Extension risk returns as Pimco skips RMBS calls

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By Owen Sanderson
12 Apr 2021

Pimco has declined to call three RMBS issues where it is the option holder, despite broadly supportive marketplace conditions which would allow new financings to be structured and sold. Last year saw issuers including NewDay and TwentyFour skip call dates, due to the chaos wrought by the pandemic, which made a refi at reasonable spreads impossible. Missing a call for pure economic advantage, by contrast, is extremely rare in European securitization.

The deals in question are Jepson Residential 2019-1, Shamrock Residential 2019-1, both Irish legacy mortgage deals, and Rochester Financing No. 2, a legacy UK non-conforming RMBS. Pimco is understood to have bought equity and call rights to the first two deals in the secondary market, from original sponsors ...

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