A review of securitisation activity over the past seven days

Transaction of the week
ResponsAbility Investments has announced the first closing of an innovative climate fund, set up as a blended finance structure that offers different classes of risk and has received commitments from a number of public and private investors. The private debt fund addresses the lack of access to clean power globally, with a strong focus on Sub-Saharan Africa, as well as South and Southeast Asia. See SCI 23 January for more.

Stories of the week
Bespoke service
Emma-Jane Fulcher answers SCI's questions
Long road ahead
Climate change management in US RMBS slow to appear
NPL ABS settled
Multi-originator trend continues

Other deal-related news

• Bankrupt DSB Bank is preparing for the possible sale of its loan portfolio by winding down its securitisation programmes. The Dutch bank is beginning with consumer ABS Chapel 2003-1 before hoping to move on to its other four outstanding ABS and RMBS deals (SCI 21 January).
• The EIF and UniCredit have increased the InnovFin SME guarantee, enabling UniCredit to offer - via its nine banks and six leasing entities across Central and Eastern Europe - additional financing worth €500m to innovative SMEs and small mid-caps in Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Hungary, Romania, Serbia, Slovakia and Slovenia. The transaction brings UniCredit's commitment under the initiative to a total of €1bn (SCI 21 January).
• Eight trade associations, including the American Bankers Association and SIFMA, have written to FHFA director Mark Calabria responding to the recent request for input (RFI) on UMBS pooling (SCI 17 December 2019). The letter states that while the FHFA's "well-intentioned effort" to address liquidity and other concerns in the UMBS market is appreciated, the RFI includes proposals that could have negative consequences for the RMBS market and mortgage borrowers, which "should not be implemented" (SCI 22 January).
• Re/insurance electronic marketplace AkinovA recently completed a landmark parametric cyber risk transfer trade, with full regulatory oversight from the Bermuda Monetary Authority, under AkinovA's insurance regulatory sandbox license. The product was a quarterly parametric cyber instrument, purchased by an asset manager in the financial services sector (SCI 22 January).
• The People's Bank of China's Credit Reference Center last week upgraded its credit information system to record and provide more comprehensive credit information on individuals and enterprises. The upgraded system can lead to better measurement and understanding of risk by lenders, which is credit positive for the asset quality of their loan books and any securitisations that include the new loans, according to Moody's (SCI 23 January).
• Charter Mortgages is set to sell its junior economic interest in the Precise Mortgage Funding 2020-1B RMBS, while the lender's parent OneSavings Bank is set to sell its junior economic interest in the Canterbury Finance No.1 securitisation (SCI 23 January).

Data

BWIC volume

Secondary market commentary from SCI PriceABS
24 January 2020
USD CLO
A strong end to the week with 25 covers reported - 8 x AAA, 12 x BB and 5 x B rated.  With the majority of AAAs short dated, the >4y WALs traded 110dm-115dm (smaller managers King St and Greywolf), these are amongst some of the tightest levels we have seen in a while for non-benchmark names, which may well trigger refi activity should there be more liquidity at these levels.  Note that we calculated a modest 2bp of tightening week on week in >4y WAL AAAs to 118dm.  With 12 x BBs today and a range of RP profiles the trading levels were 608dm-788dm, breakdown as follows:
 

• 2023 RP profiles traded 608dm-672dm, with BLUEM 2018-3A E at the wide end 672dm / 8.4y WAL (MVOC 106.03 / ADR 1.58% / MVAP 5.69 / MVOC 106.03
• 2022 RP profiles traded 620dm-639dm with an outlier CGMS 2013-3A DR cover 769dm (low MVAP 4.5 / MVOC 104.7 / ADR 0.94%
• 2021 RP profiles traded 649dm-685dm with an outlier CGMS 2013-2X ER 788dm cover / 6.1y WAL - low MVAP 3.85 / MVOC 104 / ADR 0.9%
• 2020 RP profiles trades 610dm / 5.6y WAL

The single-Bs traded in a number of profiles too.  The 2019 RP profiles had a wide dispersion given performance metrics, at the tight end NEUB 2015-19A ER2 795dm / 5.3y WAL (MVOC 104.66 / MVAP 4.46 / WARF 2859 / sub 80 0.43%) whilst at the wide end is WINDR 2015-2A F 1166dm / 5.6y WAL (MVOC 102.57 / MVAP 2.51 / WARF 3075 / sub 80 6.1%).  Whilst the 2023 RP profile single-Bs traded 868dm-896dm, these are the tightest consistent levels at this end of the rating scale for some time.
In terms of week on week moves, the AAAs we covered above.  AAs softened 9dm to 170dm this week, but this is based upon double the liquidity $48m vs last week's $24m.  Single-As have tightened 44dm to 197dm, BBBs have tightened 60dm to 292dm albeit 35m v 51m of liquidity last week.  BBs have widened 14dm to 696dm based upon $111m of liquidity vs $170m last week.  Finally single-Bs have ended the week on the much tighter note, as mentioned, trading in a 860dm generic context whilst levels around the turn of the year were in the mid-late 900s area.
EUR CLO
Another day with a lot of trading: 11 x BBB, 9 x BB, 1 x B & 2 equity. Looking at the BBBs the 4 tightest trades are all at a discount price. These trade tight because a refi works in their favour and thus their dm to mat reflects this positive optionality. These trades have priced with DMs in the range from 277dm to mat to 319dm to mat. The other 7 BBBs have all traded wider and are all at a premium price. A refi is a negative event for these bonds and thus they are limited by their DM to call. These 7 bonds have traded in a range from 335dm to mat to 375dm to mat but their dm to calls have been around 250 for 0.5yr to around 200dm for 0.2yrs.
The BBs have traded in a range from 513dm to mat to 587dm to mat. They are all around the same WAL and all at a discount price so the difference in spread is due to the manager and the credit. The tight end of the range is BLUME 2016-1X ER (Blue Mountain) at 513dm and the wide end is CRNCL 2017-8X E (Cairn) at 587dm.
The single B is CIFCE 1X F (CIFC) which traded at 99.68 / 887dm to mat / 8.32yr. In equity DRYD 2015-39X SUB traded at 99.08 / 12.63%. Its NAV is 82. This deal was reset back in 2017 and is callable now. With the AAA paying a margin of 87bps there is some benefit to the equity in a refi.
The equity in this deal is quite highly levered at x 11.8 but it attaches quite high at -1.1%. BECLO 1X SUB traded at 84.11 / 11.91%. Its NAV is 69. This deal was reset in 2018 and becomes callable in Mar 2020 but since the AAA pays a margin of 71bps there is less of an obvious benefit to equity in a refi. The collateral pool is very clean with only two semi-distressed positions: TMF Group (Business services) and Curaeos (Dentistry healthcare).
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.