News Analysis
RMBS
Israel debuts landmark public RMBS deal
Credito's public offering marks new era in Israeli securitisation industry
Israel is on the brink of a major milestone in its financial sector with the launch of its first public RMBS deal. The groundbreaking deal led by the Israeli non-bank lender Credito represents a major step forward for the country’s securitisation market, traditionally dominated by private and bilateral transactions.
The Credito IPOs RMBS deal consists of a mortgage portfolio of approximately ILS 549m (€134.7m) as of 10 April, secured by residential properties in Israel. It is being heralded as the first public RMBS securitisation in the country, a fact confirmed by the preliminary rating report from S&P Maalot, issued in July.
"This deal is set to be a landmark for the Israeli market,” says Jason Smilovitz, an Israel-based independent senior securitisation consultant. “It is exciting to see a public securitisation issuance come to fruition, marking a shift from the usual private, bilateral transactions."
Historically, Israeli securitisation has largely been confined to private deals, where banks and non-bank lenders have engaged in bilateral transactions to sell off portfolios of loans. These deals have typically used various approaches, including true sales and synthetic risk transfers, often involving structures like credit-linked notes (CLNs) and credit risk transfers (CRTs).
Smilovitz notes: "While synthetic transactions have been utilised primarily for capital relief, the introduction of a true securitisation framework would be a game-changer."
Regulatory landscape and future prospects
The development of a formal securitisation regulatory framework in Israel has been a long-term goal. Efforts to finalise this framework and present it to the Knesset, the unicameral legislature of Israel, have been ongoing for over a decade. However, recent geopolitical tensions and other pressing issues have delayed progress. According to Smilovitz, there was hope for the securitisation law to be enacted by the end of 2024, but current circumstances suggest it may be pushed into 2025.
Despite these delays, there is strong interest from market participants. The Israeli government and regulators, including Amir Yaron, Governor of the Bank of Israel, have expressed support for securitisation as a key step in the evolution of the financial market.
"The regulators are supportive of this deal and of securitisation in general," says Smilovitz. "When the law is finally passed, I expect a surge in activity as market players will rush to bring new and innovative transactions to market."
Comparative insights and market reactions
In terms of structure, Credito IPOs follows a similar model to the non-profit Ogen Group's listed securitisation, which Smilovitz previously worked on. Ogen’s deal involved SME loans and was also listed on the Tel Aviv Stock Exchange, focusing on institutional investors. However, Smilovitz highlights a crucial distinction: "The Credito deal is noteworthy not just for its public offering for retail investors, but also for its alignment with international practices."
Local and international investors are closely watching this development. While Israeli investors are expected to engage with this new product, foreign investors will assess how it fits into their mandates. Smilovitz notes: "There is significant interest in Israeli financial products, but for foreign investors, the alignment with international standards will be crucial."
S&P provides additional insights into how this RMBS transaction compares to similar deals rated in other regions. Alejandro Marcilla, associate director, explains that this transaction required particular assumptions tailored to the Israeli market. "We focused on some of the main characteristics of the market with regard to mortgage origination and policies, considering the role of the regulator within our assumptions. The originator, in this case, is focused on all-purpose mortgages – a specific loan product within the Israeli market. This has been captured within our analysis."
He adds: “Compared to other jurisdictions, this originator, in line with local regulation, maintains a strict LTV ratio and debt-to-income considerations, which were integral to our evaluation. From a customer perspective, these aspects are more or less comparable to what we generally see in other regions.”
Geopolitical factors and long-term impact
Geopolitical factors present an additional layer of uncertainty. Israel’s sovereign credit rating, which has faced recent downgrades, could influence the performance of the Credito’s RMBS deal. Smilovitz warns: "Geopolitical instability could affect Israel’s sovereign rating, which in turn would impact the ratings of local investment products. Nonetheless, there is no expectation that this poses a challenge to the deal’s closing."
While the regulatory framework remains under development and geopolitical uncertainties loom, the deal is a positive step towards a more robust and dynamic securitisation market in Israel. Smilovitz optimistically adds: "When this deal closes as expected, it will set a strong precedent and pave the way for more public securitisations in the future."
S&P also highlights the risks associated with the Israeli RMBS market, noting that the current environment necessitates consideration. "Stresses are higher than they would otherwise be given to ongoing geopolitical conflict," explains Marcilla.
Alastair Bigley, md and sector lead for European RMBS at S&P Global, adds: “Although Israel’s sovereign and banking system ratings remain relatively high, there are geopolitical risks which, if they become significantly prolonged, may crystallise into macro-economic risks. These, in turn, could impact asset, sovereign and counterparty credit-worthiness and impact RMBS ratings. Such risks are innate within RMBS ratings in other jurisdictions, but are clearly more front and centre in the current case of Israel."
Looking forward, S&P predicts that the Israeli RMBS market could see significant growth. "There has been considerable interest from banks, advisory firms and non-banks in issuing RMBS paper,” says Bigley. “Many non-banks originate niche products, so esoteric collaterals might also become a trend to watch." Smilovitz echoes this optimism, stating: "If this deal closes as expected, it will set a strong precedent and pave the way for more public securitisations in the future."
Selvaggia Cataldi
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News Analysis
ABS
Data centre securitisation: Growing in waves - video
S&P Global Ratings' Jie Liang speaks to SCI about data centre securitisation
Jie Liang, sector lead in S&P Global Ratings’ structured finance esoteric ABS group, speaks to SCI's Simon Boughey about data centre securitisation. Liang discusses the use of proxy data to achieve ratings in the asset class, the extent to which investors are prepared to accept ratings derived from these methodologies, whether there are any signs that the growth data centre financing will top out, and more.
News Analysis
Capital Relief Trades
Funded access
Rated repacks on the rise
(Re)insurer participation in SRT deals has historically been limited to unfunded and non-STS transactions, but they are increasingly finding innovative ways to participate in funded deals. One such recent innovation is the EMX Partners platform, which combines (re)insurer risk appetite with third-party funding.
Since its launch in June 2023, EMX has effectively closed a debut transaction in Q3 2023 and a second transaction in Q2 2024. Describing EMX’s overall strategy, Adam Moses, ceo at EMX, notes: “Our strategy is built on two principles. Firstly, (re)insurers will generally have the lowest cost of capital to hold the portfolio credit risk in SRT deals and will also generally have the highest credit rating of investors that need funding for these deals. The second principle is that, to participate meaningfully in the SRT market, a simple and programmatic platform is required to combine (re)insurer risk appetite with the necessary funding. This should be an attractive proposition from an issuer bank’s perspective, both quantitatively (size, price, etc.) but equally qualitatively, since insurers have a much longer investment horizon than a typical alternative asset manager.”
He continues: “What then is simple and programmatic about the EMX platform? There are two key elements here. Firstly, EMX simplifies so far as possible the “ask” of (re)insurers; we ask them to only protect the returns on the SRT instrument. This simplifies the analysis for the (re)insurer because they are not exposed to the structural risk of the platform. Secondly by establishing a rated note issuance programme with standardised documentation which has been reviewed by most of the magic circle we offer a simpler financing instrument to our funders.
Commenting on EMX’s platform and its ability to bifurcate the funding and the risk-taking elements of a funded SRT deal, one source highlights EMX’s innovative ability to deliver a rated note issuance programme.
They say: “Fundamentally, they are a platform that creates insurance-wrapped repacks with SRT notes. However, the fact that the repack vehicle's notes are rated is where EMX’s key innovation stands. In the short term, the lending bank, the vanilla note holder who provides the funding into the repack vehicle, can look to the rating of the notes as opposed to running a CRM analysis on the insurance policy. The rating element allows for a very simple way and very capital-efficient way of lending into the structure. And you are getting a very attractive margin for what is highly rated insurer risk.”
They continue: “The longer-term implication is that you can start to look to investors who buy notes of a particular rating and suddenly one is looking at a much broader pool of capital that you can bring in. You expand the universe of funders that are able to participate, pulling additional streams of capital. That, in my view, has not happened yet and is the type of innovation that makes the market move from minor to major.”
The source further underlines EMX’s ability to establish a multiple-issuance vehicle, as another differentiating factor. “In terms of execution efficiency, they have been able to create a platform designed for programmatic issuance, which allows them to complete deals in very tight timelines.”
(Re)insurer participation in the SRT space is seeing continued growth (SCI 30 October 2023). Such momentum was recently further highlighted in IACPM’s annual survey on risk sharing transactions.
Non-life (re)insurers executed 153 insurance protections on 127 transactions for a total insured amount of €4bn between 2019 and 2023 (translating into 8.7% of all protected tranches at inception in that period). Last year, (re)insurers' share was about 5.5% (€1bn out of €18bn all protected tranches that year).
An obvious interrogation however concerns whether such structure and platform can trigger a significant shift within the SRT investor base, which has historically been dominated by alternative investment managers and sophisticated pension funds. Analysing the growing investor environment, the source anticipates increased competition in the sector: “Naturally we are expecting the rise in investor appetite to be matched by a rise in supply. However, having a funded solution that insurers can just sort of plug into means that suddenly you're looking at, for example, the US banks. Or Greek, Polish, Italian banks and countries in Europe where a ratings floor means that STS deals make a lot more sense than non-STS deals.”
They continue: “That is the kind of instrument where (re)insurers can bring that know-how into play. This is serious business for them and having (re)insurers being able to participate on a funded basis is a threat for the traditional investors in this market.”
Analysing this potential shift, Adam Moses adopts a more measured perspective. He says: “We view ourselves as building a complementary facility that allows (re)insurers to access risks, exposures and premium that they wouldn't otherwise be able to access.”
Looking ahead, Adam Moses expects the expansion and diversification of the investor base to benefit the SRT market more globally. He concludes: “It can be argued that the SRT market follows a buy-and-hold model and therefore lacks in liquidity. Until we get to a point where the investor base in the market is drawing on all sources of risk capital, I think it will remain very illiquid. Therefore, it is to the benefit of the market that the greater liquidity that the (re)insurers can bring to it is brought to bear.”
Vincent Nadeau
SRT Market Update
Capital Relief Trades
The Great White Deep Freeze
SRT market update
After a bumper 2023 for Canadian CRT, issuers seem to be focused on other forms of capital allocation optimisation.
While, last year saw at least four of the big five Canadian banks issuing CRT deals with Canadian assets, issuance this year doesn’t seem quite as considerable.
One source expects CRT issuance to come back with force in future, but believes there is currently more interest in limited recourse note issuances. These are preferred shares, which effectively act as bonds on the investor-side (with the added bonus of better yields). These, and other forms of non-viability contingent capital, have made up a chunk of recent issuance.
A second North American source believes the concern is overstated: “There’s somewhat less activity in Canada, but bear in mind Canadian banks are on an October 31 year end so there might be more in September.”
While they agree both US and Canadian banks have more options to raise equity, they opine that the recent ATB deal which referenced agriculture loans proves there is still life in the market (SCI, 3 July). The recent Broadway deal also referenced Canadian assets (SCI, 22 March).
Indeed, the first source restates that “once you get a programme set up it make sense to do more than one”, but speculates Canadian banks were preparing for the worst-case scenario in a rising rate environment. The expected loan losses have not come to fruition.
In other news…
Colossus has been something of a bellwether for tightening spreads. While Colossus 2023-1 priced in the high 10% to 11% area, Colossus 2024-1 is believed to be pricing at 1000bps flat for the equity piece with the mezz pricing around 545.
This is far from the bottom of the barrel, with equity pieces seeing spreads as tight as 800-950bps and the recent Goldman Sachs deal which referenced a pool of residential mortgage warehouse lines pricing at 700bps “or maybe even less” (SCI, 18 June).
One source opines: “The market is very anaemic so we’ll see how many deals come around. The ones we’ve seen so far are very low spread.”
It’s not all doom and gloom on the pricing front however. A source tells SCI that the Pinnacle prime mortgages CRT was “well priced” and that “even though the tranche is 0-5% so quite tight, your losses would be low even with defaults” (SCI, 29 July).
Many of the loans in the pool were 80% LTV and very concentrated in Tennessee. This could worry investors if the US goes into recession, however the source believes the trade is reasonably secure as US homeowners have “lots of equity and long-term mortgages”.
Joe Quiruga
SRT Market Update
Capital Relief Trades
Mini Morgan
SRT market update
JP Morgan’s latest new mortgage-referencing CRT has a unique structure which has raised some eyebrows.
The bank referred to the transaction as a “deconsolidated portfolio risk transfer” which transfers the mortgages to an off-balance sheet vehicle. The vehicle will in turn enter a credit agreement with a JP Morgan entity to borrow against the value of the retained portion.
It references US$531m portfolio, significantly smaller to the bank’s recent trades, with $53m worth of bonds. One source says this may explain the structure: “It looks like JP Morgan have actually sold a portfolio to an SPV. It might still service the loans, but for whatever reason this is a portfolio of loans they don’t mind selling and, as the size indicates, this is a somewhat unique circumstance.”
They add that it’s unlikely to be a proof of concept as “banks usually don’t want to sell things” due to the complications the process brings.
In other news…
Meanwhile, the recent Morgan Stanley and Goldman Sachs subscription lines CRTs which are both targeted to land at under 500bps, may be an indicator to pricing trends in the market.
One source says the Goldman trade (SCI, 1 August) is expected to price at 450bps, while Morgan Stanley’s trade (SCI, 6 August) should also price at a similar spread. They explain: “Sublines are pretty much the gold standard for CRTs as they very rarely experience losses. As an investor you get flashed the gross number on coupons, but you really have to think about it on a loss-adjusted basis.”
They add that it may be unwise to expect spreads to widen: “The market has come in significantly but maybe CRTs are just pricing closer to where they should considering the relevant loss? Why shouldn’t it price at 400bps over?”
Back across the Atlantic, Santander is understood to have closed a transaction named “Hugo” during the second quarter. The deal referenced consumer finance loans.
Sources describe it as a small, bilateral trade with notes valued at “tens of millions rather than hundreds of millions”. It is hoped the transaction will pave the way to “more exciting” consumer finance transactions in Poland going forwards.
Joe Quiruga
News
NPLs
Italian NPL volumes significantly down
Volumes fall down 20% for Italian NPL collections during the first half of the year
After hitting a three year low in 1Q24 (SCI, 30 May), Italian NPL volumes were down 20% over 1H24 compared to the same periods in 2022 and 2023, according to Scope ratings.
Total collections in 1H24 reached €1,200m from 45 transactions. This is a significant drop in returns YoY, with 1H23 seeing €1,450m from 44 transactions.
The drop in collections across the half were driven by a 28% drop in discounted payoffs (DPOs) and a 62% drop in note sales, equivalent to €90m and €66m respectively, compared to the same periods in 2022 and 2023. Judicial proceeds are broadly in line with these periods but still saw a 3% decline, equivalent to €17m.
In June, collections were up 23% month-on-month to €255m – but this was still 31% below the June average of the previous two years.
As a percentage of collections per recovery strategy, judicial proceeds is dominant with 63.5% of total collections in June 2024. This is higher than the June 2023 figure (approx. 52%) and June 2022 figure (approx. 50%). As a percentage, judicial proceeds peaked at 75% in February 2023.
Note sales sit at 8.5%, a steep decline from June of the previous two years where they accounted for about 20% of the total.
Joe Quiruga
News
SRTx
Latest SRTx fixings released
SRT market sentiment highlights global market volatility.
The latest fixings for the SRTx (Significant Risk Transfer Index) have been released. If last month’s data points generally expressed a marginal widening across the indices, this month’s figures show that volatility has returned to the markets. Despite being the peak of the summer holidays, the beginning of the month of August has triggered a surge in volatility amidst renewed US recession risk, the significant re-pricing of central bank rate cut expectations and softer corporate earnings. Consequently, the latest SRTx fixings could not escape volatility contagion from broader credit and equity markets. Nevertheless, the impact of the wider macro-economic upheavals and pockets of volatility on the SRT market remains to be seen.
SRTx Spread Indexes have tightened across the board, with the European (-5.1%) and US (-10.7%) corporate segments leading the way. As for the SME sector, the figures reflect a more moderate tightening (-2.0% in Europe and -1.6% in the US). Such data points reflect a broader market sentiment of a firming up in spreads, notably in the lower end of the credit curve.
The SRTx Spread Indexes now stand at 919, 625, 1,000 and 1,033 for the SRTx CORP EU, SRTx CORP US, SRTx SME EU and SRTx SME US categories respectively, as of the 8 August valuation date.
SRTx Volatility Index values directly reflect the broader impact of sudden sentiment shifts and sharp position unwinds. Unsurprisingly, the widening was more pronounced in the US, with sentiment landing significantly higher (+80.0% for SMEs and +50.0% for large corporates). Regarding Europe, figures similarly show an incremental widening (+16.7% for large corporates and +9.4% for SMEs).
The SRTx Volatility Index values now stand at 67, 75, 63 and 75 for the SRTx CORP VOL EU, SRTx CORP VOL US, SRTx SME VOL EU and SRTx SME VOL US indexes respectively.
As for liquidity, the SRTx Liquidity Index values denote mixed, yet balanced results month-on-month, with all figures clustering around the 50 benchmark. European large corporate remained unmoved, whilst the US saw a +25.0% widening. Regarding SMEs, Europe experienced an incremental tightening (-6.7%), whilst the US ended biased higher (+20.0%).
The SRTx Liquidity Indexes stand at 50, 56, 50 and 50 across SRTx CORP LIQ EU, SRTx CORP LIQ US, SRTx SME LIQ EU and SRTx SME LIQ US respectively.
Finally, The SRTx Credit Risk Indexes widened across the board (Large corporate: EU +9.4%, US +13.6%; SMEs: EU +9.4%, US +50.0%), denoting an underlying sentiment of worsening credit risk.
The SRTx Credit Risk Indexes now stand at 62.5 for SRTx CORP RISK EU, 63 for SRTx CORP RISK US, 63 for SRTx SME RISK EU and 75 for SRTx SME RISK US.
SRTx coverage includes large corporate and SME reference pools across the EU and US economic regions. The index suite comprises a quantitative spread index - which is based on survey estimates for a representative transaction (the SRTx Benchmark Deal) that has specified terms for structure and portfolio composition - and three qualitative indexes, which measure market sentiment on pricing volatility, transaction liquidity and credit risk.
Specifically, the SRTx Volatility Indexes gauge market sentiment for the magnitude of fixed-spread pricing volatility over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating volatility moving higher.
The SRTx Liquidity Indexes gauge market sentiment for SRT execution conditions in terms of successfully completing a deal in the near term. Again, the index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that liquidity is worsening.
Finally, the SRTx Credit Risk Indexes gauge market sentiment on the direction of fundamental SRT reference pool credit risk over the near term. The index scale is 0-100, with levels above 50 indicating a higher proportion of respondents estimating that credit risk is worsening.
The objective of the index suite is to depict changes in market sentiment, the magnitude of such change and the dispersion of market opinion around volatility, liquidity and credit risk.
The indexes are surveyed on a monthly basis and recalculated on the last trading day of the month. SCI is the index licensor and the calculation agent is Mark Fontanilla & Co.
For further information on SRTx or to register your interest as a contributor to the index, click here.
Vincent Nadeau
Market Moves
ABS
Solera MBO boosts auto finance platform
Market updates and sector developments
Obra Capital has partnered with the Solera Auto Finance (SAF) team in a management buyout from Solera Corp. SAF will be rebranded as Arra Finance and by combining the company’s skills with Obra’s existing structuring and credit expertise, the aim is to jointly work with securitisation market participants and forward flow purchasers to create highly rated assets.
SAF has developed relationships with 6,000 franchise and independent dealerships across 44 states since being founded in April 2022. The company intends to leverage these relationships for an expected 3Q24 market re-entry to provide a subprime auto financing solution for used car buyers. Arra Finance’s scalable loan origination system, proprietary scorecard and data warehouse provides franchise and independent dealers access to finance solutions to facilitate auto sales for the dealership’s customers.
As part of the transaction, industry veteran Kenn Wardle will continue as ceo and chief revenue officer, while Steven Lackowski will continue as cfo. In addition, Allan Thompson will continue to serve as chief of staff, Cinde Perales will remain as head of compliance and Eugene Sims will remain as head of underwriting and funding operations. The leadership team has an average 25 years of auto finance experience, with experience in scaling finance platforms.
Arra Finance will continue to be based out of Irving, Texas.
Corinne Smith
Market Moves
Structured Finance
Job swaps weekly: New Cayman structured finance chief for Maples
People moves and key promotions in securitisation
This week’s roundup of securitisation job swaps sees Maples and Calder naming a new head of its Cayman Islands structured finance practice. Elsewhere, Scotiabank has staffed up for the launch of its new Houston-based mortgage capital markets business, while an ex-Stout md and co-lead of structured credit has taken up a C-suite role at Unifi Asset Management.
Maples and Calder has appointed finance partner James Reeve as head of its Cayman Islands structured finance practice, replacing Scott Macdonald. With over 20 years of experience, Reeve advises on structured finance transactions, including CLOs, related risk retention structures and CFOs; fund financing matters for both lenders and borrowers, including rated note feeder funds; and general banking and financing work.
He joined Maples Group in July 2011, having been an associate at Slaughter and May in London before that. Macdonald remains a finance partner at Maples, which he joined in November 2005, having worked at Deutsche Bank and Hogan Lovells before that.
Meanwhile, Scotiabank has poached a JP Morgan team of seven to launch its new mortgage capital markets business in Houston, Texas. The new recruits include three md's and J.P Morgan veterans, Thanh Roettele, Brice Simpson and Francis Lim, and director Kevin Wooten. Lindsay Schelstrate, Russell Allen and Daisy Michaelson also join the bank to handle risk and operations support.
Former Stout md and co-lead of structured credit Kulaligil has joined Unifi Asset Management as chief administrative officer, based in New York. Kulaligil stepped down from his position at Stout at the end of 2023 (SCI 5 January), two years after the company’s acquisition of Methodical Valuation and Advisory, which he co-founded in 2018. Prior to launching Methodical Valuation and Advisory he spent seven years at Houlihan Lokey.
GLAS has recruited three new Frankfurt-based team members to its transaction management group (TMG). With over 20 years of real estate expertise, Anna Kreuter joins the firm as TMG team leader from CBRE, where she was associate director, loan services. Additionally, Filipa Soares joins the firm from BNP Paribas, where she was head of team - credit operations. Finally, Rita Westlund joins from Solutus Advisors, where she was most recently head of servicing, Europe.
Corrs Chambers Westgarth has hired HWL Ebsworth partner Paul Sroka as a partner in its banking and finance team, based in Melbourne. Sroka leaves his position at HWLE after 15 years with the firm. His practice focuses on corporate finance, agri-finance, acquisition finance, real estate and project finance, asset and structured finance. He will take up his new role in September.
Matthew Cudrin has rejoined Arnold & Porter’s real estate practice as a partner, based in New York. Cudrin brings experience in handling a wide range of commercial real estate transactions nationwide, with a particular focus on the hospitality, multifamily, industrial, office, retail and mixed-use sectors. He was previously a real estate lawyer at the firm from May 2014 to November 2016, when he was recruited by Bryan Cave Leighton Paisner as a partner.
Stephenson Harwood has hired Daniel Andrews as partner in its finance practice, based in London. He will advise clients across a range of asset classes including structured finance, real estate finance, special situations, direct lending, debt restructuring, private equity and private equity real estate. Andrews left his role as senior counsel at private capital manager Triton Partners in July, after one year with the firm. He previously spent four years at RoundShield and seven years at Ropes & Gray.
And finally, AI-focused lending platform Pagaya has promoted Sahil Chandiramani, a director in its structured products team, to head of capital markets. Chandiramani joined the business four years ago, after two years in the structured finance group at SMBC Nikko Securities America. He previously spent a year and a half at Fitch Ratings, where he focused on US structured finance and asset-backed securities.
Corinne Smith, Kenny Wastell, Claudia Lewis
Market Moves
Structured Finance
JHG bolsters private credit capabilities
Market updates and sector developments
Janus Henderson Group has entered into a definitive agreement to acquire a majority stake in Victory Park Capital Advisors (VPC). With a nearly two decade-long track record of providing customised private credit solutions to both established and emerging businesses, VPC complements Janus Henderson’s securitised credit franchise and expertise in public ABS markets.
Founded in 2007 by Richard Levy and Brendan Carroll and headquartered in Chicago, VPC invests across industries, geographies and asset classes on behalf of its institutional client base. The firm has specialised in asset-backed lending since 2010, including in small business and consumer finance, financial and hard assets, and real estate credit.
Its suite of investment capabilities also includes legal finance and custom investment sourcing and management for insurance companies. In addition, the firm offers comprehensive structured financing and capital markets solutions through its affiliate platform, Triumph Capital Markets.
Since inception, VPC has invested approximately US$10.3bn across over 220 investments and has assets under management of approximately US$6bn. The firm is expected to complement and build upon Janus Henderson’s US$36.3bn in securitised assets under management globally and enhance its position in the global institutional market.
The acquisition is expected to close in 4Q24 and is subject to customary closing conditions. The acquisition consideration comprises a mix of cash and shares of Janus Henderson common stock and is expected to be neutral-to-accretive to earnings per share in 2025.
Corinne Smith
Market Moves
RMBS
August RMBS surge surprises experts
Unseasonably high activity defies market volatility and summer slowdown
In an unexpected twist, the typically quiet international primary market in August has burst into activity, with two UK RMBS and two Australian RMBS deals making notable strides. According to a recent JP Morgan report, this surprising surge of activity has unfolded despite the prevailing market volatility and the customary summer slowdown.
JP Morgan's research strategists point out that the recent UK RMBS deals were either pre-placed or involved relatively short marketing periods. These transactions included a senior tranche from London Wall Mortgage Capital 2024-01 by Citi and a prime RMBS deal from Santander, Holmes Master Issuer 2024-2. The latter adopted a non-traditional marketing strategy with a set pricing spread, which managed to capture investor interest in just two days.
The report notes: “Though this strategy was perhaps employed to mitigate the impact of market volatility and heightened uncertainty, the deal still garnered a weaker reception from investors relative to what we have seen throughout 2024 YTD.”
As a result of this flurry of activity, JP Morgan reports that year-to-date (YTD) distributed European ABS issuance has surged to €59.7bn in 2024, marking a nearly 50% increase over the post-crisis average of €40.3bn.
JP Morgan's strategists further highlight that “London Wall Mortgage Capital 2024-01 and Holmes Master Issuer 2024-2 represented the 11th UK BTL RMBS and 11th UK Prime RMBS deal, respectively, sold this year, as distributed issuance in these market segments has reached €4.9bn and €6.8bn, both approaching the corresponding totals of €5.4bn and €8.3bn sold in FY 2023.”
On the other side of the globe, the report underscores the significance of the two Australian RMBS deals: Series 2024-2 REDS Trust and Pepper Residential Securities Trust No.40. These transactions have propelled YTD distributed issuance in the region up by €1.4bn to €29bn.
“Pricing execution in the Australian RMBS market remains relatively strong,” the report continues. “Both deals were able to upsize – to a collective A$2.25bn from a combined, originally targeted size of A$1.25bn. Though, classes A1, A2, B and C of Bank of Queensland’s REDS Trust Series 2024-2 did price at the wide end of guidance.”
Looking ahead, JP Morgan’s strategists maintain a cautiously optimistic outlook for the primary market in September. While they anticipate continued healthy activity, they also expect investors to demand pricing concessions, which may result in wider spreads and steeper credit curves compared to July. For now, they recommend adopting a ‘wait and see’ approach to gauge the full impact of recent market fluctuations.
Selvaggia Cataldi
structuredcreditinvestor.com
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