A review of securitisation activity over the past seven days

Transaction of the week
Goldman Sachs has completed an unusual catastrophe bond that covers the tail risk that State National Insurance Company is exposed to through its insurance agreements with ILS manager Nephila Capital as capacity provider. Principal reduction of the notes under the transaction - dubbed Stratosphere Re Series 2020-1 - can only be triggered after at least two industry insured loss events each greater than US$5bn occur within a single annual risk period. See SCI 27 January for more.

Stories of the week
Equity increase
Aircraft ABS volumes powering rise in growth of equity notes
Grasshopper up
Landmark green SRT finalised
Ramping up
BlueBay bolsters structured credit footprint

Other deal-related news

• The US SEC has obtained a court order authorising the distribution of over US$63m to investors in connection with its action filed against Robert Morgan and two of his entities, Morgan Mezzanine Fund Manager and Morgan Acquisitions, that alleged they engaged in a fraudulent real estate investment scheme (SCI 27 January).
• TCA Fund Management Group is liquidating its main credit hedge fund, TCA Global Credit Master Fund, after the fund received redemption and withdrawal requests in excess of available cash. The redemptions come amid a US SEC probe into the firm's accounting practices (SCI 27 January).
• During its recent 4Q19 earnings call, Sallie Mae announced plans to sell US$3bn of student loan assets to fund US$600m authorised share buyback (SCI 28 January).
• The first-ever CLO applicable margin reset executed online - via KopenTech's auction platform - saw all five tranches of TCW 2019-1 CLO refinanced successfully (SCI 31 January).
• Gedesco Finance and Toro Finance are in the market with Gedesco Trade Receivables 2020-1, a revolving securitisation backed by factoring, promissory note and short-term loan receivables extended to enterprises and self-employed individuals located in Spain (SCI 31 January).
• The CFTC, FDIC, OCC, SEC and US Fed have approved a proposed rule to revise the 'covered funds' provisions of the Volcker Rule. Comments must be received by 1 April (SCI 31 January).

Data

BWIC volume

Secondary market commentary from SCI PriceABS
31 January 2020
USD CLO
A quieter end to the week with 7 reported covers across IG and sub-IG - 2 x AAA, 1 x A, 3 x B and 1 x Equity. The AAAs were both short daters with trading levels 85dm / 1.7y WAL and 90dm / 3y WAL. The single-A ARES 2014-1A BR (Ares) covers 211dm / 3y WAL (2018 RP profile) which is wide to the last 2018 comp GALXY 2018-29A C (Pinebridge) 2 weeks back 174dm despite much better MV metrics, but has a higher ADR 0.58% (v 0.1%), higher sub80 exposure 3.42% (v 1.3%), higher WARF 3225 (v 2863), lower diversity 57 (v 71) and lower par build -1.5 (v -0.53).
The single-Bs are all 2018 RP profiles trading in a 691dm-970dm range - at the tight end is OFSBS 2014-7X F (OFS) 691dm / 4.5y WAL (105.2 MVOC / 4.91 MVAP / 1.17 ADR) whilst at the wide end are CVPC 2014-2A D (Credit Value) and AVERY 2014-1A E (Bain Cap) trading 970dm/922dm / 4y WAL with much weaker MV metrics driving the softer levels (MVOCs 101-102 / MVAPs 1-2) as well as higher ADRs 1.5-1.7% with the latter metrics also having a pronounced effect given their proximity to loss as second loss tranches.
We modelled OCT37 2018-2A SUB (Octagon) to a yield of 9.97% / 4.7y WAL at a cover of 75.5 cash price (NAV 61.3) and to a call of EoRP+24m (EoRP is 2023) and applied asset level haircuts (with the 8 defaulted assets modelled to recover 18m and immediate default - including notably 2 x Constellis Cov-Lite TLs due 2024 $1.7m at MV 27.75. The deal has a relatively high ADR 1.25%, 2.7% sub 80 priced assets exposure and WARF / Diversity are healthy at 2748 and 76 respectively.
In terms of secondary market spread direction week on week, >4y WAL AAAs have tightened 5bps on the week to 107dm. AAs at the shorter end have softened with 2019 RP +5dm (145dm) and 2020 RP +13dm (163dm) on the week, at the longer end, 2022 RP -1dm (169dm) and 2023 RP -1dm (167dm). Single-As have firmed across most RP profiles, eg. 2019 RP -11dm (180dm) at the short end and 2022 RP -28dm (223dm).
Triple-Bs have widened across most maturities, at the short end (2019 RP +24dm to 311dm ) and longer end (2023 RP +25dm to 347dm). Double-Bs have widened across all maturities/RP profiles, at the short end 2019 RP +125dm to 779dm and long end 2023 RP +12dm to 698dm. Single-Bs have also widened across all maturity profiles, 2019 RP +140dm to 935dm and 2022 RP +112dm to 967dm, whilst 2023 RP profiles are relatively stable +4dm to 886dm.
EUR CLO
Quiet end to the week. There are 3 x BB & 1 x equity. The three BBs all have a margin of 566bps to 575bps which is where new issues are pricing. They have all traded around 100.50 which is around 590dm|mat which is about 10bps tighter than new issue DM. None of them have an immediate call risk with the first call coming between 0.5yrs to 1.5yrs. If they did get called the buyer would be getting between 500dm and 580dm for the short WAL.
HARVT 7X SUB traded at 46.50 / 14.99%. Its NAV is 44. It contains Prezzo Restaurants which is in CVA. The deal is refinanceable now and the AAA pays a margin of 92bps so there is some value there, which would mean its yield excluding refi value is even higher.
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.