Sector developments and company hires

GACS NPL ABS performance eyed
A sum of eight new GACS non-performing loan securitisations priced in late 2020, with a cumulative balance of €3.4bn (securitising a cumulative original GBV of €13.4bn of NPLs), according to JPMorgan’s latest Italian NPL Performance Tracker report. Including these transactions, Italian NPL ABS issuance has risen to €22.1bn across 38 deals (including three non-GACS transactions), which have securitised NPLs with a cumulative original GBV of €95.9bn. Of this total, GACS issuance stands at €21.1bn, having securitised a cumulative original GBV of €87.1bn of NPLs.

Across the eight deals that priced in late 2020, the original deal size as a percentage of total securitised GBV averages 28.7%, including a range from 20.6% (YODA 2020-1) and 35.8% (Relais SPV). The JPMorgan report notes that this average is just above the 28.3% average seen for previously issued GACS deals.

The proportion of secured loans in these eight transactions averages 68%, with a range from 49% (Summer SPV) to 91% (TTNPL 1). This average is in line with the 67% average for previously issued GACS deals.

Through the most recent reporting period, the current outstanding volume of the 38 NPL securitisations in JPMorgan’s Tracker totals €17.5bn, representing an aggregate factor of 0.79. Among the 30 deals in the Tracker that have had at least one payment date, the aggregate current factor is 0.75, with a range from 0.43 (FINO 1, issued in November 2017) to 0.95 (BCCNP 2019-1, issued in December 2019).

Among the 24 Italian NPL securitisations with updated performance ratios, five deals (all GACS transactions) have definitively failed their cumulative collection ratio triggers in either the December 2020 or January 2021 reporting periods. Of these transactions, three (BPBNP 2016-1, ARAGN 2018-1 and ISEO SPV) reported their second consecutive breach, having also failed their triggers in the previous reporting period.

Finally, ratings downgrades continue to impact Italian NPL securitisations, as DBRS Morningstar downgraded its ratings on the class A notes from eight deals (BCCNP 2018-2, BLVDR 1, BPBNP 2016-1, BPBNP 2017-1, ISEO SPV, LVTCS 1, SNNPL 2018-1 and WORLD 2018-1). Current ratings for these notes now range from triple-B low (ISEO SPV) to single-B high (BPBNP 2017-1), with most in the double-B high to double-B range.

The rating agency also downgraded the class B notes from three of these transactions (BPBNP 2016-1, BPBNP 2017-1 and WORLD 2018-1) to triple-C, based on transaction performance.

In other news…

EMEA
Channel Capital Advisors has appointed Ian Watson as group coo, reporting to Walter Gontarek, ceo and chair. Watson will manage all corporate activities, including risk management, finance and operations. He will also oversee programme management activities, such as compliance and organisational efficiencies, and joins the Channel risk and management committee structures.

Watson has over 30 years’ experience working in capital markets globally. Previously, he served as ceo Asia Pacific and ceo/president of North America at Bibby Financial Services, and executive director at GMAC Commercial Finance in the UK. He joins Channel after serving as UK md at Corporate Linx.

ESG CLO impact limited
The growth of ESG investment criteria will have limited impact on CLOs and manager flexibility, according to a new report from Moody’s. It says that most European deals’ portfolio eligibility requirements already incorporate such criteria (85% of those issued in 2020 and 2021) and they are also picking up in the US.

In addition, Moody’s notes that ESG criteria of typically narrow scope - limited to certain very specific business activities, often in areas with little relevance for CLO investments - provide flexibility to CLO managers to avoid falling into such restrictions. In addition, a lack of precise definition in ESG-restricted business activities within transaction documents leaves managers ample room for interpretation, further increasing their flexibility.

Finnish issuer debuts
LocalTapiola Finance is in the market with a rare Finnish prime auto ABS, dubbed LT AutoRahoitus (Tommi 1). Only the STS-eligible 1.33-year class A notes are being offered.

The provisional €592m pool comprises 39,375 hire purchase contracts extended exclusively to retail customers, with a weighted average seasoning of 11.96 months and a weighted average original term of 64.26 months. The majority (78.26%) of the assets are used vehicles and balloon contracts account for 57.64% of the pool. There is no residual value exposure.

Pricing is expected during the week commencing 12 April. BNP Paribas is sole arranger and lead manager on the transaction.

North America
Winstead has promoted nine associates to of counsel, including Erika Larson and Norene Napper.

Larson is a member of the firm’s finance & banking practice group in Dallas. In her practice, she handles a variety of corporate and middle-market syndicated transactions, including cashflow and asset-based facilities.

Meanwhile, Napper is a member of the firm’s real estate finance practice group in Dallas. In her practice, Napper represents national CMBS and portfolio lenders, as well as telecommunications and wireless companies.

Second Hops Hill prepped
UK Mortgages (UKML) has signed a new warehouse facility - called Cornhill Mortgages No.7 - arranged by Santander to fund the forward flow purchases of newly originated buy-to-let mortgage loans under the company’s ongoing arrangement with Keystone Property Finance. The transaction is intended to fund portfolio growth to a size suitable for a public securitisation, expected to be the second Hops Hill RMBS.

Keystone’s monthly origination levels hit a record in March, with over £40m of origination. Hence, the pre-funding phase of the Hops Hill No.1 transaction has been completed early, meaning the additional origination - which already includes a pipeline of over £100m - will go into the Cornhill No.7 vehicle sooner than expected.

Meanwhile, the second Coventry sale and subsequent tender are expected to take place in late May and early June respectively (SCI 12 February).

SME ABS restructured
Banco delle Tre Venezie has amended its Magnolia BTV securitisation to provide for the transfer of an additional €140m portfolio to the SPV, financed with a further issuance of €116m class A and €24m class J notes. The aggregate portfolio comprises 763 mortgage (accounting for 48.2%) and senior unsecured loans to Italian SMEs for a total principal balance of €259.83m, up from 365 loans with a €128.38m aggregate principal balance, as of the January 2021 payment date.

A portion of the proceeds was used to replenish the cash reserve up to a new target amount, equal to 1.5% of the class A notes principal amount outstanding, down from 2%. Following a review of the transaction, DBRS Morningstar downgraded its rating on the class A notes from single-A (high) to single-A. S&P, meanwhile, affirmed its single-A rating.

Banca Finint acted as arranger on the restructuring and is providing management services to the securitisation vehicle, with Cappelli RCCD acting as legal consultant.

Upgrades on criteria update
DBRS Morningstar has taken rating actions on 50 European securitisations, following the finalisation of its European legal criteria. The majority of the securities have been upgraded, with three downgrades.

The finalised methodology includes a matrix to assess the risk of loss due to an account bank’s failure. The matrix expresses such risk of loss levels in ratings for different combinations of account bank rating triggers and current account bank ratings.

Where exposure to the account bank in the transaction is limited, other sources are expected to be available to the issuer to meet its imminent obligations. The combination of the account bank’s rating and a downgrade trigger results in a default risk for the bank that is commensurate with the rating on the highest-rated liabilities of the issuer.

The methodology also more clearly distinguishes collection account bank risk from commingling and/or issuer account bank risk and establishes typical expectations for liquidity to cover payment disruption risk.