Investors
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Trilogue agreement finalised
Excess spread concerns highlighted
The trilogue agreement on the European Commission’s ‘quick fix’ proposals was finalised last week and has received an overall positive reception from capital relief trades players, given that it extends the STS framework to synthetic ABS structures and provides greater standardisation. However, market participants have raised concerns about the proposed treatment of excess spread as a first loss tranche.
News Analysis 24 December 2020
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RFC issued on GSE living wills
Sector developments and company hires
RFC issued on GSE living wills
Market Moves 24 December 2020
The US FHFA is seeking comment on a notice of proposed rulemaking that would require Fannie Mae and Freddie Mac to develop resolution plans (or ‘living wills’) that would facilitate a rapid and orderly resolution, should the authority have to be appointed their receiver under the Housing and Economic Recovery Act of 2008. The .......
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RBS settles RMBS claims
Sector developments and company hires
RBS settles RMBS claims
Market Moves 23 December 2020
The securities division of Maryland Attorney General Brian Frosh has entered into an US$18m settlement with RBS Financial Products, resolving claims that RBS misled investors in its issuance and underwriting of financial crisis-era RMBS. RBS offering documents for these transactions made representations that the underlying loans generally complied with the lender’s underwriting guidelines and applicable laws, .......
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Unexpected impact
Business interruption claims weigh on cat bonds
The ILS market has not been immune to the turbulence created by Covid-19 this year. However, the fallout from the pandemic has affected the sector in somewhat unexpected ways.
Given the mortality risk associated with the coronavirus, the impact of the diseases on the life book of Leadenhall Capital Markets, for instance, has been negligible. “The insured population .......
News Analysis 23 December 2020
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Romanian NPE deal sealed
Sector developments and company hires
Romanian NPE deal sealed
National Bank of Greece (NBG) has entered into an agreement with Bain Capital Credit for the disposal of a Romanian-risk corporate non-performing loan portfolio. Dubbed Project Danube, the transaction has a total GBV of circa €174m (€102m of allocated collateral value).The deal is being implemented in the context of NBG’s NPE deleveraging strategy and .......
Market Moves 22 December 2020
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Divergent regimes?
STS synthetics onshoring awaited
Formal adoption by the EU of the STS synthetics regime will not realistically occur until 1Q21, after the text has been translated into the languages of the various member states - despite the recent trilogue agreement regarding targeted changes to the Securitisation Regulation and CRR (SCI 11 December). As such, the framework will not be onshored as part .......
News Analysis 22 December 2020
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Issuance forecasts lowered on TFSME extension
Sector developments and company hires
Issuance forecasts lowered on TFSME extension
The Bank of England has extended by six months the TFSME, covering both the drawdown period and the reference period of the scheme. The former will now run until 31 October 2021, while the latter will run from 31 December 2019 to 30 June 2021.JPMorgan international ABS analysts expect eligible banks and .......
Market Moves 18 December 2020
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Margin call
CLO equity arbitrage doubts raised
CLO new issuance is once again flourishing as the arb continues to improve, but the pick-up in volumes could yet prove to be premature. New investment performance data suggests current criteria are underestimated and also reveal a disparity between European and US returns.
“The market thinks a net collateral interest margin of 150bp (including management fees) is enough to make .......
News Analysis 18 December 2020
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Improving sentiment
Opportunities rebound in aircraft ABS market
Aircraft ABS secondary market activity all but dried up with the onset of Covid-19, until trading began picking up in September and October. At the same time, investors with capital began sourcing higher yielding opportunities in the sector.
Some aircraft ABS class A notes that were trading in the low-70s in April and May are now trading in .......
News Analysis 17 December 2020
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CLO manager transfers accelerate overlap
Sector developments and company hires
CLO manager transfers accelerate overlap
When managers acquire CLOs, the underlying portfolios become more like the existing portfolios of the acquiring manager, according to a new report from Fitch.During 2020, Fitch noted four CLO contract changes, two platform sales and two ownership changes. The contract sales this year were Crestline Denali’s sale of CLO management contracts to Ares .......
Market Moves 16 December 2020
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Call for further improvement
'Unambitious' NPL strategy launched
The European Commission has published a strategy that aims to prevent a build-up of non-performing loans across the EU banking sector, as a result of the coronavirus crisis. The proposals build upon a set of previously implemented measures, but have been criticised for not providing for an improved NPL securitisation framework.
Michael Lever, md, prudential at AFME, describes .......
News 16 December 2020
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CLO liquidity complexity examined
Sector developments and company hires
CLO liquidity complexity examined
CLO secondary market activity is booming across the board, but the underlying liquidity picture is a complex one, according to a new report by JPMorgan CLO research analysts.CLO BWIC trading volume has already reached an all-time annual high in 2020 at US$48.1bn for the US and €11.7bn for Europe, the JPMorgan report says. However, it adds .......
Market Moves 11 December 2020
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NPL momentum
Call for specific securitisation framework
Regulatory support for the non-performing loan securitisation market has coalesced over the last few weeks, with the publication of the Basel Committee’s technical amendment (SCI 27 November) and Wednesday’s announcement that the European Parliament’s Economic and Monetary Affairs Committee and the European Council have reached an agreement regarding the targeted changes to the securitisation rules and the CRR .......
News Analysis 11 December 2020
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Disclosure charges settled
Sector developments and company hires
Disclosure charges settled
Market Moves 9 December 2020
BlueCrest Capital Management has agreed to pay US$170m to settle US SEC charges concerning inadequate disclosures, material misstatements and misleading omissions. These charges concern the firm’s transfer of top traders from its flagship client fund, BlueCrest Capital International (BCI), to BSMA Limited, a proprietary fund, and replacement of those traders with an underperforming algorithm. The SEC’s order .......
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Real return
Money managers unlikely to be able to resist CLOs
The rapid Covid-driven blow-out in US CLOs, followed by an equally dramatic reverse, wrong-footed many real money managers and skewed their perception of the sector’s risk-reward profile. Consequently, some have been hesitant to return to the market. But, as 2021 approaches, many will re-join investment managers that didn’t step away, along with new investors all seeking the returns they .......
News Analysis 9 December 2020
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ESN debate
Could structures cannibalise true sale ABS?
The European Parliament recently called for legislation to establish European Secured Notes (ESNs) to facilitate SME funding. The EBA is also supportive of an ESN funding option, alongside traditional covered bonds, but there are concerns about the potential for the instrument to eclipse true sale securitisation issuance.
“ESNs are touted as dual-recourse instruments and are expected to largely .......
News Analysis 9 December 2020
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ADI securitisation review underway
Sector developments and company hires
ADI securitisation review underway
Market Moves 8 December 2020
The Australian Prudential Regulation Authority is undertaking a review of securitisation practices, having recently identified repurchased residential mortgage loans at some authorised deposit-taking institutions that were subject to repayment deferral from their securitisations. In APRA’s view, this represents implicit support, which is inconsistent with Prudential Standard APS 120 Securitisation. APS 120 requires ADIs to be clearly .......