Sector developments and company hires

Call for aircraft ABS protections
Fitch reports that a material number of aircraft failed to be novated to two aircraft ABS - START III and Lunar 2020-1 – last year, following closing. The failure of aircraft to novate in START III resulted in the asset count falling to just two aircraft from 19 initially, while six of 18 initial aircraft did not novate following the closing of Lunar 2020-1. Meanwhile, the structures continued to pay note principal pro-rata and thus the class A notes remained outstanding, alongside the class B and C notes.

As such, Fitch downgraded the START III notes by multiple rating categories and the Lunar notes by one category, due to a significant increase in concentration risk that exacerbated the negative impact of stresses in the aviation sector. At year-end 2020, all other aircraft had transferred into each transaction, so novation risk no longer exists for outstanding Fitch-rated aircraft ABS.

The agency notes that novation risk, although occurring in only a couple of transactions to date, can be addressed in future new issuances if structures employ a priority-of-payment trigger that switches principal payments to sequential if a material number of assets fail to novate into deals, with senior notes paid down fully before subordinate notes receive any principal. Similarly, concentration risk could be mitigated with additional structural protections for senior notes, such as triggers that switch the structure to fully sequential under certain conditions related to pool count and/or concentrations.

In other news…

Auto datasets offered
dv01 has launched auto benchmark datasets, with the aim of providing investors with loan-level performance transparency on auto ABS. The new benchmarks pull Reg AB data from EDGAR to create both a prime dataset - consisting of 133 transactions valued at US$232bn in original balance - and a subprime dataset, consisting of 45 transactions valued at US$62bn in original balance. The data library at launch represents roughly 53% of all auto loan issuance since 2017 and, going forward, dv01 will onboard all new deals to the platform at the point of issuance in real-time.

North America
Golub Capital has made a number of senior-level promotions in its direct lending, structured products and investor partners group teams. Andy Steuerman has been appointed to the new role of vice chair of direct lending. He will continue as a senior member of the firm’s investment committee, oversee its special situations and late stage lending businesses and spearhead new strategic initiatives.

Greg Cashman will succeed Steuerman as head of direct lending. He has been with Golub Capital for over 24 years as an underwriter, originator and member of the investment committee.

Meanwhile, Spyro Alexopoulos, Craig Benton, Alissa Grad, Gregory Robbins, Marc Robinson, Rob Tuchscherer and Jason Van Dussen have been promoted to senior md.