A review of securitisation activity over the past seven days

Transaction of the week
Jack in the Box is marketing an inaugural US$1.45bn whole business securitisation backed by 2,240 franchised quick service restaurants distributed across the US (SCI 19 June). Dubbed Jack in the Box Funding 2019-1, the transaction has been announced despite a number of criticisms from the firm's franchisee association.

Jack in the Box will use around US$1.054bn of net proceeds from the debt issuance to repay existing debt in its entirety and to pay transaction fees and expenses, with excess proceeds used for general corporate purposes. But the transaction has faced criticism from the Jack in the Box National Franchisee Association, which says the securitisation will impair their rights under the franchise agreement, and follows previous criticisms from the association regarding the company's management team and company performance. This culminated in a vote of no confidence in the ceo, as well as filing complaints with the California Department of Business Oversight and the Superior Court of the State of California for the County of Los Angeles.

S&P comments that some of the accusations of mismanagement stem from claims that Jack in the Box withheld an audit of the marketing fund and that the company mischaracterised a tenant improvement contribution programme for purposes of shifting the company's financial obligations to the franchisees. The rating agency notes that the firm has hit back, saying that the franchisees are trying to exert leverage over the company to extract certain concessions.

The rating agency adds that "evidence to date seems to support management's claim", as there have been no defaults or delinquencies in payments coming from its franchisees, scheduled remodelings have continued and the existing franchisees have absorbed 100% of the refranchised stores. As such, S&P says that under the current circumstances, it is unlikely that this will lead to substantial cashflow deterioration.  

Other deal-related news

• Distressed investors are anticipated to become more aggressive in generating cash and overcome the significant complexity associated with on-boarding and servicing tens of thousands of non-performing loans. The move is in light of some rated NPL securitisations performing below business plan expectations in terms of collections (SCI 17 June).
• Standard Chartered has completed a risk transfer transaction that references a US$1bn portfolio of corporate revolvers. Dubbed Chakra 3, the US$90m CLN is the third in a series of programmatic corporate capital relief trades, as the bank builds up its corporate and institutional banking business in the US and Europe while managing concentration risks through the credit cycle (SCI 21 June).
• The first securitisation backed exclusively by distributed network systems (DNS) assets has hit the market. ExteNet Issuer Series 2019-1 is secured by around 5,800 nodes associated with 267 multi-carrier and multi-technology outdoor and indoor DNS networks and related licenses and equipment (SCI 18 June).
• An Irish re-performing loan RMBS has hit the market. The €336.56m Shamrock Residential 2019-1 is backed by owner-occupied (accounting for 92.98% of the pool) and buy-to-let loans that are currently in the mortgage book of Lone Star Funds, which acquired them in 2015 (SCI 20 June).
• KBRA has withdrawn its ratings from Honor Automobile Trust Securitization 2016-1, after the notes were paid in full on 17 June (SCI 20 June). Given the remaining pool factor was less than 20% of the cut-off date pool balance, the servicer exercised its option to purchase the trust property and redeem the notes.
• Moody's has downgraded the provisional ratings of the class D, E and X notes in Mortimer BTL 2019-1 from Baa1, B3 and B1 respectively to Baa2, Caa1 and B2. The move reflects the correction of an input error by Moody's in the yield vector assumption used in its cashflow analysis (SCI 18 June).
• The implementation of the restructuring of Ballantyne Re has been completed and distributions were made to noteholders on 17 June (SCI 15 April). In addition, DTC has allocated escrow CUSIPs to the scheme notes to facilitate the distribution of the deferred consideration (expected to represent up to approximately 1% of the par value of the scheme notes) to the scheme noteholders and the Assured Guaranty financial guarantees trust interests to the Assured Guaranty guaranteed noteholders (SCI 20 June).
• Mount Street Portfolio Advisers (MSPA) has been appointed successor asset manager to Talon Funding I (SCI 19 June). Portigon Financial Services was previously collateral manager on the deal, as well as swap counterparty - although the swap was novated to Erste Abwicklungsanstalt (EAA) in May 2016, following the transfer of Portigon to EEA. For more CDO manager transfers, see SCI's database.

Regulatory round-up

• FHFA director Mark Calabria last week, in the agency's annual report, encouraged Congress to enact housing finance reform that seeks to increase competition to Fannie Mae and Freddie Mac - by chartering new housing finance providers - and strengthen the FHFA's safety and soundness powers. Moody's notes in its latest Credit Outlook publication that a materially lower market share for the GSEs would erode the creditworthiness of both companies and could lead the rating agency to reduce its assumptions of extraordinary federal government support (SCI 18 June).
• Three Capital One cardholders have filed a putative class action in the Eastern District of New York alleging the rates of interest they paid to a securitisation trust unlawfully exceed the 16% threshold in New York's usury statutes. As such, the plaintiffs are seeking to recoup the allegedly excessive interest payments and an injunction to cap the interest rates going forward (SCI 20 June).

Data

Pricings
Last week saw a mixed bag of new issuance from Europe and the US. Auto and consumer ABS accounted for the majority of prints, but several CLOs, CMBS and RMBS also priced.

The auto ABS new issues comprised: US$764.08m Bank of the West Auto Trust 2019-1, US$434.22m Carvana Auto Receivables Trust 2019-2, US$1.05bn Ford Credit Auto Owner Trust 2019-B, US$193.96m Foursight Capital Automobile Receivables Trust 2019-1, €543m Golden Bar (Securitisation) Series 2019-1, US$525m Harley-Davidson Motorcycle Trust 2019-A and US$509.15m Wheels SPV 2 Series 2019-1. The consumer ABS were: €1.83bn Caixabank Leasings 3, US$269.60m Consumer Loan Underlying Bond Credit Trust 2019-P1, US$167.63m Sunnova Helios III Series 2019-A, US$485m Horizon Aircraft Finance II, US$350m Lendmark Funding Trust 2019-1, US$560m Navient Private Education Loan Trust 2019-D, US$850m Synchrony Card Issuance Trust Series 2019-2 and US$381m World Financial Network Credit Card Master Note Trust Series 2019-B.

The US$584.08m Anchorage Capital CLO 9 (refinancing), US$508m Black Diamond CLO 2019-2, US$508.5m Octagon 44 CLO, US$506.5m Rockford Tower CLO 2019-2, US$425m THL Wind River 2012-1 (refinancing) and US$403.65m Voya CLO 2019-2 deals were among last week's CLO prints. The RMBS new issues were €825m Green Apple 2019-1 NHG and US$579m Verus Securitization Trust 2019-2, while the CMBS were £283m Cold Finance and US$435m FREMF 2019-KG1.

BWIC volume

Upcoming SCI event
Middle Market CLOs, 26 June, New York