A review of securitisation activity over the past seven days

SCI seminars

• SCI's 2nd Annual NPL Securitisation Seminar will be held on 13 May in Milan. For more information or to register, click here.
• SCI's 1^st Annual Middle Market CLO Seminar will be held on 26 June in New York. For more information or to register, click here.

Transaction of the week
DLA Piper bulked up its securitisation capabilities to 20 lawyers for Stack Infrastructure's inaugural and innovative ABS from February, due to structuring challenges (SCI 12 April). The potential for rendering the deal risk retention-compliant means that similar deals could be seen in Europe in the future.

Dubbed Stack Infrastructure Issuer series 2019-1, the deal is a securitisation of real estate and tenant lease payments for space and electrical capacity in Stack Infrastructure's six completed and operating wholesale data centres located across five states. Stack plans to use the proceeds to repay existing debt and for other purposes, including further development of data centres. Indeed, securitisation proved an attractive tool for refinancing the data centres, due to the cheaper cost of financing.

The structure of the securitisation had to reflect the firm's business model, which involves numerous expenses, many reserve requirements and different leases. As such, DLA Piper reviewed every lease and addressed various state-level real estate matters, including transfer tax issues. Hence requiring a team of 18-20 attorneys across the US.

Rated by S&P, the transaction comprises US$125m single-A minus rated class A1 and US$725m single-A minus class A2 notes (which priced with a 4.540% coupon) (see SCI's primary issuance database). Among the strengths of the transaction are the current tenants' high average credit quality, leases that are important to the tenants' core businesses - with the majority of leased capacity supporting revenue-generating services - and geographic diversity, with sites in Oregon, Georgia, Illinois, Texas and California. Weaknesses include limited industry diversity - with the majority of tenants in various subsectors of the technology industry - and limited historical sector performance data.

The deal is structured as a master trust, allowing for the addition of new collateral and the issuance of additional series of notes. David Ridenour, partner at DLA Piper, notes: "The master trust structure is an efficient way of adding new collateral to an existing pool of assets and reduces the cost of future financings. Given the asset class, the overcollateralisation of the pool and the various credit enhancement mechanisms, investors see this structure as a relatively low risk."

Other deal-related news

• The first seasoned non-qualified mortgage RMBS issued by a private fund managed by PIMCO is marketing. The US$382.45m transaction, dubbed BRAVO Residential Funding Trust 2019-1, is backed by 1,311 loans originated by Capital One and acquired by a PIMCO-run fund in a bulk sale (SCI 12 April).
• The One Stamford Forum loan, securitised in the MSBAM 2016-C31 and WFCM 2016-BNK1 CMBS, transferred to special servicing due to imminent monetary default. The property's top tenant Purdue Pharma is understood to be preparing a bankruptcy filing to mitigate its liability from lawsuits alleging its role in the opioid epidemic. For more CRE-related news, see SCI's CMBS loan events database.
• The World Bank Group is seeking to hire a modeling agent to work on the development of the next phase of its Pandemic Emergency Financing Facility (PEF 2.0), an insurance-based financing mechanism supporting efforts to tackle rare, high-severity disease outbreaks, with the aim of preventing such outbreaks from becoming pandemics (SCI 30 June 2017). In advance of the scheduled maturity of the PEF 1.0 parametric insurance coverage in July 2020, the World Bank - with the help of selected re/insurance brokers - is reviewing all aspects of the structure in order to improve the programme, where necessary, for the anticipated commencement of marketing the PEF 2.0 risk transfer mechanism in May 2020 (SCI 11 April).

Regulatory round-up

• The European Council has adopted new rules for the provisioning of non-performing loans, which stipulate loss coverage for future NPLs with different coverage requirements depending on different NPL classifications. The text is a relief for Italian banks, given the application of the rules to newly created NPLs - both secured and unsecured (SCI 10 April).
• The European Court of Justice's (ECJ) 26 March judgement on early-termination clauses in Spanish consumer mortgage contracts could result in the use of quicker mortgage foreclosure proceedings in Spanish non-performing loan transactions. The final outcome rests with the Spanish courts, however, prolonging existing uncertainty over the course and length of Spanish foreclosure proceedings (SCI 12 April).

Data

Pricings
US ABS issuance roared back into life last week, with 13 transactions pricing, including seven auto deals. Meanwhile, five international RMBS also printed.

The auto-related securitisations were: US$1.37bn CarMax Auto Owner Trust 2019-2, US$228.28m CPS Auto Receivables Trust 2019-B, US$998.04m Daimler Trucks Retail Trust 2019-1, US$1.25bn GM Financial Consumer Automobile Receivables Trust 2019-2, US$1.25bn Nissan Auto Lease Trust 2019-A, US$1.23bn Santander Retail Auto Lease Trust 2019-A and US$270m US Auto Funding Trust 2019-1. The other ABS pricings comprised: US$374.89m Ascentium Equipment Receivables 2019-1, US$867.57m Castlelake Aircraft Structured Trust 2019-1, US$302.7m CCG Receivables Trust 2019-1, US$914.69m Dell Equipment Finance Trust 2019-1, US$746.6m Navient Student Loan Trust 2019-2 and US$300m PFS Financing Corp Series 2019-A.

Last week's RMBS issuance consisted of €219.2m Cartesian Residential Mortgages Blue, US$857.33m CAS 2019-R03, €215m Dilosk RMBS No. 3, A$750m La Trobe Financial Capital Markets Trust 2019-1, €358m Mulcair Securities and A$750m-equivalent Pepper I-Prime 2019-1. The US$634m Apidos XXXI, US$405m Barings 2019-III, US$438m Benefit Street Partners IV (refinancing), US$614.8m Carlyle CLO 2012-4 (refinancing), US$656m Magnetite XXII and US$503.31m Nassau 2019-I deals were among the CLOs that priced. Finally, the US$1.6bn FREMF 2019-K734 CMBS was also issued.

BWIC volume

Podcast
Episode six of SCI's podcast is now available. In this edition, we discuss European CLO structural innovations, the difficulties involved in securitising unlikely-to-pay loans and the evolving CRE CLO landscape.