A review of securitisation activity over the past seven days

Market commentary
The US CLO market last week made up some lost ground after a tough start to the year (SCI 16 May).

"We're at last heading in the right direction, after five to six months of widening or trading sideways," said one trader.

"The arb is tough and loan issuance is slow right now, making new issuance tricky, and at the same time reset volumes have slowed significantly," the trader explained. "Despite this, even though corporates have moved strongly for some time, CLOs didn't move until the last two weeks when we've seen CLO mezz rally and triple-As have stabilised in primary and started to tighten in secondary."

As a result, the trader said: "There's a positive feeling for the first time for quite some time, the trade war notwithstanding. It's still hard to know whether that's the real thing or just a Twitter thing. If it does last, then the general improvement in tone could, of course, dissipate."

Transactions of the week
Two European buy-to-let RMBS from non-bank issuers are marketing (SCI 15 May). One comes from a first-time Dutch issuer and another is an inaugural issuance from a UK lender.

The Dutch transaction from Domivest is dubbed Domi 2019-1 and is a static €267m securitisation backed by 960 loans with an average current balance of €277,643. According to Rabobank analysts, most of the loans are backed by multiple properties, with the average being 1.6 houses and average seasoning of 6.8 months.

Domivest was set up by Cervus Capital Partners and started originating loans in 2017, building up a portfolio of €365m. The Rabobank analysts note that the deal is not STS-compliant, but will seek ECB repo-eligibility.

Another European debut BTL RMBS issuer is marketing, this time from Shawbrook Bank. The £308m static transaction, dubbed Shawbrook Mortgage Funding 2019-1, comprises loans secured by mortgages on UK buy-to-let residential properties extended to 1,141 borrowers.

A notable feature of the transaction is the use of SONIA as a reference rate. As such, on each quarterly interest payment date, the coupon on the notes is calculated by compounding the daily SONIA rate for the calculation period.

Moody's notes that the transaction is supported by none of the borrowers in the pool having adverse credit history. The rating agency also says that the transaction has a better interest coverage ratio compared with other similar transactions it rates, as well as low weighted average LTVs of 67.7%, with no loan having an WA LTV of higher than 80%.

Other deal-related news

• Hoist Finance has confirmed in its latest 2019 interim report that it will securitise part of its non-performing loans, due to regulatory demands for higher risk weights for purchased defaulted assets. The securitisation option is unusual for debt collectors, given that they have to surrender some of the upside on their defaulted assets to third-party investors and - unlike other debt collectors - Hoist is regulated as a credit market company and is therefore subject to the bulk of banking regulations (SCI 16 May).
• The US$503.5m Cloverleaf Cold Storage Trust 2019-CHL2 is believed to have become the first CMBS to pay off a month after making its inaugural bond payment. The single-borrower deal - collateralised by Cloverleaf Cold Storage facilities - had its first interest payment in April and then paid off with the May remittance cycle, according to Trepp (see SCI's loan events database for more CMBS news).
• The EIB and the EIF have provided CaixaBank with a €100m guarantee for an existing loan portfolio, which will enable the bank to mobilise up to €600m of additional financing for Spanish SMEs and mid-caps (SCI 14 May). This is the first guarantee for a mezzanine tranche of a SME loan securitisation operation, in which the EIB, the EIF and CaixaBank are participating together in Spain.
• Freddie Mac has introduced a new offering designed to help financial institutions with less than US$10bn in assets access additional liquidity for the financing of affordable housing (SCI 14 May). The newly created Private Placement PC Swap execution (PPP) facility - a variant of Freddie Mac's 55-day Multifamily PC Swap - enables a lender to swap a pool of loans backed by affordable properties for Freddie Mac Multifamily PCs backed by the loans, which can then be sold to investors, returning liquidity to the financial institution.
• Dock Street Capital Management has replaced State Street Global Advisors as investment manager to Diogenes CDO I. Moody's has determined that the appointment will not at this time impact the ratings of any notes issued by the ABS CDO. For more CDO manager transfers, see SCI's database.

Regulatory round-up

• Synthetic securitisations referencing unlikely-to-pay loans are a more promising prospect than synthetic securitisations of NPLs, given their potential as an IFRS 9 hedge, according to panellists at SCI's recent NPL securitisation seminar in Milan. However, regulatory challenges and the issue of defining UTPs and credit events remain open questions (SCI 17 May). 

Data

Pricings
A slew of auto ABS issuance hit the market last week, with 10 transactions pricing. The remaining prints consisted of non-auto related ABS, CLO and RMBS deals.

The auto ABS transactions comprised: £430m Bumper UK 2019-1, US$338.99m Flagship Credit Auto Trust 2019-2, US$366.97m GMF Floorplan Owner Revolving Trust 2019-1, US$681.52m GMF Floorplan Owner Revolving Trust 2019-2, US$650m Hertz Fleet Lease Funding 2019-1, US$400m Hyundai Floorplan Master Owner Trust Series 2019-1, US$350m Mercedes-Benz Master Owner Trust 2019-A, US$650m Mercedes-Benz Master Owner Trust 2019-B, US$1bn Santander Drive Auto Receivables Trust 2019-2 and US$285m United Auto Credit Securitization Trust 2019-1. The non-auto related securitisations were US$751.14m CNH Equipment Trust 2019-B, US$450m MVW 2019-1, US$174.24m Prosper Marketplace Issuance Trust 2019-2 and €1.11bn Sunrise 2019-1.

A trio of RMBS printed: US$919m Arroyo Mortgage Trust 2019-2, A$299m Mortgage House Capital Mortgage Trust No. 1 and US$525m-equivalent Pepper Residential Securities Trust No. 24. Finally, among last week's CLO pricings were €300m Carlyle Global Market Strategies Euro CLO 2016-2 (refinancing) and US$407m Symphony CLO XXI.

BWIC volume

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