SCI Start the Week - 9 December

Category: ABS Capital Relief Trades CLOs


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A review of securitisation activity over the past seven days

Transaction of the week
NIBC recently priced the first fully-compliant ESG CLO, North Westerly VI, utilising a wholly exclusionary loan section process. The €410m transaction is expected to be the first of many ESG-compliant transactions from the firm, which also plans to bring North Westerly V onto the same reporting platform and in line with ESG best practices next year.
North Westerly VI is the first CLO to completely exclude loans from firms that derive any revenue from a non-ESG compliant source. Other CLOs have employed a partially exclusionary method for selecting loans and might, for example, exclude loans from firms that derive over 50% of their revenues from a non-sustainable source, says Robin Willing, head of sustainability at NIBC.
See SCI 3 December for more

Stories of the week
Alternative appetite
Euro CMBS specialist property exposure to rise
Grattan refinanced
Bank of Ireland completes CRT
Moving into the mainstream
Booming aviation ABS sector shakes off esoteric label?

Other deal-related news

  • Moody's has placed a number of Mexican RMBS originated and serviced by the Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit) on review for possible downgrade, following the disclosure of errors in the classification and reporting of the non-performing loans ratio (SCI 2 December).
  • US cigarette shipments have declined by an average of 3.2% per year since 2000 and are expected to decrease by 4%-5% over the next 12-18 months, hitting the cashflow available to pay down tobacco ABS bonds. However, revenue from future potential settlements and other special payments could partially offset the risk from slowing tobacco sales (SCI 4 December).
  • The EIF has agreed with Banca Popolare di Puglia e Basilicata (BPPB) the first SME Initiative operation with the objective of freeing up the Italian confidi regional guarantee consortia. The project represents an innovative risk transfer, whereby funds managed on a national (or regional) level can be combined with resources from the European programme (SCI 6 December).
  • Hoist Finance has completed its securitisation of Italian unsecured non-performing loans with a gross book value of €5bn via Deutsche Bank and UBS. The transaction represents the first-ever Italian investment grade rated securitisation backed by a portfolio comprising only unsecured NPLs (SCI 6 December).
  • GSO/Blackstone Debt Funds Management has established a new manager entity – called Blackstone/GSO CLO Management – designed to facilitate the opportunistic investment by Blackstone/GSO Corporate Funding in certain US CLOs that are expected to be structured to comply with the European risk retention regulation (SCI 6 December).

Data

BWIC volume

Secondary market commentary from SCI PriceABS
6 December 2019
US CLO
A quieter end to the week with 8 covers, all BB rated today.  The RP profiles were 2022-2024 and the trading range is 670dm-761dm, with the 2024 RP profiles trading with the tightest basis 718dm-739dm.  At the wide end of the BB trades today is TIA 2016-1A ER (TIAA) 761dm / 8.5y WAL, the metrics on this bond are as follows – MVOC 104.3, MVAP 4.1 (both in line with peers), 5.2% sub80 assets, annualised equity return 10.9% (low), lo-diversity 73 whilst other metrics are sound.
We have run DMs on 27 double-Bs this week which trade in generic terms 726dm across almost $70m of supply, we have seen almost 40bps of tightening from the prior week.  Breaking these BBs down further, given the generic levels include an array of RP profiles, the 2019/2020 RPEs traded this week 615dm, 2021 RPEs traded 720dm, 2022 RPEs trade 711dm, 2023 RPEs trade 769dm and 2024 RPEs trade 718dm so we are seeing some inversion amongst the 2022 and 2024 RP profiles which have outperformed other profiles in the term structure.
In AAAs this week we observed significant supply with $161m of liquidity of AAAs / >4y WAL which traded 2bps wider week on week with a generic 128dm. For single-A, BBB and single-Bs there was far less liquidity this week so based off those we ran DMs on this week we have the following traded levels: single-A 267dm (vs 269dm last week), triple-B 399dm (vs 468dm last week) and single-B 958dm (no observations last week). However, we observed $74.4m of liquidity in AAs this week versus none last week and only $20m the week before, we calculate generic level of 192dm for AAs this week across 2020 to 2023 RP profiles.
EUR/GBP ABS/RMBS
GAPPL 2019-1 A (Green Apple – Dutch RMBS) traded at 19dm for the AAA. SAPPA 2019-1 A (Sapphire One – French autos) traded at 7dm for the AAA. SCGC 2015-1 D (German consumer loans originated by Santander) traded at 326dm for the BB.
EUR CLO
3 x AA, 1 x A, 1 x BBB & 1 x BB today. All the AAs traded at a premium price.
Because of the upward sloping yield curve the spreads to call are greater than the spread to mat for a par price. Thus, even with the amortisation of the premium price taking place more quickly if priced to call, still the DMs to call and mat are not that different. All three AAs closed in Apr 2019 and callable around Apr 2021. All three are potentially refinanceable especially BILB 2X A2A (Guggenheim) in which the AAA pays a margin of 114bps. We will be recording the DM to call as an enhancement to the Archive but for now we can say here that the DMs to maturity range from 197dm to 203dm and the DMs to call are 189dm to 216dm. ARESE 11X B1 DMs have been calculated using a price of 100.50 because all that was disclosed was a CVR of 100h. These spreads are not a noticeable change on previous AA levels.
The single A is BABSE 2016-1X CR which traded at 98.27 / 237dm / 5.05yr. Even allowing for the fact this is quite a short WAL bond (it was refi'd in July 2018 and RP End Date is July 2020) this is a tight level. Recent single As have been in the 270dm to 290dm area for 6.5yr to 6.9yr trades. The BBB is from the same deal and traded at 97.95 / 336dm / 5.36yr. Again this is a strong level with other recent trades being in the 370dm to 380dm region.
The BB is ARBR 4X E which traded at 99.63 / 590dm / 6yr. This is also a tight level with recent trades having been in the 630dm to 680dm range for WALs in the 5.9yr to 7.8yr range. The deal is performing well and from a good manager. The deal could be being managed for debt since the equity return has been quite low at 9.7% pa.

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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