Monday 16 September 2019 10:44 London/ 05.44 New York/ 18.44 Tokyo

A review of securitisation activity over the past seven days

Transaction of the week

Alior Leasing has launched a 12 month revolving cash securitisation of auto leasing loans and leases extended to sole traders and SME obligors in Poland. Dubbed AL Poland Securitisation 01, the transaction is the first to receive a public rating by Moody's.

Moody's has assigned a rating of Baa2 on the PLN359.9m floating rate secured notes, while the PLN140m subordinated loan is not rated.  The originator, Alior Leasing, will act as the servicer of the portfolio during the life of the transaction.

The portfolio of 9,433 receivables contracts backing the notes consists of auto leasing loans and leases to Polish sole traders and SME obligors collateralised by new and used vehicles, including trucks. Sole traders make up 80.1% of the initial pool while used cars make up 61.2% of the initial pool, with a limit of 65% for the pool after replenishments.

The transaction is exposed to some credit weaknesses, however, with the rating agency highlighting that some types of contracts, such as those for the purchase of heavy vehicles, have seen high default rates historically, and can make up to 35% of the total pool. This is partially mitigated by a minimum requirement of a 5% down-payment for certain higher risk contracts sold during the replenishment period.

See SCI 11 September for more...

Stories of the week
Performance questions:
Scepticism about whether CLO managers and their investment affiliates can be truly independent of each other has accompanied the rise of CLOs anchored by risk retention capital raised via capitalised manager vehicles (CMVs). As the first iterations of these vehicles near the end of their reinvestment periods (SCI 26 June 2017), a better understanding of their performance could emerge, however.

Roll play: Impending changes to Asia's CDS index are grabbing traders' attention. Meanwhile, other structured finance derivatives activity in the region is on the up.

Targeting opportunities: Hipoges Iberia, the Iberian servicer, is targeting opportunities in the Greek non-performing loan market that include NPL securitisations. Servicers are targeting Greek NPL ABS deals (SCI 31 May) amid actual and pending completions of NPL ABS transactions, as well as the European Commission's pending approval of a government-backed NPL securitisation programme (SCI 12 October 2018).

Other deal-related news

  • Green securitisation can play an important role in helping to close the yearly investment gap of almost €180bn needed to meet EU climate and energy targets by 2030, according to AFME. The industry body, and its members, "strongly support" the growth of a green ABS market but recommends the need for greater clarity around definitions of green securitisation, as well as the introduction of incentives, such as around capital treatment. (SCI 12 September).
  • The US Treasury's plan to reform the country's housing system is expected to level the playing field between the GSEs and the private sector (SCI 6 September). However, a reduced GSE footprint will also impact credit risk transfer and multifamily CMBS volumes. (SCI 13 September
  • Intesa Sanpaolo is rumoured to be prepping for 4Q19 two capital relief trades that reference respectively corporate and SME loans. The bank printed its last corporate and SME SRTs last year from the GARC programme (see SCI's capital relief trades database) (SCI 12 September).
  • China's internet finance regulators last week issued a notice asking peer-to-peer lending platforms to submit credit information on all their borrowers to the country's major credit bureaus. Moody's notes in its latest Credit Outlook publication that the move is credit positive for Chinese ABS backed by consumer debt, as the availability of such information will allow both internet-based and traditional lenders to make better informed underwriting decisions, increasing the asset quality in structured finance deals. The regulators also encouraged financial institutions and insurance companies to take tougher action against borrowers that default on online loans, including by limiting their loans and insurance services and charging them higher interest rates for future loans – another credit positive move, according to Moody's, since it will discourage poor credit behaviour. (SCI 9 September)
  • The ECB has announced that it is cutting the interest rate on the deposit facility will be decreased by 10 basis points to -0.50%. The interest rate on the main refinancing operations and the rate on the marginal lending facility will remain unchanged at their current levels of 0.00% and 0.25% respectively.  Additionally, net purchases will be restarted under the asset purchase programme (APP) at a monthly pace of €20bn as from 1 November 2019. The Governing Council expects them to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates. Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. Additionally, the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III) will be changed to preserve favourable bank lending conditions, ensure the smooth transmission of monetary policy and further support the accommodative stance of monetary policy. Finally, in order to support the bank-based transmission of monetary policy, a two-tier system for reserve remuneration will be introduced, in which part of banks' holdings of excess liquidity will be exempt from the negative deposit facility rate. RaboBank's analysts note that, as for the ABSPP, it is a very small part of the overall APP and net purchases are potentially only some €0.1bn a month. As such, redemption flows continue to be the most important factor as they total some €6.6bn (~25% of the portfolio) in the next 12 months.  The analysts add: "As it stands currently, the ECB is already failing to keep their ABSPP portfolio steady, let alone grow it further (however marginal the net increase actually is). Hence, no pullback by the ECB in the ABS market is expected." (SCI 13 September).

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