Sector developments and company hires

Green railcar ABS debuts
Trinity Industries has priced its inaugural green railcar ABS, following the publication of its green financing framework in January. The US$355m TRP Series 2021-1 transaction is backed by a US$482.68m portfolio comprising 6,350 railcars.

The notes constitute green bonds based on the generally accepted market principles for such classification published by ICMA. Sustainalytics, acting as an external verifier, has provided a pre-issuance review of the deal. 

Crédit Agricole acted as structuring advisor in connection with Trinity Industries Leasing Company’s (TILC) green financing framework, which enables the firm to issue green financing instruments - including green non-recourse ABS bonds and green loans - supported by green eligible assets. TILC will manage and report on eligible projects and assets, in line with the Green Bond Principles 2018 and the Green Loan Principles 2020. 

Under the framework, currently eight of TILC’s outstanding debt financings - representing over US$4bn of railcar-related debt - meet the criteria and qualify for the green financing designation. Sustainalytics provided a second-party opinion on the framework. 

KBRA and S&P have assigned preliminary ratings to the US$334m A/A rated class A notes and US$21m BBB/BBB class Bs to be issued by TRP Series 2021-1. The proceeds will be used to redeem in full the series 2012-1 class A1 and A2 notes and the series 2013-1 class A1 notes issued under the Trinity Rail Leasing 2012 programme.

In other news…

CMBS delinquencies rise as debt relief expires
Fitch’s US CMBS delinquency rate rose 2bp to 4.12% in April from 4.10% in March 2021, marking the first increase after five consecutive months of decline. The rating agency notes, however, that this was partially offset by strong new issuance volume.

Fitch says it had anticipated that the overall delinquency rate would be volatile as stimulus burns off and coronavirus debt relief expires. New delinquencies rose to US$1.6bn last month from US$697m in March, with approximately 37% previously having been granted relief. Many of the larger newly delinquent loans have become 60 days delinquent for at least a second time, with borrowers requesting additional debt relief.

The roll rate of 30 to 60 days delinquent was 42% from March to April, up from 21% from February to March and 33% from January to February. Total 30-day delinquencies fell to US$2.6bn in April from US$3bn in March.

Meanwhile, resolutions totaled US$1.2bn in April, compared with US$1.6bn in March. Since the onset of the coronavirus pandemic, US$24.9bn (806 loans) have received debt relief, up from US$24.1bn (778 loans) in March.

Special servicing volume in April was US$28.6bn (1,188 loans), down slightly from US$28.9bn (1,210 loans) in March. Approximately 71% of the special servicing volume (US$20.3bn) was at least 60 days delinquent in April, similar to 69% (US$20bn) in March.

With the exception of hotel and industrial, all major property types reported higher delinquency rates from the prior month. The largest new delinquency last month - the US$171m Empire Hotel & Retail loan (securitised in CGCMT 2013-GCJ11 and GSMS 2013-GC10) - became 60-days delinquent for a second time, after being brought current in August 2020 when the borrower was granted a consent agreement to allow for the reallocation of reserve funds to pay debt service. The special servicer is reviewing the borrower’s request for additional relief.

RFC issued on long-term asset funds
The UK FCA has launched a consultation on proposals for a new category of fund designed to invest efficiently in long-term, illiquid assets. These funds would be open-ended and able to invest in assets such as venture capital, private equity, private debt, real estate and infrastructure.

The aim of this new long-term asset fund (LTAF) would be to provide a fund structure through which investors can invest with appropriate confidence in less liquid assets because the fund structure is specifically designed to accommodate relatively illiquid assets. These illiquid assets can offer attractive expected returns to investors. If successful, the existence of funds investing in these assets can also help businesses and infrastructure projects have greater access to long-term capital to support investment and wider economic growth.

The FCA is proposing that LTAF rules embed longer redemption periods, high levels of disclosure and specific liquidity management and governance features. These would take account of the types of risk to which LTAFs might be exposed and help provide investors with confidence that they are being managed appropriately and in their interests.

As well as offering an alternative investment opportunity to experienced retail investors, the LTAF would be aimed at defined contribution (DC) pension schemes that may be interested in investing part of their assets into an LTAF, in line with their investment horizons and risk appetite. The consultation also therefore proposes amending the permitted link rules to enable pension schemes to consider the proportion of illiquid assets across their investment portfolios, rather than to restrict the proportion of illiquid assets in each underlying fund in which they invest.

Establishing a new fund regime and overcoming operational hurdles are only two steps in creating an environment in which investment in longer-term, less liquid assets can flourish. To address these wider questions, together with Her Majesty’s Treasury and the Bank of England, the FCA has convened a Productive Finance Working Group. The group is considering how to ensure that the wider ecosystem can operationally support the LTAF as a non-daily dealing fund.

The working group is expected to draw its conclusions in July. Views from stakeholders on the LTAF proposals should be submitted by 25 June.