A review of securitisation activity over the past seven days

Transaction of the week
Banco BPM has completed a €7.4bn (GBV) securitisation of secured and unsecured Italian non-performing loans dubbed Leviticus SPV (SCI 8 February). The transaction involves the transfer of the bank's servicing platform to Credito Fondiario, which is part of a broader joint-venture trend in the Italian NPL market (SCI 14 December 2018).

"The trend is driven by the desire to monetise the platforms and high regulatory scrutiny that accompany their maintenance," says David Bergman, executive director at Scope.

Rated by Scope and DBRS, the transaction comprises €1.44bn BBB/BBB class A notes, €221.5m unrated class B notes and €248.9m unrated class J notes.

The transfer of the servicing platform was the greatest rating challenge for Scope. "You get an interim period, where people move from BBPM to a joint venture controlled by Credito Fondiario - something that leads to lower recoveries, due to the lack of manpower that this period implies. However, we have taken this into account by factoring in the back-loaded recoveries."

The transaction features a number of positive drivers, including the granularity of the portfolio, with the top-10 borrowers making up only 5% of the portfolio's GBV. The credit enhancement for the senior note is 80.5%, which is unusually high compared to other NPL securitisations, given that the typical range is 70%-75%.

However, "legal proceedings haven't started for two-thirds of the loans, meaning that the recoveries will be back-loaded in time and Scope has therefore assumed a weighted average recovery time of 6.7 years, which is 31 months longer than the business plan. Furthermore, around 12% of the assets are still under construction, making them harder to value," notes Bergman.

Another issue is the lack of updated property valuations, although Scope compensates for this in its analysis by applying additional haircuts on those property valuations.

Other deal-related news

• Nord LB's owners have approved a plan to recapitalise the bank with funds from regional states and savings banks. The plan won the backing of its majority owner - the regional state of Lower Saxony, which has a 59% stake - last week, side-lining a rival offer by Cerberus and Centerbridge. The recapitalisation will further spur the bank's shipping non-performing loan disposals, although it may fall foul of EU state aid rules (SCI 6 February).  
• The RMAC Securities No. 1 Series 2006-NS1, 2006-NS2, 2006-NS3, 2006-NS4 and 2007-NS1 issuers have confirmed that they have been validly served with a Part 8 claim form by Clifden, naming them, the corporate services provider and the share trustee as defendants (SCI 28 January). The defendants consider the claim to be both procedurally defective and without merit, and are pursuing an immediate strike out and/or summary dismissal of the claim (SCI 8 February).
• Meetings for class C to E noteholders will be held on 14 February to pass extraordinary resolutions relating to the Delphine loan securitised in the DECO 2014-GNDL CMBS. Among the resolutions are the introduction of arbitration definitions and a change of maturity. For more CMBS-related news, see SCI's CMBS loan events database.

Regulatory round-up

• ESMA has agreed memoranda of understanding with the Bank of England for the recognition of central counterparties and of the central securities depository established in the UK, that would take effect should the UK leave the EU without a withdrawal agreement (SCI 5 February).

Data

Pricings
Over US$7.7bn of US ABS issuance priced last week in the busiest period so far of 2019. Meanwhile, Europe saw its inaugural public securitisations of the year via two RMBS, which cumulatively placed €1bn of bonds with investors.

Auto ABS accounted for the majority of last week's prints, comprising: US$1bn Ally Auto Receivables Trust 2019-1, US$600m Avis Budget Rental Car Funding Series 2019-1, US$373.5m DT Auto Owner Trust 2019-1, US$260m Flagship Credit Auto Trust 2019-1, US$268.44m GLS Auto Receivables Issuer Trust 2019-1, US$1.25bn Nissan Auto Receivables 2019-A Owner Trust, US$1.21bn Toyota Auto Receivables 2019-A and US$755.16m Volvo Financial Equipment Series 2019-1. Non-auto ABS issuance consisted of US$1.56bn American Express Credit Account 2019-1, US$612m GreatAmerica Leasing Receivables Funding 2019-1, US$249.13m Marlette Funding Trust 2019-1 and US$725m Stack Infrastructure Issuer series 2019-1.

A pair of floating rate CMBS also priced - US$335m CSMC 2019-SKLZ and US$336.5m Waikiki Beach Hotel Trust 2019-WBM. Finally, the European deals were €315m Fanes 2018-1 (re-offer) and US$778.74m-equivalent Lanark Master Issuer Trust 2019-1.

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