Sector developments and company hires

Survey suggests improved sentiment
KBRA has published the results of its December survey of European structured finance investors, which was conducted to gauge their views and expectations regarding the market. The report reveals a more positive picture than the rating agency’s previous investor survey from June.

“While many challenges remain for the European securitisation sector, sentiment for the market has improved over the past six months. Sentiment is not overwhelmingly upbeat, but it does lean towards a more positive environment in the beginning of 2023 versus 2H22,” KBRA notes.

Most investors surveyed expect a tightening in European securitisation market spreads over the next six months: this appears especially true for investors in RMBS, ABS and CLOs. Bank investors, independent asset managers and pension funds are the strongest believers in future tightening, while hedge funds largely anticipate further spread widening.

Meanwhile, issuance is expected to return in some sectors, with a marginal bias towards an ongoing steady supply of transactions versus a return to retention and a quiet market. From a collateral performance perspective, the UK is overwhelmingly the area of greatest concern for investors surveyed.

For the survey, KBRA gathered responses from 57 investors across a wide spectrum of asset classes, from RMBS to non-performing loan (NPL) ABS. Respondents represented a range of investor types, including those in hedge funds, family offices, pension funds. The survey asked five short questions to gather investors’ views on where the market is heading, as well as the scale of their impression.

In other news…

CAS issuance expectations lowered
Fannie Mae expects “lower issuance volumes” of CAS bonds next year in the region of US$6bn-US$8bn, the GSE has announced. It has issued around US$9bn under the programme this year, much of which was executed in H1. Two deals will be issued every two months, though Fannie Mae says it retains the option to forgo issuance in each window depending on market conditions.

The GSE has also commenced fixed-price cash tender offers for the purchase of 14 CAS bonds issued between 2014 and 2018, with an aggregated principal balance of US$4.83bn. BofA Securities is lead dealer manager on the offer and Wells Fargo is dealer manager, with Great Pacific Securities and Siebert Williams Shank & Co acting as advisors on the transaction.

EMEA
Sustainable Fitch has named senior director Maria Bazhanova co-head of EMEA, ESG ratings, based in London. She was previously head of ESG ratings, financial institutions, EMEA at Fitch Ratings. Before that, Bazhanova worked at BNP Paribas and ABN AMRO in securitisation-related roles.

North America
Neil Aggarwal has joined Reams Asset Management as portfolio manager and head of structured products, based in New York. He was previously a portfolio manager at Verition Fund Management and worked at Semper Capital Management, BlueCrest Capital Management, Jefferies, Barclays, Citi and KPMG before that.

WAB out with fourth CLN
Western Alliance Bank (WAB) is in the market with its fourth CLN transaction, designed to transfer credit risk on a guaranteed portfolio of predominantly prime mortgage assets. Dubbed Western Mortgage Reference Notes Series 2022-CL4, the deal references a pool of 3,205 loans with an unpaid principal balance of US$1.9bn and offers US$95.02m of mezzanine and junior notes with ratings – assigned by KBRA and Moody’s – ranging from double-A to single-B plus.

The reference obligations were originated and are serviced by a number of underlying loan originators and servicers, although the top originator is New American Funding, which accounts for 21.4% of the pool balance. Owner-occupied property makes up 57.9% of the pool and investment property 40.1% of the pool. The properties are concentrated in California (representing 54.9% of the pool) and non-QM loans represent 58.6% of the collateral.

The borrowers in WAL 2022-CL4 have a weighted average original credit score of 770 and a WA debt-to-income (DTI) ratio of 34.7%, which KBRA says are generally consistent with prime-quality underwriting. Additionally, there is notable borrower equity in the properties, which is reflected in the WA original LTV ratio of 66.3%.

The transaction incorporates an actual realised loss framework for the issued notes and a first-priority perfected pledge of a collateral account secures WAB’s principal obligations. A letter of credit has also been obtained to pay up to four months of interest payments due on the notes in the event an FDIC stay is imposed. KBRA notes that this is distinguishable from other, similar CLN transactions, in which unsecured obligations of the issuer constrain the rating on the related notes.

JPMorgan is sole bookrunner on the transaction.