Monday 21 December 2020 11:17 London/ 06.17 New York/ 19.17 Tokyo

A review of securitisation activity over the past seven days

Last week's stories
Agricultural SRT prepped
Lloyds readies Fontwell II
Baltic SRT finalised
First synthetic under Luxembourg law
Bellemeade 2020-4 comes in at $337m
3-tranche MILN has higher than usual LTV pool
Call for further improvement
'Unambitious' NPL strategy launched
CRT super spreader
Asset manager ArrowMark, a long-time investor in CRT, sees increased US usage
Delayed defaults
German auto ABS support weighed
Full stack resilience
Volumes down, but not out
Leasing debut
NPL ABS expected to benefit from GACS
Leasing, SME SRTs executed
Unusual capital relief trade completed
Margin call
CLO equity arbitrage doubts raised
On the cards
2020 credit card spending low, suggesting slim ABS issuance to continue
STACR 2020-DNA6 prints
All tranches of new STACR print well inside guidance
UK corporate SRT inked
NatWest finalises capital relief trade
Improving sentiment
Opportunities rebound in aircraft ABS market (Full story as follows)
Aircraft ABS secondary market activity all but dried up with the onset of Covid-19, until trading began picking up in September and October. At the same time, investors with capital began sourcing higher yielding opportunities in the sector.

Some aircraft ABS class A notes that were trading in the low-70s in April and May are now trading in the mid/high-90s, while some B tranches are showing price improvements from the high-30s to the high-70s.

"If you look at what happened in the A, B and C debt tranches, during April/May time, there was quite a drop in the prices and that has since rebounded. This is mainly due to an improving sentiment regarding contracted lease and maintenance reserve payments coming into the structures, as well as positive news regarding a vaccine," says Mark Rogers, md at Floreat Aviation Capital.

He continues: "In all ABS deals, the lessors will have agreed lease deferrals with a number of the lessees within the structure. This will impact cashflows coming into the ABS. In addition, as many aircraft have either been parked or suffered reduced utilisation rates, the maintenance reserve payments coming into the structure have been markedly reduced, ultimately impacting principal and interest revenues to all tranches."

Consequently, for many aircraft ABS, interest is being paid on the A and B tranches, with partial principal payments on class A tranches only. "It is important to look at each ABS in isolation," Rogers notes. "The wider aviation industry and, in particular, investors in ABS structures - as Floreat is - is hopeful that everyone is going to start flying again. We want lease deferrals and 'Power by the Hour' (PBH) agreements to be behind us and revenues coming back into the ABS structures."

Nevertheless, the winter months are identified as being particularly challenging for airlines and it is possible that some may fail. Rogers identifies 'survivor' airlines as those with government or strong shareholder support, with a strong positioning in their particular market, access to the capital markets and the ability to draw on liquidity. Airlines are also restructuring fleets and strengthening their balance sheets.

Against this backdrop, those with capital have the ability to source higher yielding opportunities in the sector. For example, Castlelake recently formed a partnership with Boeing to provide financing solutions for new commercial aircraft deliveries (SCI 1 December) and PIMCO is collaborating with GECAS on an aviation leasing platform (SCI 21 October).

"PIMCO has seen there is an opportunity to invest in the market now. This period of dislocation - where there is a great need by lessees and lessors for capital, combined with a lack of bank and institutional capital available - is an investment opportunity. The greatest investment opportunities arise after periods of market disruption, as was seen in the 2-3 years post the 2008/2009 GFC," notes Rogers.  

Floreat, for one, believes that Q1/Q2 next year will be the right time to invest. "It is exactly how we are positioning our capital," Rogers concludes.

Jasleen Mann

Other deal-related news

  • Brit has printed its debut catastrophe bond, dubbed Sussex Capital UK PCC Series 2020-1 (SCI 14 December).
  • The EBA has published an opinion on the amendments proposed by the European Commission in connection with the EBA's final draft RTS specifying the methodology competent authorities should follow when assessing institutions' compliance with the requirements to use the internal ratings-based (IRB) approach laid down in the CRR (SCI 14 December).
  • When managers acquire CLOs, the underlying portfolios become more like the existing portfolios of the acquiring manager, according to a new report from Fitch (SCI 16 December).
  • Freddie Mac has closed its debut social impact M-Deal, a first-of-its-kind multifamily securitisation secured by 27 mission-focused properties for low-income residents, many of whom are disabled, seniors with disabilities or homeless veterans (SCI 16 December).
  • ESMA-listed STS securitisations have seen a year-on-year increase of 90%, according to PCS figures (SCI 16 December).
  • The Bank of England has extended by six months the TFSME, covering both the drawdown period and the reference period of the scheme (SCI 18 December).
  • Fitch has taken various rating actions on 1427 classes of notes from 67 GSE credit risk transfer RMBS issued between 2013 and 2020 (SCI 18 December).
  • Following an RFC issued in July, Moody's has updated its methodology for rating auto loan and lease ABS, which will result in rating actions for approximately 162 tranches across 100 transactions backed by auto loan pools (SCI 18 December).

Company and people moves

  • Alter Domus has appointed Tim Houghton coo and a member of its group executive board, based in Luxembourg (SCI 14 December).
  • CLSA Capital Partners has closed its first secured private debt strategy - the Lending Ark Asia Secured Private Debt Fund (SCI 14 December).
  • Josh Eisenberger, md at Sculptor Capital Management, has been promoted to co-head of Sculptor's US CLO management business, with a focus on portfolio management and fundamental credit analysis(SCI 16 December).
  • S&P and IHS Markit have unveiled the future divisional structure of the combined company, effective upon completing their pending merger (SCI 18 December).
  • Michael Gramins has been sentenced by US District Judge Robert Chatigny to two years of probation, after defrauding MBS customers of Nomura Securities International during his employment there (SCI 18 December).
  • The FHFA is seeking comments on a notice of proposed rulemaking regarding liquidity requirements for Fannie Mae and Freddie Mac, which build on existing FHFA guidance and the experience gained from managing the enterprises' liquidity positions in conservatorship (SCI 18 December).

Recent research to download
CLO Case Study Autumn 2020
Autumn 2020 CRT Report

Upcoming events
SCI's 2nd Annual Middle Market CLO Seminar
21 January 2021, Virtual Event
SCI's 5th Annual Risk Transfer & Synthetics Seminar
March 2021, Virtual Event
SCI's 3rd Annual NPL Securitisation Seminar
May 2021, Virtual Event


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