SCI Start the Week - 5 March

Category: ABS Capital Relief Trades CDO

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A look at the major activity in structured finance over the past seven days.

Upcoming event
SCI Risk Transfer & Synthetics Seminar - 13 March, New York
SCI's Synthetic Securitisation Seminar provides an in-depth exploration of how synthetic securitisation is being utilised to transfer risk, achieve capital relief and create bespoke investment opportunities in the post-financial crisis environment. Panels cover capital relief trade structuring and regulatory considerations, issuance trends, index tranches and mortgage credit risk transfer.

There were seven ABS added to the pipeline last week, as well as a couple of ILS, four RMBS and four CMBS.

The ABS were: US$480m DT Auto Owner Trust 2018-1; US$504m ECMC Group Student Loan Trust 2018-1; US$437m NextGear Floorplan Master Owner Trust Series 2018-1; US$97.03m San Diego City Tobacco Settlement Revenue Funding Corp Series 2018; US$1.18bn Verizon Owner Trust 2018-1; RMB3.77bn VINZ 2018-1; and US$801m World Omni Automobile Lease Securitization Trust 2018-A.

The CMBS were US$1.4bn BX 2018-BIOA, US$1.1bn CGCMT 2018-B2, US$1.36bn FREMF 2018-K730 and US$1.35bn RETL 2018-RVP, while the ILS were US$225m Akibare Re Series 2018-1 and US$200m Kizuna Re II Series 2018-1. The RMBS were US$1bn CAS 2018-C02, ConQuest 2018-1, Pepper Residential Securities No.20 and US$446.17m PSMC 2018-1 Trust.

With most of the industry decamped to Las Vegas, there were limited deal prints. The only ABS was a European deal, while three of the five CLOs also came from Europe. There was also a US CMBS.

The ABS was €749m Auto ABS Italian Loans 2018-1 and the CMBS was US$1.36bn FREMF 2018-K730. The CLOs were: €369.75m Arbour CLO III 2016-3R; US$744m Madison Park XXX CLO 2018-30; €908.74m Popolare Bari SME 2017; €362.5m Providus CLO I 2018-1; and US$661.2m Voya CLO 2018-1.

Editor's picks
NPL platform incentives weighed
: As part of efforts to facilitate a non-performing loan secondary market, the European Commission is considering a private sector-led platform to handle data warehousing and potentially trade execution. Such an initiative could eliminate information asymmetry and lower barriers to entry, but its success hinges on incentivising both buyers and sellers to use it...
Landmark sukuk could be first of many: The inaugural UK sharia-compliant RMBS recently closed, marking the start of a new asset class in the jurisdiction. Al Rayan Bank's £250m Tolkien Funding Sukuk No.1 (SCI 29 January) signals a high point for the growth and acceptance of Islamic finance in the UK and could be the first of many such securitisations, across a range of assets...
Bank acquisition trend continues: HSH Nordbank has been sold for €1bn to JC Flowers and Cerberus. The agreement is accompanied by a sale of predominantly shipping non-performing loans to an acquisition vehicle of Cerberus and JC Flowers, as well as minority owners GoldenTree Asset Management and Centaurus Capital. The sale reflects an investment trend, whereby private equity investors acquire distressed financial institutions rather NPL portfolios...
US CLOs steady: The US CLO secondary market appears to be holding steady as participants consider their next move. "Superficially it looks like the long-standing pattern in the market will hold, but it feels to me like changes are afoot following the return from Vegas," says one trader...
LCR amendments could be STS 'game-changer': The European Commission's recent draft regulation on the LCR does not ensure STS securitisations are eligible as level 2A assets. Along with other factors, this could result in securitisation remaining a less attractive option compared to other financial instruments...

• Consumer protection legislation passed in California last October will collectively strengthen PACE underwriting practices, according to Morningstar Credit Ratings. The agency views most of the requirements as credit positive for future securitised residential PACE assessments and suggests that programme administrators may adopt the new measures on a nationwide basis.
• Bank of Ireland has released its Pillar Three report, which indicates an expansion of its synthetic securitisation exposure. It also provides insight into the lender's counterparty exposures.
• The incorporation of 'stop-advance' provisions in US RMBS 2.0 deals appears to be becoming more prevalent. However, sponsors are implementing this mechanism in different ways, as they seek to mitigate losses and advance timeline ambiguity while maintaining liquidity for high investment grade securities.