Sector developments and company hires

European SME ABS struggling
Coronavirus-driven disruption is creating financial difficulties for European SMEs that heavily rely on securitisations for funding. Consequently, the crisis and subsequent recession will challenge the asset quality of SME ABS, according to a new report from Moody’s.

“There is a widespread lack of financial strength and fewer financing options among SMEs, relative to large corporate borrowers, so SME obligors are financially vulnerable - especially with a high concentration of underlying businesses in exposed industry sectors, such as tourism and retail,” explains Frank Cerveny, vp-senior research analyst at Moody’s. “Weakening credit profiles among SME obligors are likely to erode the asset quality of securitised transactions.”

The ultimate effect of the coronavirus on underlying asset quality will partly depend on the path of the economic downturn, Moody’s observes. However, structural protections - such as high subordination levels (especially for senior tranches), as well as reserve funds and liquidity facilities - will limit idiosyncratic and recession risks within most securitised transactions.

In other news…

Auto extension rates surge

US auto loan ABS extension rates surged to 3.7% in March, according to Moody’s, compared with 0.7% in both the prior month and March 2019. The year-over-year jump in extension rates was particularly pronounced for certain shelves, ranging from an increase of 0.4 to 6.7 percentage points. The agency reports that servicers are increasingly offering extensions to borrowers affected by the coronavirus, a move that will delay cashflow for several months and slow payments to noteholders.

EMEA
BNP Paribas Asset Management has appointed Christophe Montcerisier as head of real estate debt within its private debt and real assets (PDRA) investment division. Montcerisier has been deputy head of the division since joining BNPP AM in 2019. He was previously at Société Générale, where he held the position of md within the real estate M&A team.

Aurelia Lamorre-Cargill has joined Crédit Agricole as global head of structuring and product development, a role which will involve some joint projects with the firm’s securitisation team. Most recently, she co-founded and was ceo of Argon Capital Management, and has also worked at JPMorgan, Deutsche Bank and Barclays, where she was global head of fixed income structuring. Based in London, Lamorre-Cargill reports to Thomas Spitz, head of hedging and investment solutions, global markets at Crédit Agricole.