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SCI Start the Week - 7 December

Category: ABS Capital Relief Trades CLOs

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A review of securitisation activity over the past seven days

Last week's stories
Collections conundrum
Italian NPL ABS amortisation eyed (Full story below)
Covid communications
The pandemic has meant greater negotiation over terms between CRT buyers and sellers
High-quality counterparties
Insurer involvement in SRT on the rise
Innovative SRT inked
Belgian synthetic RMBS finalised
SCI CRT Awards 2020
Advisor/Service Provider of the Year: US Bank
SCI CRT Awards 2020
Analytics Firm of the Year: Mark Fontanilla & Company
SCI CRT Awards 2020
Arranger of the Year: Credit Suisse
SCI CRT Awards 2020
Issuer of the Year: Intesa Sanpaolo
SCI CRT Awards 2020
Law Firm of the Year: Allen & Overy
SCI CRT Awards 2020
North American Arranger of the Year: BMO Capital Markets
SCI CRT Awards 2020
North American Issuer of the Year: Freddie Mac
SCI CRT Awards 2020
North American Law Firm of the Year: Clifford Chance
SCI CRT Awards 2020
Personal Contribution to the Industry: Steve Gandy
BofA and Wells Fargo to underwrite imminent STACR deal
Tech solution
Peter Jasko, ceo at Semeris, answers SCI's questions
Test case
JPMorgan CRT details revealed

Other deal-related news

  • The US Fed, the OCC, the FDIC and the UK FCA have welcomed a proposal by ICE Benchmark Administration, the administrator for Libor, that lays out a path forward in which banks should stop writing new US Libor contracts by end-2021 while enabling most legacy contracts to mature before the cessation of the benchmark (SCI 1 December).
  • Credit quality will deteriorate for new European CLOs in 2021, but credit enhancement should help maintain strong performance among outstanding deals, according to a new report from Moody's (SCI 1 December).
  • The EIB Group has provided a mezzanine guarantee on a €330m portfolio of mainly Austrian loans to SMEs and mid-caps, originated by Hypo Vorarlberg Bank (SCI 1 December).
  • Pre-pandemic trends in US leveraged lending - including high leverage, weak covenants and declining recoveries - resumed by 3Q20 and should continue into 2021, absent a renewed downturn, according to Moody's (SCI 2 December).
  • Dutch National promotional institution Invest-NL has signed a new guarantee agreement with the EIF to cover a lending portfolio to innovative Dutch SMEs (SCI 2 December).
  • Summit Issuer Series 2020-1, the first securitisation backed by dark fibre communication infrastructure assets, is being marketed by Barclays on behalf of sponsor and manager Summit Infrastructure Group (SCI 4 December).
  • Fitch says that it resolved its negative rating watch on 47 European CLO tranches in November (SCI 4 December).
  • The EU Securitisation Regulation is unlikely to incorporate beneficial bank capital treatment for green securitisation holdings until the EBA has completed a similar analysis of the bank prudential framework, Fitch suggests (SCI 4 December).
  • The New York Fed is undertaking a small value agency MBS sale open market operation on 10 December (SCI 4 December).


Recent research to download
CLO Case Study Autumn 2020
Autumn 2020 CRT Report

Upcoming events
SCI's 2nd Annual Middle Market CLO Seminar
21 January 2021, Virtual Event
SCI's 5th Annual Risk Transfer & Synthetics Seminar
March 2021, Virtual Event
SCI's 3rd Annual NPL Securitisation Seminar
May 2021, Virtual Event

Collections conundrum
Italian NPL ABS amortisation eyed

The number of Italian non-performing loan securitisations with lagging collections is set to rise to 17 by 1Q21, Scope predicts. If the slowdown continues, the average time for deals to amortise will exceed 10 years, according to the agency's NPL Dynamic Coverage Index.

The index is based on the median of the net yearly proceeds by outstanding liabilities and measures the average number of years needed for transactions to amortise if the pace of collections remains unchanged. Scope's NPL Performance Index tracks the ratio between aggregated cumulative net proceeds and original cumulative business plan net forecasts.

"We expect both indices will continue to deteriorate in the short term, based on our projection of the slowdown in the pace of collections resulting from the coronavirus pandemic and the recent Italian lock-down," says Paula Lichtensztein, senior representative in the structured finance team of Scope. "Consequently, the Scope NPL Performance Index is likely to fall below 100, while the projected average number of years needed for transactions to amortise will exceed 10 years."

Scope examined the performance of 25 NPL ABS, with an aggregated gross book value of €73bn. The agency expects that by the next quarter, an expected average underperformance of 27% in terms of gross collections versus original business plans will be seen across the sector.

As at end-September, underperformance was seen in 14 of the 25 transactions, in terms of gross collections, and 12 of the 25 in terms of net collections. Subordination and/or underperformance events have been reported by nine out of 25 transactions.

Various factors drive underperformance, including initial servicing onboarding processes causing delays for servicers' activities, the slow-down in judicial proceedings this year, a deterioration in borrower affordability and liquidity conditions and real estate depreciation.

Out of 24 transactions, 22 are overperforming. Scope notes that overperformance has been driven by factors such as collections from cash-in-court positions and servicers reaching extra-judicial agreements, which leads to a frontloading of collections.

Given the risks brought about by lockdown measures, attention has turned to recovery strategies. Scope has identified judicial proceedings as the main recovery strategy, accounting for on average 49% of transaction collections. Discounted-pay-offs with 23% of transaction collections and note sales with 8% of transaction collections have also been seen.

Jasleen Mann