A review of securitisation activity over the past seven days
Transaction of the week
RMF is marketing its first private RMBS backed by jumbo proprietary reverse mortgages loans and, according to KBRA, the first RMBS backed by newly-originated reverse mortgages since the financial crisis. Dubbed RMF Proprietary Issuance Trust 2019-1, the US$256.667m transaction is backed by 385 reverse mortgage loans.
The assets are composed of recently originated, with WALA of five months, reverse mortgages that typically exceed the current FHA jumbo loan principal balance limit and so they are not insured by the FHA under the Home Equity Conversion Mortgage (HECM) program. KBRA notes that any loss resulting from disposition of the property at net proceeds less than the accrued loan balance is borne by the transaction structure, unlike HECM loans where this loss (if any) is covered by the FHA up to the maximum claim amount. See SCI 4 October for more...
Stories of the week
Index ingenuity
Credit derivatives strategy finds value in capital constraints
Nascent stages
CRT mezz investor base needs time to develop
Problem solving
Credit derivative hedges mooted in a deteriorating environment
Spanish SRT finalised
Santander completes full-stack auto ABS
Other deal-related news
- Wing Chau and his firm Harding Advisory have settled with the US SEC in connection with violations of Section 206(2) of the Advisers Act and Section 17(a)(2) of the Securities Act in their role as investment managers for the Lexington V Capital Funding and Neo CDO 2007-1 transactions (SCI 30 September).
- Illimity Bank and a Cerberus Capital Management affiliate have acquired a second unlikely-to-pay loan portfolio from Banca Monte Paschi di Siena (MPS), following a previous MPS transaction with Cerberus. Separately, UniCredit has disclosed a pair of non-performing loan transactions (SCI 2 October).
- Fannie Mae has completed its sixth Credit Insurance Risk Transfer transaction of 2019: CIRT 2019-3 covers US$14.8bn in unpaid principal balance of 21- to 30-year original term fixed-rate loans. The deal marks the first time a 30-year bulk CIRT transaction was structured with an extended policy term of 12.5 years and a 40bp retention layer (SCI 2 October).
- Moody's notes that store closures as a result of Forever 21's recent bankruptcy filing could negatively impact US CMBS loans with large exposure to the tenant, particularly among properties that have seen other recent tenant departures (SCI 2 October).
- Tullett Prebon, part of TP ICAP, has successfully settled the first Insurance Linked Notes (ILN) transaction following onboarding of the first group of clients to its newly launched ILN platform. ILNs are fully collateralized, securitized, listed and tradable instruments (SCI 2 October).
Data
BWIC volume
Market commentary from SCI PriceABS
04 October 2019
US CLO
A busy end to the week with 26 observed covers today right across the capital structure that SCI generated DMs on - 11 x AAAs, 3 x AA, 4 x A, 1 x BBB and 7 x BBs. The >4yr WAL AAAs traded in a tight 115dm-118dm range, whilst we observed the overall AAA market (>4y WAL) tighten 4bps on the week to 117dm. However this was based on a lower level of liquidity than last week ($23m vs $60m). At the BB level, todays BBs traded in a 724dm-759dm range whilst there was an outlier OAKCL 2019-1A E (OakTree) which covered at 864dm / 9.2y WAL, this tranche has a lo-MVOC of 106.02 whilst the deal carries 6% CCC and almost 3% sub 80 priced assets and the manager has a weaker record than its peers (104bps annualised default rate v 55bps cohort / -0.09 par build / 10% annualised equity return v 15.3% cohort). Overall this week we observed BB spreads tighten 8bps to 748dm based upon $43m of supply ($62m supply last week at 756dm).
The AAs today also traded in a tight 181dm-184dm range ($9.4m aggregate). The single-As traded in a wider dispersion 251dm-337dm range, at the wide end of the range was a recently closed CAVU 2019-1A C1 (Trimaran Advisors) at 337dm / 8.2y - this manager is inexperienced with 2.4bn AUM across 5 CLOs and has a weaker annualised default rate 91bps than the cohort 55bps, the deal closed with a WARF of 3200. Finally the only BBB of the day OZLMF 2013-3A CR (Sculptor Capital Management) covers at 99.74 / 431dm / 5.4y WAL which is at the wide end of BBBs we have observed over the past few weeks, this deal carries 6.7% CCC, 34bps defaults, -0.15 par build and 3.64% of sub 80 priced assets.
EUR CLO
16 EUR CLO trades today. 11 x AAA ranging from 127dm to 198dm. The majority have a 130 handle. The widest trade here is OZLME 4A A2 which traded at M100h / S+198 / 4.52yr but it is a small fixed rate class managed by Sculptor AM (formerly Och-Ziff). The widest of the floaters is HAYEM 1A A2 (Hayfin Emerald) which traded at 100a / 158dm / 4.57yr which is margined off un-floored Euribor. The deal is performing OK with a below average WARF of 2874, above average WAS of 387bps and below average CCC bucket of 0.75%.
There are 2 x AA which traded at 233dm and 244dm (see PriceABS archive for details). These AA levels are quite a bit wider than we have recently. Most recent AA trades have been around 180dm to 195dm. At the BBB level we have GLME 2X D (Goldentree) at 99.78 / 326dm / 7.31yr and BABSE 2018-3X D (Barings) at 99.93 / 409dm / 7.4yr. These two trades neatly bifurcate recent traded levels which have been in the 350dm to 370dm range. The reason for this is not immediately obvious to us. They both have similar WALs and are both perfroming well and Barings' deals normally trade well in secondary.
There is one single B (TCLO 2X FR) managed by Chenavari. It traded at 90.00 / 970dm / 6.66yr. This is a bit wider than recent single B's which have been in the 890dm to 920dm range more typically.
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