Contents

Asset-Backed Finance

UAE securitisation market boost

Cross-border forward flow transaction could catalyse ABF growth in the Middle East

Gargash Group’s Deem Finance, a UAE-based financial services firm, has secured an up-to-US$400m forward flow securitisation deal with JPMorgan as senior lender and Daman Investments as financial advisor. Due to its cross-border nature, the transaction presented unique complexities.

“The underlying receivables are dirham-based, generated within the UAE, while the private ABS funding is cross-border and denominated in US dollars. This creates additional structural considerations, including cross-currency risk and differing banking hours across jurisdictions,” explains Debashis Dey, partner at White & Case and lead advisor to Deem Finance in the deal. 

Indeed, the securitised portfolio includes a diversified pool of assets originated in the UAE, ranging from credit cards and personal loans to merchant finance. Its revolving structure allows funding to grow alongside Deem’s portfolio, enabling the firm to scale its mission of supporting the ‘un-banked’ consumer finance and SME sector. 

“What’s so great about this deal is that it’s an evergreen facility, so we can continue growing and growing. As long as we’re meeting all of the rigid criteria that our partner, ourselves and the regulator would expect, there’s no cutoff and nothing that stops our ability to grow,” says Chris Taylor, ceo of Deem Finance.

The deal is part of a growing trend in the Middle East involving non-bank financial institutions and fintech companies seeking alternative funding sources to scale their operations. While large commercial enterprises have access to traditional bank loans or IPO funding, fintechs and asset-light financial institutions have started to explore structured products, including securitisations, often backed by private credit to leverage their equity more efficiently.

“In markets like Saudi Arabia and the UAE, there’s a convergence of factors driving the securitisation wave: ambitious national economic goals, increasing consumer spending, a boom in fintech entrepreneurship and a maturing regulatory environment. These factors make the region attractive for private credit investors,” says Dey.

Securitisation momentum building across the Gulf 

Deem’s transaction with JPMorgan follows similar deals in the region, such as the one involving Tamara and Goldman Sachs, and signals a growing confidence among international investors in the Middle Eastern securitisation market.

According to Dey, one key challenge to completing similar transactions is the absence of settled true sale laws in the UAE and Saudi Arabia, which impacts securitisation structures. “In jurisdictions like the UK or continental Europe, case law or even specific true sale laws provide clarity on asset transfers in securitisation transactions. In the UAE and Saudi Arabia, however, legal frameworks on the topic are in their infancy, meaning legal teams must carefully structure deals to ensure compliance and risk mitigation,” he explains.

Additionally, the absence of orphan SPVs in Saudi Arabia and the UAE’s onshore market adds further structuring complexity.

Nonetheless, the successful execution of Deem’s transaction could act as a catalyst for similarly structured deals across the region. “The fact that Deem and JPMorgan have successfully closed this deal proves that these transactions can be executed in the region. This could encourage other players to engage with international credit providers and explore ABS to scale their businesses,” says Dey.

As international investors grow more comfortable with the evolving regulatory frameworks in these markets, neighbouring countries such as Saudi Arabia are well-positioned to replicate Deem’s cross-border, cross-currency model – particularly as the country has already hosted several fintech-led securitisations and SMEs comprise 28.7% of its total GDP, as of 2023. 

Marta Canini

RMBS

SCI in Focus: Specialist RMBS set for robust 2025

Non-bank lenders to see continued growth amid strong investor appetite and ongoing innovation

The UK’s specialist lender RMBS market saw a year of strong activity in 2024, with new issuers entering the space, solid investor demand and attractive spreads – a trend that is expected to persist in 2025. In particular, niche lending to underserved borrower segments is expected to see growth.

Total European RMBS issuance reached €122.6bn last year, slightly down from €133.8bn the previous year, according to Morningstar DBRS. The UK maintained its position as the most active jurisdiction in the region, accounting for €42.7bn across 59 transactions.

Heading into 2025, similar trends are anticipated, with non-bank lenders continuing to be particularly active. “We saw really strong activity from the specialist RMBS market last year, with a number of new issuers entering the space and healthy investor demand comfortably absorbing available supply,” says Rehanna Sameja, svp at Morningstar DBRS. “The dynamics are different for non-bank lenders - they have to come to market for funding, unlike banks that have retail deposits. For non-bank lenders, accessing capital markets is not optional.”

Sameja notes that spreads remained attractive last year and she expects this to continue: “For this year, going forward, we expect to see more of that.”

Of course, a key factor shaping issuance dynamics across the European RMBS market this year will be TSFME repayments – which will likely drive an increase in bank issuance, although non-bank lenders are expected to maintain high volumes given ongoing investor appetite. “There are a couple of dynamics at play for the year ahead - TFSME repayments are coming significantly later this year, meaning banks will participate more,” Sameja explains. “But I think we will see non-bank lenders coming to the market in more volume, given that we’ve got that depth coming back from the investor side.”

Together stands out for its innovation

Among the specialist lenders making a mark in the RMBS space, Together continues to stand out for its consistent growth and innovation. Historically a major player in second-lien lending, the lender significantly repositioned itself a decade ago following increased market competition and the entry of new lenders.

“The RMBS market opened up to new sources of capital around 2015-2016, with many new lenders entering, and the specialist segment grew from there,” observes Hassan Ahmad, director, debt capital markets at Together. “Given the market size and growth, we took the strategic decision to expand beyond second-lien loans into owner-occupied and BTL segments.”

Together has carved out a niche in lending to underserved borrower segments, such as the self-employed and those with more complex financial backgrounds. “We’re not the cheapest specialist lender, but we are more flexible on criteria and can lend to a wider range of customers - and on a deal level, our pools are typically less credit-impaired than others,” explains Ahmad. “We’ve never purchased a loan, we’ve never sold a loan - we originate in-house, we service in-house.”

​Together has begun the year in a strong position, after successfully pricing its £276.8m second charge-only RMBS, TABS13, in February and closing just last week on its fifth small balance CMBS transaction.

Recently, Together implemented significant structural innovation in its securitisations by introducing a liquidity reserve facility provided by a major and highly rated banking institution, replacing traditional cash reserves. “Cash is undrawn on day one, but as and when you need that liquidity reserve, the liquidity reserve provider will put cash into the deal – which saves costs for us while keeping investors comfortable,” explains Ahmad.

The move was well received by rating agencies and investors, with some suggesting it could become a broader market trend. “I have a feeling people will be moving towards it - it's a very nominal commitment fee compared to traditional methods,” he adds.

Investor demand for Together’s recent transactions has been notably strong. “Subscription levels were three times oversubscribed in the class A notes - never seen before in the specialist space,” says Ahmad. “If you include those investors who fell out at the cheaper pricing, it was four times oversubscribed - the market is very hot out there.”

Morningstar DBRS corroborates this sentiment, noting that specialist RMBS pricing remains competitive, despite some early-year spread widening in prime RMBS and covered bonds.

Despite an evolving market, specialist lenders still see room for growth in niche lending – including in the bridging loan, later-life and other underserved borrower segments. "Investor sentiment towards niche segments has shifted significantly from five or 10 years ago,” adds Sameja.

However, the ability to expand into new areas will require investor engagement and education. "Lenders will still need to take time to build relationships and bridge knowledge gaps," adds Sameja. "Things like investor roadshows will be key – but the fundamentals do now exist to support these niche products.”

Regulatory and macroeconomic headwinds remain

While the outlook for specialist RMBS remains positive, there remain several regulatory and macroeconomic headwinds to contend with. Regulatory discussions around risk weightings, which continue to dampen RMBS volumes, are ongoing.

“There has been some unfavourable treatment of RMBS that has suppressed issuance volumes to an extent. It’s good those conversations have started, but it’s a longer time horizon - maybe 2026 or 2027 - before we see tangible changes,” Sameja notes.

Interest rates also remain a concern. “In terms of reductions in interest rates, we think they’ll come, but probably higher for longer - and that trajectory of reducing rates will be a lot slower,” Sameja explains. “Inflation, stagnation - however you term it - is still a persistent concern. The Bank of England is obviously cautious.”

However, low unemployment remains a supportive factor. “That’s the one caveat. If unemployment remains stable, specialist RMBS should perform well. But if we see a shift, that could be a game-changer,” she adds.

The BTL segment continues to experience affordability pressures, with rental yields lagging behind borrowing costs, though anticipated gradual rate cuts should ease these concerns somewhat. Owner-occupied lending, meanwhile, should see increased refinancing activity as rates stabilise.

Ahmad explains: “We’ve experienced peaks and troughs of demand. If interest rates climb, we see a fall-off in the owner-occupied space, but an uptick in bridging. So where one market may go slightly quiet due to the economic backdrop, another market opens up.”

Meanwhile, owner-occupied mortgage lending is expected to increase, with refinancing demand driving more activity. "As rates stabilise, more borrowers will be looking for refinancing options, and that could support issuance volumes," says Sameja.

Looking ahead, Morningstar DBRS expects UK RMBS issuance in 2025 to remain healthy but slightly below 2024 levels, due to fewer scheduled call dates. Nevertheless, issuance is expected to remain balanced between banks and non-banks, driven largely by TFSME repayments.

Together maintains confidence in its issuance strategy. “The view is that interest rates are coming down, so originations for BTL and owner-occupied should increase - and if they increase, we will increase our RMBS issuance in line with that growth,” comments Ahmad. “But we plan to be in the RMBS market multiple times a year.”

The lender reportedly maintains substantial liquidity - between £750m and £1.25bn - to ensure continued origination capability for at least nine months without accessing markets, even under stress scenarios.

Together differentiates itself further through a direct, relationship-focused approach. “Most lenders are heavily broker-led, typically 90-95%, whereas around 50% of our business is direct, relationship-driven lending, giving us flexibility competitors lack,” he adds.

Like many of specialist mortgage lenders, Together prides itself on agile underwriting, bespoke products and responsiveness, often providing solutions banks are unable to deliver quickly.

With strong investor interest, structural innovations and proactive strategies from specialist lenders like Together, the specialist RMBS market is poised for another dynamic year. “The market’s good at this moment in time,” concludes Ahmad. “We’re seeing levels of demand we’ve never seen before, and that’s a strong signal for the health of specialist RMBS going forward.”

Claudia Lewis

CLOs

Eldridge expands ETF offering providing European investors access to triple-A rated CLO tranches

Eldridge expands ETF offering in Europe with TAAA, targeting non-US investors seeking tax-advantaged access to AAA CLOs

To offer non-US investors access to triple-A rated CLO tranches with tax advantages over US-registered ETFs, Eldridge has launched its first actively managed fixed income ETF in Europe, the AAA CLO UCITS ETF (TAAA).

Speaking to SCI, the firm highlights it anticipates that investor interest will continue to grow as they learn more about the asset class and the product.

“TAAA is designed to provide investors and allocators with a compelling investment option when building portfolios,” says Eldridge.

TAAA which listed on Deutsche Börse Xetra on March 5 with a total expense ratio of 0.35%, is expected to pay a monthly dividend to investors, with income derived from floating-rate payments based on three-month SOFR and credit spreads. 

Danielle Gilbert, managing director at Eldridge, further explains that the firm's decision to launch TAAA was mainly driven by a desire to broaden access to the CLO market. She notes that while CLOs have traditionally been held by institutional investors, the introduction of new CLO ETFs offers a more accessible avenue for a wider range of investors.

"The fund's objective is to seek current income for investors, and our strategy to achieve this is by providing diverse exposure to CLO triple-A rated bonds," Gilbert states.

Addressing concerns about the risk profile associated with ETFs, she highlights the relative stability of the triple-A rated tranches of CLOs. "These tranches benefit from the prioritisation of cashflows from the underlying secured loan pool, thanks to their seniority," she explains.

Gilbert acknowledges that the structure of the fund carries both the risks of the underlying asset class and those associated with an actively managed ETF. However, she expresses confidence in the potential benefits of expanding the investor base. "I believe that the CLO asset class could benefit from having a more diverse set of investors with different liquidity needs," she adds.

The company also outlines several factors that supported the decision to launch the fund. Gilbert points to the long-standing robust historical performance of CLOs, their relatively low default risk expectations in corporate credit, and the tendency for triple-A rated CLO bonds to exhibit lower correlation to traditional stocks and bonds compared to other credit assets.

Eldridge’s actively managed fixed income ETF suite also includes the Eldridge AAA CLO ETF (CLOX) and Eldridge BBB-B CLO ETF (CLOZ).

Camilla Vitanza

ABS

SCI In Conversation Podcast: Moty Citrin, Midroog, and Jason Smilovitz, independent consultant

We discuss the hottest topics in securitisation today...

In this episode of the SCI In Conversation podcast, SCI’s Selvaggia Cataldi speaks to Moty Citrin, head of financial institutions and structured finance at Moody’s subsidiary Midroog, and independent senior securitisation consultant Jason Smilovitz about the evolution of Israel’s securitisation market. In light of a new law aligning the country with global standards, Citrin and Smilovitz discuss how the legislative changes will impact banks, investors and issuers, as well as the broader implications for Israel’s capital markets.

Citrin and Smilovitz also examine the challenges and opportunities presented by the new framework, investor appetite for Israeli securitisations and how the market compares to other jurisdictions.

This episode can be accessed here, as well as wherever you usually get your podcasts, including Apple Podcasts and Spotify (just search for 'SCI In Conversation').

Selvaggia Cataldi

Capital Relief Trades

Unfunded crossover

SRT market update

Reiterating a recent observation and sentiment, market sources continue to describe a historically busy first quarter of the year.

Commenting on this momentum, one SRT investor identifies two dominant reasons. He says: “Firstly, regulators have prompted banks to issue smaller trades more regularly and consequently issuance is now more spread out throughout the year. Secondly, banks are keen not to be caught at the back of the issuance queue which inevitably can be a consequence given relative limited bandwidth on the investor side.”

Within such context of increased supply, we asked the investor if, a floor in the spread compression, has been reached. On this topic, the investor describes a ‘marginal tightening’ from Q4 into Q1 this year.

However, the investor identifies a broader pricing dynamic. He says: “While unfunded SRTs have historically been the cheaper option for bank issuers, some reports suggest that we experienced a crossover between funded and unfunded deals last year.”

He continues: “While this could directly impact appetite on the (re)insurer side, it could also indicate that we’re near the bottom in terms of spreads for funded investors.”

Finally and continuing on the topic of market trends, the investor suggests that provision of repo for SRT deals continues. While Deutsche Bank has reportedly left a gap in this segment, the investor notes that a “number of banks are seeing an opportunity here.”

Vincent Nadeau

ABS

TwentyFour rides Aussie ABS wave to new highs

Australia's securitisation market soared to A$80.3bn in 2024, with another record year expected in 2025

A new report from TwentyFour Asset Management underscores the rapid transformation of the Australian securitisation market, which reached a record-high issuance of A$80.3bn (€46.6bn) in 2024. According to the firm, strong growth across all sectors, particularly in RMBS, has cemented Australia’s position as an increasingly attractive market for global investors.

"Non-bank lenders significantly increased RMBS issuance, benefiting from favourable market conditions as they rely heavily on securitisation for funding," TwentyFour AM notes. The report also highlights how prime RMBS issuance surged as banks refinanced their Term Funding Facility obligations, while auto ABS expanded sharply as non-bank lenders stepped in to replace banks retreating due to higher capital charges.

TwentyFour attributes the record issuance to robust investor demand from both domestic and international players. "With the help of overseas accounts, investor demand comfortably absorbed the increased supply, highlighting the broadening investor base attracted to Australia's securitisation market," the firm states. Investors from Japan, UK, Europe and US hedge funds have been particularly drawn to Australian ABS due to its relative value.

The report further emphasises how strong technical conditions led to deals being "heavily oversubscribed and frequently upsized between announcement and pricing." This tightening spread dynamic throughout 2024 has reinforced confidence in the market. According to TwentyFour Asset Management, non-bank triple A-rated prime RMBS currently offer a spread of 100bp over the one-month Australian Bank Bill Short Term Rate (BBSW), translating to a 5.5% yield when converted into GBP and providing a 40bp premium over UK prime RMBS on a currency-adjusted basis.

Despite a 430bp increase in interest rates since 2022, the report highlights the resilience of Australian ABS, backed by strong home-ownership culture, a robust labour market and real wage growth of 3.7% in 2024. "Consumers have reduced discretionary and non-discretionary spending, utilised savings accumulated during the Covid-19 period, worked additional hours or secured multiple jobs to increase income streams," TwentyFour AM observes, illustrating the adaptability of Australian borrowers.

Looking ahead, TwentyFour remains optimistic about 2025. With the Reserve Bank of Australia implementing its first rate cut of 25bp in February and two-to-three additional cuts expected, the firm anticipates improved loan performance and further stabilisation of arrears. "We believe the Australian securitisation market, which currently stands at an equivalent €83.1bn in size, continues to offer attractive opportunities for investors seeking diversification, enhanced returns and improved liquidity," the report notes.

With expectations for another record year, TwentyFour AM sees Australia’s securitisation market as an increasingly compelling investment destination, offering strong fundamentals and growing international appeal.

Selvaggia Cataldi

ABS

European and UK ABS robust in February amid diverging outlooks

European and UK ABS and MBS markets maintain their momentum, driven by strong demand and tightening spreads

February proved to be a strong month for European and UK ABS and MBS markets, with spreads tightening and issuance levels exceeding the previous year, according to monthly fact-sheets monitored by SCI.

Aegon reports that European ABS markets performed strongly despite broader market volatility, noting that non-senior tranches saw higher demand than senior tranches. TwentyFour echoes this, stating that mezzanine ABS bonds rallied by 10-25bps in terms of spreads and that higher beta bonds generally outperformed.

Amundi similarly points to robust investor appetite, emphasizing that mezzanine tranches were in particularly high demand, with levels reaching figures close to those of 2021. The firm attributed this to investors' search for stability amid interest rate volatility.

While all three firms acknowledge the strength of the market, their perspectives on future trends varied. Aegon expresses a more cautious view, emphasizing that risks remain to the downside due to macroeconomic uncertainties, including geopolitical tensions and diverging central bank policies. "With valuations tighter, there is limited upside for spreads and risks are to the downside," Aegon notes, adding that "carry will be the most important driver of returns."

TwentyFour AM Momentum Bond Fund’s managers, on the other hand, appears more optimistic, citing strong technical support and resilient collateral performance. "The strength of the European securitized market continued during February, supported by strong flows and attractive yields against alternative asset classes," the firm states. However, they did acknowledge geopolitical risks, suggesting that "tail risk from various geopolitical events and tariffs are not priced in by all markets."

Amundi takes a slightly different approach, noting that while there is still potential for residual tightening in senior tranches, the room for further compression in mezzanine spreads is more limited. They also emphasise that "issuers are taking advantage of a tightening spread environment," suggesting that strong technicals may persist in the near term.

The managers also differ in their sectoral allocations. Aegon reports increasing its exposure to CLOs and CMBS while decreasing its ABS allocation. Conversely, TwentyFour highlights the strong demand for UK prime RMBS, viewing them as historically cheap relative to non-conforming paper. Meanwhile, Amundi showcases its diversified approach, participating in green RMBS transactions in the Netherlands, auto loan securitizations in Finland and SME leasing deals in France.

Fund specifics:

Amundi ABS returned +0.39% in February 2025. YTD: 0.84%
Fund size: €1.15bn. ABS/MBS allocation: 97.65%

Janus Henderson ABS Fund returned +0.49% in February 2025. YTD: 1.08%
Fund size: £337.02m ABS/MBS allocation: 56.41%

TwentyFour AM Monument Fund returned +0.52% in February 2025. YTD: 1.18%
Fund size: £1.88bn. ABS/MBS allocation: 58.57%

Note: Aegon European ABS Fund’s January factsheet is not available yet.

Matthew Manders

Asset-Backed Finance

'Pioneering' Shari'ah-compliant securitisation marks major milestone for ABF

MUFG-structured deal sets precedent for Islamic ABF and ABS, paving way for future transactions

The UK’s second Shari’ah-compliant securitisation closed last week, marking a significant development in both the Islamic finance and ABF sectors. 

The sukuk securitisation from Gatehouse Bank and ColCap Financial UK, structured and financed by MUFG, follows the recent formation of the pair’s Buy-to-Let Purchase Plan partnership. 

By adhering to Islamic finance principles, the transaction is among the first deals in the UK to comply with Shari’ah law, ensuring ethical investment standards while avoiding interest-based returns. 

The first Shari’ah-complaint securitisation in the UK was completed in 2018 by Tolkien Funding; however, no further deals followed since. According to multiple market sources, MUFG’s latest deal could set a long-awaited precedent for future Shari’ah-compliant ABF and ABS transactions in the UK and across the EMEA region.

On top of the deal’s compliance with Shari’ah law, structuring was further complicated by seeking to adhere to the Alternative Finance Tax Rules – demanding substantial structural amendments far beyond that of traditional warehouse financing of conventional mortgage loans. However, further details on the deal’s structure remain limited, with those involved in the transaction declining to comment beyond last week’s official statement. 

As Islamic finance continues to expand across Europe, this transaction represents a milestone within the UK’s ABF framework, potentially opening new avenues for market participants seeking alternative structuring solutions.

MUFG was supported by legal counsel Simmons & Simmons, led by securitisation and ABF partner Kathryn James in the UK. The deal builds on the law firm’s previous advisory work in Islamic financing – including RMBS structuring in the Middle East. Simmons & Simmons is reportedly gearing up to support further securitisations of Shari’ah-compliant home finance products.

The return of a Shari’ah-compliant securitisation structure within the UK’s ABF space underscores the increasing diversification of funding structures, with potential implications for both conventional and Islamic finance markets. If successful, the transaction could pave the way for more such activity in the UK and beyond.

Claudia Lewis

Asset-Backed Finance

UK structured credit hiring to soar in 2025

Investor appetite fuels hiring boom across ABF, consumer ABS, and esoteric ABS

The UK structured credit market is poised for a hiring boom in 2025, driven by rising demand across ABF, consumer ABS, and esoteric ABS. Investor appetite for yield and high compensation packages in these sectors are fuelling this growth, according to RCQ Associates’ latest report, which forecasts sustained hiring momentum throughout the year, following a sharp rebound in the second half of 2024.

“Hiring has been unusually busy in the first two months of this year. Typically, hiring picks up mid to late March post-bonus rounds, but it's been busy already. Appetite for hiring is high and is likely to be significantly higher than it has been for the last two years,” says Edward James, founding director of RCQ Associates.

RCQ expects structured finance and private credit hiring to maintain a positive trajectory in 2025, as ABF, consumer ABS, and esoteric ABS drive appetite. Sectors like CLOs and SRTs will also continue to attract recruitment growth; however, RMBS hiring will remain subdued due to prolonged high interest rates.

According to the report, the underlying factors that drive this growth include an increasing investor appetite for yield and diversification, favourable market conditions and a demand for specialised financing solutions. Edward James highlights that ABF is the standout growth area, as investors seek ways to expand their income streams. “ABF is being seen as the next direct leader in terms of potential size growth,” he says.

In general terms, the ABF market is experiencing significant growth. According to Macfarlanes, “ABF has been seen as attractive for its structural flexibility and risk-adjusted returns” as “58% of investors indicated they would prioritise ABL strategies in 2025, underscoring the growing interest in this space”. For RCQ, ABF hires in 2024 were also pushed as several asset managers enter into strategic partnerships with insurance companies, and the results are expected to “drive much buy-side hiring this year.”

Regarding roles within the sectors, demand remains highest for professionals with three to ten years of experience, with 70% of placements through RCQ in 2024 representing candidates with titles of “senior associate,” “vice president,” or “director.”

Compensation levels have also experienced an uptick across the sector, particularly for senior roles. “Average basic pay increases for those not promoted or moving externally is 6%. Average total compensation increase, including bonuses, is 11%, reflecting an improved bonus pool. Average pay increases for external moves were 21% in 2024, versus 19% in 2023,” states the report.

Beyond experience, James also emphasises the importance of dominating other soft skills in all sectors within structured credit. “I think the key skill sets that people are looking for is someone who is tech-savvy and has the willingness to go above and beyond. Someone who really cares about their job, someone who not just knows the basics, but has shown evidence of going above and beyond in understanding the sector and their role within it,” he says.

Marina Torres

Capital Relief Trades

New auto loan deal for Huntington

Midwest lender comes back to reg cap market after 2024 debut

Huntington Bank last week closed a synthetic securitization of prime auto loans, designated HACLN 2025-1, in its first visit to the reg cap market in 2025.

The reference pool is US$3.5bn and sale of notes is worth US$415m. The deal is believed to have been syndicated.

This issuer last visited the reg cap market in November 2024, following its debut in June.

Huntington sold a 0%-12.5% loss position on this occasion but has retained the first 65bp of exposure.

The class E tranche, attaching at 65bp and detaching at 1.25%, was sold at a spread of plus 715bp, add sources.

The class D tranche attaches at 1.25%, detaches at 2.05% and was priced to yield plus 350bp.

The class C tranche attaches at 2.05%, detaches at 2.50% and came in at plus 225bp.

The class Bs attach at 2.50%, detach at 12.5% and were sold at a fixed rate coupon of 4.957%.

The coupons are on the thin side, but, as sources point out, the assets are prime loans.

As SCI has noted, auto loans make a lot of sense for reg cap trades by regional banks.

Huntington Bank, which is the wholly owned subsidiary of Huntington Bancshares, is headquartered in Columbus, Ohio but has over 1000 branches throughout the Midwest. At the end of last year it has assets of over US200bn.

Simon Boughey

Capital Relief Trades

Accelerating synthetics simplification and standardisation

Mayer Brown lawyers outline the key points and eligibility criteria of the ECB's SRT Fast Track process

Following the start of development work on an accelerated procedure for the regulatory recognition of significant risk transfer (SRT) securitisations last year, the ECB last month published guidance addressed to significant institutions¹ (SIs or SI) for certain simpler and more standardised traditional and synthetic securitisations. The new SRT Fast-Track process is currently being tested by the ECB and is expected to continue until the end of 1H25. Participation in the test is voluntary, with the testing phase designed as a parallel run, meaning that institutions are expected to continue to follow the 2016 ECB public guidance on the recognition of significant risk transfer.

Thus, SIs should still inform the ECB by means of a pre-notification at the latest three months before the expected closing date of a securitisation. The ECB will then, on the basis of the results of the test phase, decide how to introduce the SRT Fast-Track on a permanent basis. Accordingly, participating SIs will have the advantage of first-hand experience with the SRT Fast-Track process.

The main expected benefit is a shift towards further simplification and standardisation for eligible transactions. The objective of the SRT Fast-Track process is to significantly reduce the time needed to assess an individual securitisation transaction for sufficiently simple and standardised securitisations that do not include complex features. In this way, the competent authorities should be able to assess in a shorter period of time whether the securitisation meets the criteria set out in the Capital Requirements Regulation (EU) 575/2013 - in particular, in Article 244 and Article 245 CRR - and to assess whether the institution's capital requirements can be reduced.

SRT Fast-Track eligibility criteria

The ECB will in principle accept an SRT notification for a securitisation under the SRT Fast-Track process, if the following criteria are met:

• Size - a securitisation's total aggregated notional amount shall not exceed €8bn.
• Capital relief - in terms of CET1 by such originations shall not exceed 25bp.
• Granularity - at origination, at least 100 effective exposures must be assured, while no individual aggregate exposure value shall exceed 2% of the pool's value.
• Underlying - pool of securitised exposures shall only include credit risk exposures in the banking book which have defined periodic payment streams. Rental, principal, interest payments or similar rights may differ in their instalment amounts. However, underlying exposures shall not include transferable securities, with the exception of non-listed corporate bonds.
• Performing assets - no exposures in default under the Article 178 paragraph 1 CRR definition.
• Premiums - should be contingent on outstanding amounts to the protected tranche. Mechanisms which avoid allocation of losses to investors should not be featured in SRT transactions.
• Verification - originators shall appoint a third-party verification agent as defined in Article 26e paragraph 4 of the Securitisation Regulation (EU) 2017/2402, without the obligation to identify such in an SRT notification. Alternatively, self-assessment by internal audit may be allowed if protection agreements do not require third-party agents.
• Regulatory - compliance with minimum criteria of CRR and applicable criteria for credit protection in this new guidance is ensured.

Additional criteria for securitisations with an internal risk-based (IRB) approach:

• The limitations imposed by the ECB directly impact K_irb and SEC-IRBA risk weights OR
• The bank conservatively includes relevant limitation(s) in the calculation of said risk weights when assessing SRTs AND
• commits to reflect their impact in regulatory reporting via a self-imposed margin of conservatism according to Article 3 CRR.

For portfolios with no effects on their SEC-IRBA formulas from ECB-imposed limitations, individual agreements with the ECB about the conservative approach should be made before any notifications of a securitisation under the SRT Fast-Track process. All following securitisations covered by an internal model agreed upon are subject to the SRT Fast-Track process.

Key points of the SRT Fast-Track process

SIs intending to use the SRT Fast-Track process to recognise SRT in accordance with Article 244 paragraph 2 or Article 245 paragraph 2 CRR should inform the ECB of their intention at least one month ahead of the expected closing date of the securitisation. SRT Fast-Track documentation needs to contain the SRT Fast-Track template, necessary legal and accounting opinions for traditional and synthetic securitisations, and a summary document outlining key elements of the securitisation.

The closing documentation is to be submitted to the ECB no later than 15 working days after the securitisation's closing and include a final version of the SRT Fast-Track template or confirmation of a former version, as well as all documents foreseen in the Public Guidance.

In case of a positive outcome, the ECB will provide feedback to the SI at the latest eight working days after receipt of the SRT Fast-Track notification via email. In case of a negative outcome, the ECB will inform the SI as to the unmet criteria and assess the notification in accordance with the Public Guidance, taking up to three months. A negative outcome hereunder will take the form of a formal ECB decision.

In cases where SRT Fast-Track documentation differs from final documentation and certain criteria are not met, the ECB will undertake a comprehensive ex-post SRT assessment. A negative outcome hereunder will take the form of a formal ECB decision.

Guidance for completing the SRT Fast-Track template

Annex 1 contains guidance on how to complete the SRT Fast-Track template. For each securitisation, in accordance with the required cashflow model and the technical implementation of the Commensurateness Risk Transfer (CRT), banks should submit to the ECB the template for cashflow models provided by the ECB.  The template contains six categories of tabs, covering the following aspects:

• Key information on the securitisation, as well as on the eligibility criteria for the SRT Fast-Track assessment.
• Quantitative elements on the securitised exposures.
• Input parameters needed to execute the cashflow model that include specific information (e.g. start and end date of the securitisation, portfolio size, risk parameters, recovery rate, etc).
• Cashflow models with different scenarios.
• Results of the CRT test under all scenarios mentioned.
• Information on the cost of protection and of capital relief (for synthetic transactions).

Annex 2 provides a list of call options that are allowed in SRT Fast-Track transactions. Annex 3 contains the SRT Fast-Track template in the form of an Excel spreadsheet.

¹ Under ECB's direct supervision in line with the SSM Regulation and the SSM Framework Regulation.

Structured Finance

Job swaps weekly: Gandy returns to the SRT fold

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees SRT veteran Steve Gandy return to the industry as a board member at an SRT-focused fintech business. Elsewhere, Simpson Thacher & Bartlett has appointed a New-York-based securitisation-focused partner, while Trafigura Group has named a new global head of structured finance.

Iconicchain, a Finnish fintech specialising in SRT services for issuers, has appointed SRT veteran Steve Gandy to its board. Based in the US, he is tasked with advising the firm on product development and expanding into new markets. Gandy retired from his position as md and head of private debt mobilisation, notes and structuring at Santander in June 2022, after a 27-year career in the securitisation industry.

Meanwhile, Simpson Thacher & Bartlett has hired Niels Jensen as a securitisation-focused partner in its New York office. Jensen leaves his role as partner and co-head of aviation finance at Vinson & Elkins after three years with the firm. His practice spans a wide range of transactions, including corporate, asset-backed and structured financings, with particular focus on securitisations, including digital infrastructure, whole business and PDP well securitisations.

Trafigura Group has appointed David Gallagher as global head of structured finance, based in Geneva. Gallagher has over 25 years of experience in derivatives, structured finance, principal investing and commodities. Prior to joining the firm, he was based in London working for Signal Capital Partners, where he managed a commodities and natural resource investment portfolio.

In his new position, Gallagher will lead the structured finance team in supporting business development, structuring finance transactions; risk monitoring, reporting and mitigation; and in implementing developments related to financing projects and assets.

Milliman has expanded its suite of comprehensive mortgage solutions with the addition of two new strategic advisors, Jeff Juliane and Brett Ludden. The pair will leverage Milliman's mortgage data, modeling and analytics platform to provide strategic, actionable advice to clients including mortgage lenders, servicers and investors. Based in Washington, DC, both Juliane and Ludden have been appointed md at Milliman and have previously worked at Sterling Point Advisors and Capital One, among other companies.

Allison Salas has joined Reinsurance Group of America as senior trader and portfolio manager, focusing on CLOs. Based in New York, she was previously senior director at Fitch, which she rejoined in August 2022 – having left the firm in August 2005 to become a director - securitised credit research at DWS Group.

Maples Group has hired Pfida's structured finance specialist Shohel Ali as vice president in its fiduciary services team, based in London. Ali leaves his role as head of legal at Pfida after nine months with the business, having previously spent five years on the acquisitions, treasury and debt capital markets team at OneSavings Bank. His expertise spans RMBS, trade receivables and auto loans and leases.

ReviewPort, a firm specialising in CLO legal documentation reviews has appointed Laurence Isabelle Kubli as executive advisor, director of strategic initiatives and commercial strategy. She brings over three decades of management and investment experience in structured credit, with expertise in CLO senior, mezzanine, and equity tranches. 

Kubli’s career highlights include investment director at Muzinich, along with senior positions at GAM Investments and Man Group. At ReviewPort, Kubli will advise on strategic initiatives and commercial strategy, leveraging her expertise to drive growth and innovation. (Editor’s note: ReviewPort provides SCI with exclusive and comprehensive insights into the latest CLO transactions, helping investors stay informed about market developments. To explore such reports or request a trial, visit CLO Markets.)

And finally, Ocorian has appointed Elizabeth Fisher as global head of partnerships in a push to strengthen its senior management. Among other capital-markets-related services, Ocorion provides oversight and administration services focused on securitisation. 

Based in London, Fisher will be responsible for driving strategic partnerships and supporting Ocorian’s growth ambitions across its global business. She brings over 30 years of experience to the role and a multidisciplinary skill set spanning law, litigation finance, business development and commercial leadership.

She joins Ocorian from Restitution Capital, a litigation impact funder, where she was head of investment. Other roles include head of origination for Europe at Burford Capital and EMEA head of the regulatory and banking practice at Axiom, an alternative legal services.

Corinne Smith, Marina Torres, Ramla Soni, Kenny Wastell