Investors
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Multi-level Libor exposure eyed
Sector developments and company hires
Multi-level Libor exposure eyed
Market Moves 9 September 2020
Japanese securitisations with exposure to Libor on multiple levels will face the highest risks in the transition away from the benchmark rate when it is phased out at end-2021, Moody's notes. Around 20% of Japanese structured finance transactions the agency rates have Libor exposure and, in some cases, there is Libor exposure through notes, as well .......
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Risk transfer round-up - 9 September
CRT sector developments and deal news
Commerzbank is rumoured to have significantly upsized a corporate and SME significant risk transfer trade that is expected to close in 4Q20, following the alleged replacement of PGGM as counterparty with another private investor. The German lender’s last capital relief trade was closed with the EIF in February (see SCI’s capital relief trades database).
....... News 9 September 2020
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Euro CLO payment mismatch grows
Sector developments and company hires
Euro CLO payment mismatch grows
Market Moves 8 September 2020
The payment frequency mismatch between underlying loans and European CLOs is growing as loan issuers switch to semi-annual payments to manage risks in the Covid crisis, according to Fitch. The agency reports an increase in the share of semi-annual obligations among quarterly-paying Fitch-rated CLOs to around 50% of the portfolio balance in July 2020, from .......
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ILS burden eased
Trapped capital securitisation debuts
Bermuda-based ILS Capital Management has completed a US$57m first-of-its-kind trapped capital securitisation. Trapped capital has historically been considered a burden in the ILS sector.
The debut transaction encompasses 51 contracts and represents 70% of the trapped capital across ILS Capital funds, as of 1 January 2020. Tom Libassi, managing partner and co-founder of ILS Capital Management, says: “The .......
News 8 September 2020
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Dispersion emerging
Mortgage payment holidays rolling off
A significant number of borrowers across Europe have resumed their mortgage payments, after exiting payment holiday schemes. However, dispersion across RMBS pools is emerging, due to the different lending practices of each lender.
Julian Craughan, partner at Hogan Lovells, notes the commonality in responses as regulators and central banks took a pragmatic approach to addressing coronavirus-induced stress. “Different .......
News Analysis 7 September 2020
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Reporting template RTS published
Sector developments and company hires
Reporting template RTS published
Market Moves 4 September 2020
Seven Commission Delegated and Implementing Regulations comprising the technical standards in connection with the details to be made available by the originator, sponsor and SSPE in a securitisation transaction subject to the Securitisation Regulation have been published in the EU Official Journal. Publication means that the reporting templates RTS will be effective on 23 September, after .......
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Liquidity boost
Piraeus taps Intrum
Piraeus Bank and Intrum have signed an agreement under which Intrum will acquire 30% of the junior and mezzanine tranches of a €1.9bn non-performing loan RMBS dubbed Project Phoenix. The novelty of the deal lies in its ability to facilitate auctions via an SPV liquidity reserve.
According to the terms of the transaction, 30% of the junior and .......
News 4 September 2020
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CMBS cure rates eyed
Sector developments and company hires
CMBS cure rates eyed
August US CMBS remittance data shows declining 30-plus day delinquency rates, as consent and forbearance agreements came into force and the country reopened. Within post-GFC conduit deals, 30-plus day delinquencies fell 40bp month-on-month to 8.1%, while SASB delinquencies improved 34bp to 7.4% and CRE CLOs improved 30bp to 2.4%.Contributing to this improvement in delinquencies .......
Market Moves 3 September 2020
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Negative rating actions tallied
Sector developments and company hires
Negative rating actions tallied
Market Moves 2 September 2020
Fitch reports that global structured finance negative rating actions - including downgrades, negative outlooks and rating watch negatives - reached an eight-year high in 1H20, reflecting weakening credit conditions due to the coronavirus pandemic-related recession. As of 30 June, 8% of the agency’s ratings had a negative outlook and 3% of ratings were assigned a RWN, compared .......
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View from an investor Part II
Last week DuPont Capital's Karlis Ulmanis told us where he s...
Things not to like
CRT
Three GSE CRT bonds have been issued since early March, when the lockdown began. These were the most recent $1.088bn (upsized from $1.038bn) STACR DNA4 priced by Freddie on August 18, the $1.1bn STACR 2020-DNA3 printed at the beginning of July which re-opened the market and the $835m STACR 2020-HQA3 printed at the end of .......
Talking Point 1 September 2020
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EGF expression of interest launched
Sector developments and company hires
EGF expression of interest launched
Market Moves 1 September 2020
The EIF has issued a call for expression of interest in participating in its Pan-European Guarantee Fund (EGF), which forms part of the overall package of measures agreed by the Eurogroup on 9 April and further endorsed by the European Council on 23 April (SCI passim). The EGF has a target size of €25bn and .......
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Seeking stability
Stimulus complicating SME SRT analysis
Coronavirus-related stimulus schemes are complicating the analysis of European SME significant risk transfer deals. While a small number of such transactions are being discussed with investors, the EIF’s involvement is anticipated for the vast majority of them – given that its mandate is to support the sector – until further clarity emerges regarding SME performance.
Prior to the .......
News Analysis 1 September 2020
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CECL eligibility expanded
Sector developments and company hires
CECL eligibility expanded
Market Moves 28 August 2020
The FDIC, OCC and the US Fed have finalised a rule that allows institutions that adopt the current expected credit losses (CECL) accounting standard in 2020 to mitigate the estimated effects of CECL on regulatory capital for two years (SCI 31 March). Under the rule, eligible institutions have the option to mitigate the estimated capital effects .......
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Impairment posted
Write-down for Arrow, but collections improve
Arrow Global posted a £110.4m loss in 1H20 and a non-cash impairment equal to £133.6m, following a revaluation of its balance sheet after the Coronavirus crisis. However, non-performing loan collections have registered a positive trend since April as courts and real estate markets reopen. Indeed, Arrow is expected to return to profitability in 2H20.
The macroeconomic impact of .......
News 26 August 2020
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Lack of transparency
Reporting discrepancies cause confusion
US RMBS reporting discrepancies are becoming a source of confusion among investors, with some shelves and servicers not always reporting loans in forbearance as delinquent. These discrepancies appear to be more visible in the reperforming loan space, where there has been a significant increase in modified loans with ‘current’ status that are not amortising.
To address the increased .......
News Analysis 20 August 2020
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SSRT trio revealed
Sector developments and company hires
SSRT trio revealed
Market Moves 19 August 2020
S&P has published its ratings and research on three previously privately-rated risk transfer RMBS issued by Freddie Mac, at the issuer's request. The trio of deals are STACR Single-Seller Risk Transfer (SSRT) Series 2019-CS02 (sized at US$245.2m and closed in March 2019), 2020-CS01 (US$578.36m; April) and 2020-CS02 (US$190.78m; July). The transactions transfer a portion of the risk .......
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Special servicing assets transferred
Sector developments and company hires
Special servicing assets transferred
Market Moves 18 August 2020
The assignment of substantially all of the assets of C-III Asset Management to Greystone Servicing Company, pursuant to the applicable PSA associated with each of the C-III specially-serviced CMBS, is complete. The assignment includes 64 transactions rated by Moody's and 28 Moody's-rated US conduit CMBS that hold C-III specially-serviced companion loans, but excludes the non-C-III specially-serviced .......
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Suburban bounce
SFR volumes up as renters vacate cities
Single-family rental (SFR) securitisation issuance has picked up this year, despite coronavirus-related volatility. Notably, suburban developments appear to be benefiting as renters seek alternatives to the urban environment.
“The impact of the Covid-19 environment on the economy and real estate assets continues to unfold,” says Daniel Tegen, senior director at KBRA. “The resulting implications on cashflow and value .......
News Analysis 18 August 2020
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Maximum impact
Full deduction SRTs stage comeback
Supranational and private capital relief trade structures have had to be adjusted following the coronavirus fallout to address the impact of payment holidays on deal performance, according to SCI’s latest CRT Case Study. Both supranational and private investors have treated the issue with equal caution. However, full deduction significant risk transfer deals originated by standardised banks and solely backed .......
News Analysis 17 August 2020
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'Flip clause' complaint dismissed
Sector developments and company hires
‘Flip clause’ complaint dismissed
Market Moves 14 August 2020
The US Court of Appeals for the Second Circuit has ruled that investors should keep roughly US$1bn received from various Lehman Brothers affiliates after the bank’s 2008 bankruptcy filing triggered the liquidation of dozens of CDOs. The case centres on the Bankruptcy Code’s treatment of ‘flip clauses’ in a securitisation waterfall, which reprioritise cashflow upon bankruptcy and .......
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LLPA increase 'misguided'
Sector developments and company hires
LLPA increase ‘misguided’
Market Moves 13 August 2020
Fannie Mae and Freddie Mac are increasing the loan-level price adjustment (LLPA) by 50bp as an adverse market delivery charge on effectively all mortgage refinances, except for construction loans, with settlement dates after 1 September. In response to the move, the Mortgage Bankers Association states that the announcement “flies in the face of the Administration's recent executive .......