Another Fine Mezz asked last week, how much would investors charge El Corte Inglés for its somewhat tricky debut consumer ABS compared to Santander’s market-leading shelf?
We now have the answer: 17bp for the seniors.
El Corte’s Secucor Finance 2025-1 ultimately got away pretty well in the conditions, but investors did get their premium. It is reflective of a busy, but healthy, market for issuers.
Investors seem to have a lot of cash to deploy but also a wide choice about where to deploy it, allowing for a constructive market, despite some caution about certain risks, particularly from macro conditions.
El Corte needed a little bit of JLM interest on the €332m class ‘A1’ notes at the first book update to get things going, but that was dropped from the final 1.3 times oversubscription, while an equally sized ‘A2’ note was preplaced, helping to smooth the execution.
Secucor was backed by 13 types of loans “with vastly different repayment requirements and default performance”, according to the Morningstar DBRS presale report. It is also the first time an issuer has publicly marketed a trade, and it came amid busy overall conditions.
But given investors seem hungry, Secucor offered a good chance to put some cash to work at wider levels, while still carrying the “simple, transparent and standardised” stamp.*
It bodes very well that in late September, the market remains busy, tricky deals are getting done, and spreads seem to be moving even tighter. On that front, there is much to watch this week, including whether the triple-As of Enra’s UK RMBS can go even tighter than the firm’s February print of 72bp.
* A note for those who are not lawyers:
After some reading, GlobalCapital has worked out why a deal can be considered “simple” despite having so many loan types.
“Simple” requires the underlyings to be “homogenous […] taking into account the specific characteristics relating to the cash flows of the asset type, including their contractual, credit-risk and prepayment characteristics” (Article 20.8 of the Securitization Regulation).
Superficially, that might appear to be a problem here, but there is a separate Regulatory Technical Standard on homogeneity which says that as long as everything in the pool is a “credit [facility] provided to individuals for personal, family or household consumption purposes”, then the pool is homogeneous as long as it was all underwritten and is serviced to the same standard.
El Corte Inglés is the originator and servicer here and has satisfied that requirement, hence Secucor qualifies as “STS”.