BWIC volume

Secondary market commentary from SCI PriceABS
16 April 2020
USD CLO
A very active day with 24 covers - 2 x AAA, 3 x A, 7 x BBB and 12 x BB rated. There is a fixed rate AAA that trades to a 3.96% yield, this is ANCHF 2020-10A AV that closed only a month back. The other AAA is a FRN PLMRS 2015-2A A1R2 (Palmer Sq) and covers 196dm / 3.9y WAL.
The single-As trade 388dm-459dm which is tighter than the 410dm-475dm range seen in recent days, so at the tight end RRAM 2018-3A BR2 (Apollo) covers 388dm / 6.34y WAL - this is from an experienced manager but weaker stats and represented with higher risk taking on this deal (WARF 3126, high ADR 1.28 and low diversity 64) showing investors are able to start taking more risk not at the compromise of return.
With the large number of BBBs from various RP profiles the trading range today is 595dm-969dm, so at the tight end we now see sub600 DMs for BBB for the first time post-vol with the tightest levels seen in 640dm context until today, bonds from Napier Park and Apollo break through into 5-handle territory.
There are 12 BBs today with a trading range of 1056dm-1526dm across 2021-2025 RP profiles, so at the wide end we continue to see levels as wide as 1500dm but at the tight end we now break through 1200dm with a 1056dm trade (PLMRS 2018-2A D - Palmer Sq) - please see PriceABS for a full listing of the BB trades and associated data.
EUR CLO
Just one BB today. BNPAM 2018-1X E traded at M60s which we calculate to be around 1260dm / 8yr. The CCC bucket has ticked up, as reported this month, but is still only 0.9% according to Moodys and 1.8% according to S&P. The MVOC for this tranche is 93.9%.
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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