Monday 30 March 2020 11:07 London/ 06.07 New York/ 19.07 Tokyo

A review of securitisation activity over the past seven days

Transaction of the week
Northern Arc Capital and fintech platform CredAble have closed a trade finance securitisation backed by invoice receivables. The transaction is the first rated and listed invoice receivables-backed ABS from India.
Kshama Fernandes, md and ceo of Northern Arc Capital, says: "Banks and non-banking financial companies (NBFCs) have traditionally been present in this space and have been discounting these invoices directly. However, this exposes them to idiosyncratic anchor/vendor risks, since there is a single underlying exposure." See SCI 23 March for more.

Last week's stories
Closing the gap
Audentia Global answers SCI's questions
Cloudy outlook
RMBS perseveres amid market volatility
CRT deals disclosed
Intesa publishes capital management strategy
Forced selling
REITs struggling to meet margin calls
Liquidity risk
Pandemic pressure on NPL performance
PPIP call
CRT and non-agency MBS still in need of purchasing power
SASB stress
RWN action reflects hotel pressure
TALF response mixed
Fed facility could be found wanting
Testing times
MPL platforms addressing coronavirus impact

Other deal-related news

  • The US Fed announced a slew of new measures to support the credit markets this morning, including the revival of the Term Asset-Backed Securities Loan Facility (TALF), first seen in the wake of the global financial crisis (SCI 23 March).
  • The British Business Bank has launched the Coronavirus Business Interruption Loan Scheme (CBILS), which provides facilities of up to £5m for smaller businesses across the UK that are experiencing lost or deferred revenues, leading to disruptions to their cashflow (SCI 23 March).
  • The US FHFA has authorised Fannie Mae and Freddie Mac to enter into additional dollar roll transactions, with the aim of providing increased liquidity to MBS investors (SCI 23 March).
  • The New York Fed has retained BlackRock Financial Markets Advisory as a third-party vendor to operationalise its purchases of agency CMBS and transact with primary dealers on behalf of the SOMA (SCI 25 March).
  • The CRE Finance Council (CREFC) and 12 other real estate trade organisations have submitted a letter urging the US Fed and Treasury to expand the TALF 2.0 to include agency and private-label CMBS and GSE credit risk transfer securities (SCI 25 March).
  • Barclays Private Bank has closed North Dock No. 1, its first UK prime RMBS (SCI 26 March).
  • KBRA has reviewed UK CMBS with exposure to purpose-built student accommodation (PBSA) assets and identified one loan with PBSA exposure, which serves as the collateral for the Taurus 2019-3 UK transaction (SCI 26 March).
  • The EBA has issued a statement explaining a number of additional interpretative aspects on the functioning of the prudential framework in relation to the classification of loans in default, the identification of forborne exposures and their accounting treatment (SCI 26 March).
  • S&P expects the COVID-19 pandemic to result in a material negative turnover impact for many UK whole business securitisation issuers (SCI 26 March).
  • A portion (15%) of European CLO collateral is derived from the industries most vulnerable to the coronavirus pandemic, according to Moody's (SCI 27 March).
  • An unprecedented 8% of US broadly syndicated loans (totalling around US$45bn) have been downgraded or placed on negative watch by S&P since the SF Vegas conference, according to BofA Global Research (SCI 27 March).
  • A number of CDO manager transfers have been inked this week (SCI 27 March).
  • FFELP student loan ABS are expected to exhibit higher borrower utilisation of forbearance in the short term as a result of the economic effects of coronavirus containment measures (SCI 27 March).

SCI NPL Securitisation Awards 2020 - new deadline
SCI NPL Securitisation Awards 2020 - new deadline As a result of COVID-19, the SCI NPL Securitisation seminar has unfortunately had to be postponed until 1 July, along with the NPL Securitisation Awards ceremony. Award nominations remain open and a have a revised deadline of 24 April. Further information and details of how to pitch can be found here.

MRT report
SCI has published a Special Report on the US Mortgage Risk Transfer sector – it can be downloaded for free here.

Data

BWIC volume

Secondary market commentary from SCI PriceABS
27 March 2020
USD CLO
A pick up in flow today with 20 covers, all mezz – 5 x AA, 5 x A, 8 x BBB and 2 x BB rated. At the upper end of the rating scale the AAs traded 339dm-464dm for 2022-2024 RP profiles (5.2-6.7y WALs), MV metrics being the biggest lever for levels with CVC's APID 2016-25A A2R at the tighter end 339dm / 6.7y WAL with a 111.65 MVOC and a good ADR level 0.35%, whilst a weaker manager Hayfin's KING 2018-8A B despite a healthy MVOC 113.03 and 0.21% ADR covers 420dm / 6.2y WAL. To put into context DMs for this cohort was in 170area context pre-vol.
The single-As (2022/2023 RP profiles) trade in a 470dm-559dm range, at the tight end is Octagon's OCT37 2018-2A B 470dm / 6.93y WAL which defies logic with the tightest DM amongst the cluster of single-As today despite a weaker manager record, weaker MV metrics and 1.28% ADR which is wider than it's average across all deals. At the wide end is ArrowMark's AWPT 2018-10A C 559dm / 6.7y WAL with the highest MVOC 104.81 and lowest ADR 0.38% whilst the best diversity 84, lowest WARF 2779 and sound manager record!
The BBBs trade in a relatively tight spread 849dm-879dm (2023/2024 RP profiles) versus pre-vol levels of 325dm-350dm for similar cohort, there was an outlier today MARNR 2018-5A D (Mariner) 715dm / 7.4y WAL – strong manager metrics whilst the deal itself carries 0.12% ADR, 4.75% sub80 assets and a good WARF 2726.
The two double-Bs traded today in a 1267dm-1319dm range (2023/2024 RP profiles), to put into context the DMs have doubled from pre-vol levels of 685dm-775dm for similar cohorts, the trades today have not any material fundamental issues, only dislocation in terms of distressed underlying loan prices and liquidity in this rating level.
EUR CLO
3 x BBB & 1 x BB today. First a note of caution. We have adjusted our scenarios to decrease CPRs and increase the amount of reinvestment that takes place thus lengthening the WALs. Therefore today's calculated spreads are not directly comparable with recent levels.
Two of the BBBs are DNTs and one is a CVR. All three prices represent spreads between 720dm and 800dm. The tight end of this range is from CORDA 4X DRR which has a shorter RPE Date than the others and hence shorter WAL and is the traded bond. The wider levels DNT. Previous recent BBB spreads have been 900H, but that is under the previous assumptions with shorter WALs.
The BB is CONTE 5X E which traded at 1219dm/9.5yr. This bond traded at 97 price in Jan 2020 and traded at 59 today, a fall of almost 40 points. In Jan 97 price represented 535dm / 6.73yr and today 59 represents 1219dm / 9.46yr.
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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