Monday 23 December 2019 12:30 London/ 07.30 New York/ 20.30 Tokyo

A review of securitisation activity over the past seven days

Transaction of the week
A pair of Italian non-performing loan securitisations – dubbed Futura 2019 and Iseo SPV – have closed. The former is notable for being only the second Italian NPL ABS to not benefit from a GACS guarantee, following the issuance of Belvedere SPV in December 2018.
Futura 2019 is the first issuance sponsored by Guber Banca and securitises assets with a gross book value of €1.256bn originated by 53 different local cooperative banks. The pool includes cash at closing of around €6.5m resulting from collections between 30 June and 22 November, as well as around €15.6m of cash in court ready for distribution. See SCI 17 December for more.

 

Stories of the week
Canadian restructuring
Alberta energy market stress hits CMBS
Economic efficiency
Standardised bank SRT pros, cons weighed
Nordic SRT inked
Nordea returns with capital relief trade

SCI's latest podcast is now live!
In this episode of the SCI podcast, Mark Pelham and Corinne Smith discuss our new research report on standardised banks' capital relief trades and where European securitisation investors are looking to find relative value in the year ahead.
This podcast and previous episodes can be accessed via the SCI site, online here as well as wherever you usually get your podcasts, including Spotify and iTunes (just search for Structured Credit Investor).

Other deal-related news

  • In an unsolicited comment, Fitch last week suggested that the overall benefits of US whole business securitisation are often overstated, especially considering the increase in market activity and sectoral breadth seen this year (SCI 16 December).
  • US securitisation market participants are having to address a melee of important issues ahead of year-end. The one that appears to be causing the most ire, however, is the FHFA’s recent request for input (RFI) regarding GSE pooling practices for the formation of TBA-eligible UMBS (SCI 17 December).
  • Proposed restructuring terms have been agreed for the Fairhold Securitisation CMBS, which would - if implemented - deliver between 57% to 73% recovery for the class A notes on a sale of the underlying assets, based on an illustrative £700m-£800m enterprise value for the group at December 2019 (SCI 18 December).
  • Pennsylvania Treasurer Joe Torsella has announced that a proposed stipulation of settlement has been filed to resolve outstanding claims against all remaining defendant banks in a lawsuit alleging price-fixing of GSE bonds (SCI 18 December).
  • Hoist Finance has acquired a French non-performing mortgage portfolio with more than 3,500 claims and an outstanding balance of approximately €375m (SCI 19 December).
  • The Financial Stability Board has published a report assessing the financial stability implications of developments in the global leveraged loan and CLO markets. Based on a combination of available data and analyses from FSB members, the report concludes that vulnerabilities in the sector have grown since the financial crisis (SCI 19 December).
  • FMO and Munich Re have established a new unfunded risk participation programme, which will allow Munich Re to invest in the UN sustainable development goals by participating in FMO transactions for a total amount up to US$500m over the next three years via its risk-sharing framework agreement (SCI 19 December).

Secondary market commentary from SCI PriceABS
19 December 2019

USD CLO
24 covers today – 4 x AAA, 2 x AA, 2 x BBB, 10 x BB and 6 x Equity.  The >4y WAL AAAs traded in a 120dm-136dm range, with the PPM CLO 3 Ltd A tranche cover 136dm / 4.4y WAL and has a mediocre MVOC 152.46 whilst the deal performance metrics are fairly sound with only some concentrations in Oil & Gas or Retail (both ~3.5%) whilst all the other metrics look reasonable, the manager PPM America is however very inexperienced with 2 deals in the market meaning a ‘new’ manager premium is levied.
The AAs traded 153dm-175dm for 2020 and 2023 RP profiles including Octagon and CVC Credit managed CLOs, which is also tight to yesterday’s 178dm levels for a 2023 RP profiles.
The BBBs traded 334dm-356dm for 2021/2023 RP profiles (tight to the 337dm-423dm range yesterday), with a PGIM Dryden 53 CLO D tranche covering 334dm / 7.4y WAL.
The BBs today and yet again traded across 5 RP profiles (2020-2024) in a 556dm-765dm range (vs a 598dm-677dm range yesterday ‘s comps), with 2 outlier trades, Carlyle Global Market Strategies CLO 2015-4, Ltd (covers 765dm / 9.7y WAL) and LCM XV Limited Partnership (covers 746dm / 7.44y WAL) resulting in a 556dm-688dm range excluding the outliers which is a shade tighter to yesterday’s trading levels.
There were 6 Equity tranches today with reported covers, for these we apply a deeper dive valuation methodology to incorporate the idiosyncratic risks (eg. asset level haircuts, equity call timing, basis, asset reinvestment and so forth) and generate a 16.27% YTC on Madison Park Funding XX PS (CSAM), 14.51% YTC on OHA Credit Partners XII (Oak Hill) and 11.96% YTC on THL Credit Wind River 2017-4 CLO (THL Credit).  The Dryden 40 Senior Loan Fund PS (PGIM) covers at 52 which is equivalent to ~1.25/1.3y CF over the NAV (29.3) with 3.75y RP and 6m NCP available for CF, Octagon Investment Partners 31 PS (Octagon) covers 56.75 which is ~1y CF over NAV (37.9) with 2.5y RP available for CF given NC has now passed.  There is another equity from Octagon Credit Octagon Investment Partners 36 covers 79.92, which is equivalent to ~2y CF over NAV (33.8) with 3.3y RP and 7m NCP available for CF.

EUR CLO
Probably one of the last sets of EUR trades before the holidays, we have 5 x AAA, 2 x A & 3 x BBB today. None of the AAAs are callable yet but all look to be refi candidates with margins between 96bps and 114bps. All of them priced at a premium which gives DMs to maturity between 124dm and 132dm and DMs to call between 129dm and 144dm (don’t forget the higher par DM for the bond that is getting called). All 5 deals were issued in 2019 but the Fair Oaks deal stands out because it has a considerably shorter WAL than the others. Its NC End Date is one year or more earlier than the other deals and its RP End Date is around 3.5yrs sooner than the others. These AAA trades represent around an 11bps softening from the levels of 113dm to 120dm seen in the middle of Dec.
The single As traded between 250dm to 255dm to mat for around 6.5yr WAL. There were a number of single A trades in the middle of Dec. The single A curve displays a pronounced term structure with spreads around 200dm for 5yr WAL, todays trades at 250dm for 6.5yrs and spreads of 275dm for 7.2yrs.
The BBBs traded between 352dm to 386dm for 6.86yrs to 7.10yrs. All the deals are performing well but CGMSE 2014-2X CRR has the highest OC levels (121.98% versus around 118% for the other two). Recent BBB spreads have been around 345d to 360dm so the JUBIL 2018-21A D trade at 386dm which at first glance seem a bit on the wide side is explained by the long WAL of 7.1yrs. From a credit point of view it is performing as well as most deals.
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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