Sector developments and company hires

Volcker revision impact modest
The impact of the changes made to the Volcker Rule (SCI 26 June) will be relatively modest for the CLO market, according to S&P. The agency notes that nearly all current CLO documents prohibit investing in bonds, so will not see any changes unless they’re amended, which would require investor consent. However, a small number of recent deals do have ‘springing’ bond buckets that should now activate.

Consequently, S&P says: “It’s worth noting that the high yield corporate bond market has been much more active than the leveraged loan market in recent months, so this change could provide access to some additional collateral for new issue CLOs. This, plus a slight boost to CLO transaction economics, could make for a (modest) increase in CLO new issuance volume.”

However, the agency adds: “While CLO managers may view bonds as a natural extension of the credit work they’re already doing on leveraged loans (and often on the same companies that issue the bonds), some investors view the bond market as fundamentally different and requiring a different skill-set. These investors (in particular, Japanese banks when they return to the market) may view the addition of bonds as increasing risk and therefore push back on allowing them in new issue CLO transaction documents.”

In other news…

EMEA
Manish Peshawaria has joined SMBC Nikko Capital Markets as executive director, head of ABS trading. Based in London, he has been tasked with building out the firm’s EMEA secondary ABS trading capability. Peshawaria was previously md, ABS/MBS trading at Wells Fargo in London and he has also worked at Knight Libertas, Tullett Prebon, Credit Agricole and Commerzbank.

Internalisation closed
Annaly Capital Management has completed the acquisition of its external manager, Annaly Management Company, finalising its transition from an externally-managed REIT to an internally-managed REIT (SCI 13 February). Following the closing of the internalisation, Glenn Votek will retire from his role as senior advisor to the company on 31 August, but will continue to serve as a member of its board. Additionally, effective immediately, Steven Campbell has been appointed as the company’s coo, having most recently served as head of business operations.

Live bidding offered
KopenTech has introduced a new live bidding feature to its BWIC electronic trading platform, which allows sellers to customise the two stages of the process. For example, the seller could set stage 1 to accept initial blind bids for 15 minutes. At the end of stage 1, the top three bidders are invited to a second stage where they are able to see the top bid in real time. The feature aims to offer transparency in stage 2 as the current best price is made visible to users.

UK auto delinquencies up
The average payment holiday take-up across the 18 securitisations JPMorgan follows in its UK auto ABS performance tracker stands at about 8%, as at end-May 2020, with a sizeable range between the transactions from as low as circa 1% (DRVUK 4) to circa 23% (DWSON 2020-1). The firm notes that generally deals from non-captive originators have registered above-average payment holidays, which may also be a reflection of the higher risk category of borrowers. In terms of CPR, the index average of the outstanding deals has dropped to 9% through the end of May from around 34% in March, with the impact of Covid-19 stress appearing particularly sharp in seasoned transactions. Furthermore, the average total delinquency index has increased to 2.3% through the end of May, from 1.4% in February, implying deterioration in credit performance across the sector.