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Array of new deals, but "cracks showing"

By Graham Bippart
16 Jun 2015

Several ABS are being marketed this week in Barcelona, where delegates are meeting for IMN and AFME's Global ABS securitization conference — but the market is showing signs of stress.

Even with a broad range of assets on display, persistent turbulence in rates has begun to undermine the momentum the market has built up so far this year. 

Last week, JP Morgan was forced to widen the spreads on offer for most of its dual currency CMBS, and Goldman Sachs announced its was postponing its sale of an Italian CMBS. Even more granular asset classes like auto ABS saw some meaningful spread widening. 

“I think it is sentiment around Greece and rates volatility — fixed income mandates are shrinking generally,” said Ruben van Leeuwen, senior ABS and covered bond analyst at Rabobank. “ABS had resisted that negativity for a while, but in the last week, some cracks have started to show. 

"I was very surprised to see new deals yesterday,” he added, speaking to GlobalCapital at the Barcelona conference. 

Busy pipeline

Banco Internacional do Funchal (Banif) is marketing a Portuguese SME ABS with StormHarbour, Agos Ducato is showing investors an Italian consumer loan ABS, Crédit Foncier de France is in the market with an RMBS and in the UK Newday Limited has priced a pre-placed consumer loan ABS.

Banif has mandated StormHarbour Securities as joint arranger and lead manager along with Banif for Atlantes SME No 5. The transaction is expected to be launched and priced, subject to market conditions, following a roadshow which kicks off this week at the Barcelona conference.

The envisaged capital structure comprises four classes of notes. The A, B and C class notes are intended for sale. The €440m A class notes with an A3 rating from Moody’s and an A- rating from Standard & Poor’s have a weighted average life (WAL) of 1.6 years and credit enhancement (CE) of 46.6%.

The €36m B class notes are rated B1 with Moody’s and BBB with S&P, they have a two year WAL and CE of 42.1%. The €164.4m C class notes are unrated, even though they benefit from 20% CE. The €172.8m unrated D class notes are not offered.

Italian stallion

Italian consumer finance company Agos Ducato will also begin marketing its Italian consumer loan ABS, Sunrise Series 2015-2 ABS, this week. 

The deal is being jointly arranged by Crédit Agricole and Banca Aletti. Joint lead managers are Banca IMI, Crédit Agricole and Mediobanca. Pricing is due next week.

Meanwhile, Goldman Sachs has confirmed that it will postpone its Reitaly Finance euro CMBS sale until after the Global ABS conference.

CFF's second

Lead arranger Crédit Foncier De France is also marketing its second RMBS of the year, CFHL-2 2015, at Barcelona, with a view to pricing in the week starting June 22. 

The issuer mandated lead arrangers HSBC and Natixis last Friday. HSBC, Morgan Stanley, Natixis, UBS and UniCredit are mandated as joint leads.

Newday pre-places

And on Monday, Newday Limited announced that it had pre-placed Newday Funding 2015-1a UK credit card ABSThe deal was co-arranged by Newday Cards and Citi. Joint leads were Citi, Deutsche Bank, Lloyds and RBS.

The transaction comprised five classes of notes of which the top four were pre-placed. “We flagged the deal was out there and was priced, but not publicly syndicated,” said a lead.

Classes A to C were placed with a third party investor and the triple B-rated D class notes were sold to Deutsche Bank, who may or may not re-offer them. The most junior single B rated F class notes were retained.

Newday issued a three year deal last year and earlier this year issued a five year. The previous deals were backed by store cards while in this case the transaction was backed by a near-prime portfolio.

Being a more credit-intensive offering, this transaction had been expected to price wider than the previous deals. All tranches have an expected maturity of July 2018 and a legal final maturity of July 2023.

The £147.3m A class notes rated AAA with Fitch and DBRS benefit from 50.9% CE and were priced at 100bp over one month sterling Libor. The £21.6m B class notes rated AA by the same agencies with 43.7% CE were priced at 155bp over.

The £31.8m C class notes, rated single-A and with 33.1% CE, were sold at 195bp over. The £44.1m BBB-rated D class notes with 18.4% CE were priced at £250m over. The £22.8m BB-rated E class notes with 10.8% CE were issued at 350bp over and the single B rated F class with 5.7% CE were priced at 450bp.

The servicer has the option to delay the scheduled redemption by up to 12 months but will pay a step-up margin of 100bp over the initial margin. The provisional £579.6m pool is backed by loans with an average balance of £868 and an average credit limit of £1,937. The weighted average annual percentage rate being charged is 38.43%.

ABS to remain hamstrung

Despite the plethora of securitizations on offer, Moody’s published a report on Monday saying demand for European securitizations is likely to remain weak as the market lacks liquidity and regulatory capital costs are still too high.

“If the current levels of regulatory capital associated with structured finance instruments remain the same, the European structured finance market will not return,” the agency said.

For the market to properly get off the ground, bank investors will be needed. But they remain hamstrung because bonds cannot be easily liquidated, said the rating agency.

FlexiGroup to issue in Aussie dollars

In Australia, FlexiGroup’s subsidiary, Certegy Ezi-Pay, plans to issue a A$285m ABS which Moody’s and Fitch have both assigned ratings for. The consumer finance deal will be issued through Flexi ABS Trust 2015-2.

The A$100m class A1 notes are rated P-1 by Moody’s and F1+ by Fitch. The A$125.1m class A2 notes are rated Aaa by Moody’s, AAA by Fitch. The A$17.1m class B notes are rated Aa2 by Moody’s, AA by Fitch.

The A$12.85m class C notes are rated A2 by Moody’s, A by Fitch. The A$10m class D bonds are rated Baa2 by Moody’s and BBB by Fitch. The A$5.7m class E notes are rated Ba1 by Moody’s and BB by Fitch. The A$14.25m class F notes are not rated.

By Graham Bippart
16 Jun 2015