A review of securitisation activity over the past seven days

Transaction of the week
Ellington Residential Holdings Ireland is in the market with a €620m Irish re-performing RMBS dubbed Jepson Residential 2019-1 (SCI 26 February). The transaction is a refinancing of European Residential Loan Securitisation 2017-PL1, sponsored by Lone Star.

"The deal is expected to be called [this month], although the rationale for the move isn't clear," says one portfolio manager. "A lot of the underlying assets were restructured and the portfolio went from having zero arrears to some delinquencies. The bonds were originally issued at a discount to par and recently they were trading at close to par, so I think this is some sort of exit for Lone Star."

Indeed, restructured loans comprise 75.8% of the mortgage portfolio and the proportion of loans paying 100% or more of the scheduled payment has slightly improved to 86.7% from 85.5% in March 2017, indicating stable performance to date and sustainable terms for the majority of the restructured loans. However, as of 31 December 2018, 7.8% of the mortgage loans are three months plus in arrears.

Rated by DBRS and S&P, the transaction consists of as-yet unsized AAA/AAA rated class A notes, AA/AA rated class B notes, A/A+ rated class C notes, BBB/BBB+ rated class D notes, BB/BB rated class E notes, B/B rated class F notes and B/B- rated class G notes. The class Z1 and Z2 are not rated and will be retained by the seller.    

Proceeds from the issuance of the notes will be used to purchase the first charge performing and re-performing Irish residential mortgage loans that were previously securitised in European Residential Loan Securitisation 2017-PL1. The mortgages were originated by Bank of Scotland (Ireland) (accounting for 67.1% of the portfolio), Lone Star subsidiary Start Mortgages (29.2%) and NUA Mortgages (3.8%). Lone Star acquired the loans originated by BoSI and NUA in February 2015 and December 2014 respectively.

The origination vintages of the portfolio range between 2006 and 2008 (70.6%), with 13% of the borrowers having negative equity. The pool is primarily concentrated outside Dublin (59.7%), with the remaining 40.3% located in the Irish capital. Irish house prices in Dublin and outside the city have rebounded 102% and 79% respectively, following the peak-to-trough drop of 59.7% and 55.7% respectively.

Other deal-related news

• GC Securities has placed a pair of innovative catastrophe bonds. Insurance Australia Group's A$75m Orchard ILS transaction marks the first ILS issuance from Singapore, while Pool Re's £75m Baltic PCC deal is the first-ever cat bond to cover terrorism risk exclusively and only the second to be issued under the UK's new regulatory framework for ILS (SCI 27 February).
• A note EOD occurred in connection with the Delphine loan, securitised in the DECO 2014-GNDL CMBS, following the borrower's failure to repay principal in full at maturity. The loan subsequently transferred to special servicing, with a standstill until 10 March in order to evaluate the outcome of noteholder meetings due on 4 March. For more CRE-related news, see SCI's CMBS loan events database.
• S&P has lowered its ratings on TGIF Funding series 2017-1 notes to double-B plus from triple-B minus and removed them from credit watch with negative implications. Since the close of the transaction in March 2017, the number of stores within the securitisation has decreased by 28 units and TGI Fridays has demonstrated nine consecutive quarters of negative same-store sales . TGIF Funding's DSCR declined to 1.99x in December 2018 from 2.18x at close (SCI 26 February).
• Dock Street Capital Management has assumed all the responsibilities, duties and obligations of collateral manager for the Jupiter High-Grade CDO, II and III ABS CDO deals from Maxim Advisory (SCI 28 February). Moody's notes that the move will not impact its ratings on any of the notes issued by the transactions. For more CDO manager transfers, see SCI's database.
• Moody's has withdrawn its B1 underlying rating on the class A7 whole business securitisation notes issued by Punch Taverns Finance B. Due to an internal administrative error, the underlying rating on these notes was not withdrawn on 9 October 2014, following the release of the financial guarantee on the class A7 notes due to restructuring (SCI 28 February).

Regulatory round-up

• The EBA is expected to publish a report on STS synthetic securitisations by year-end, which will then be reviewed by the European Commission. The main challenges that the supervisor will be dealing with are the lack of performance data on synthetic securitisations and the creation of STS criteria for the sector (SCI 1 March).
• The US CFTC and the Bank of England have issued a joint statement aimed at reassuring market participants of the continuity of derivatives trading and clearing activities between the UK and US, after the UK's withdrawal from the EU. The measures that will be in place by end-March include: information-sharing and cooperation arrangements to support the effective cross-border oversight of derivatives markets and participants and to promote market orderliness, confidence and financial stability; and the extension of existing CFTC relief and comparability for the UK, as well as UK equivalence for the US (SCI 26 February).

Data

Pricings
Unusually, there was no primary ABS issuance last week, following the SFIG Vegas conference. However, a number of CLOs priced, from both Europe and the US.

Among last week's CLO prints were: US$507.5m Ares LII CLO, US$509.19m Golub Capital Partners CLO 34(M)-R (refinancing), US$259.3m JFIN Revolver CLO 2019, US$808.7m Octagon Investment Partners XXIV (refinancing), €452mn RRE 1 Loan Management and €410.1m St Paul's CLO X.

BWIC volume

SCI Magazine
The spring issue of SCI Magazine is now available to download. The latest edition includes articles on credit derivatives, fintech, Libor replacement, middle market CLOs and UK RMBS. It also features a wide-ranging interview with Tim Turner, chief risk officer at the African Development Bank.