40 International Financing Review March 21 2020Glenhawk says demand for bridging
products has been robust, with the balance
OFûOUTSTANDINGûLOANSûINû1ûûUPûBYûû
YEAR
ON
YEARûTOûaBN
Glenhawk was launched in January 2018
and agreed a £75m funding line from
Shawbrook and Insight Asset Management
LATERûTHATûYEARû)TSûLOANûBOOKûGREWûTOûOVERû
£100m at the end of last year and the
securitisation with JP Morgan is designed to
take the book to £200m.NEXT CONSIDERS CUSTOMER
RECEIVABLES SECURITISATIONUK high street retailer NEXT may securitise
UPûTOûaMûOFûONLINEûCUSTOMERûRECEIVABLESû
as part of a series of measures to control
COSTSûANDûCONSERVEûCASHûWHILEûTHEûBUSINESSû
STRUGGLESûDURINGûTHEûCORONAVIRUSûCRISIS
Other measures include the sale and
leaseback of a warehouse as well as the
DEFERRALûORûSUSPENSIONûOFûDIVIDENDS
h7EûBELIEVEûWEûCANûLEASEûBACKûHIGHû
quality assets and recall part of a loan from
THEûCOMPANYûWHICHûHASûBEENûADVANCEDûTOû
the [employee share option trust] and
securitise some of our customer
RECEIVABLES vû.EXTûSAIDûINûAûSTATEMENTBANKS TRIM EUROPEAN 2020 ABS
ISSUANCE EXPECTATIONS"ANKSûHAVEûSTARTEDûCûUTTINGûTHEIRûPREDICTIONSû
OFûû%UROPEANûSTRUCTUREDûlNANCEûSUPPLY û
with BofA Securities lowering expectations
by 10% and JP Morgan by around 5%.
JP Morgan analysts say the reduction will
BEûDRIVENûBYûLOWERûPRIMEû5+û2-"3ûSUPPLYû
after the Bank of England announced the
Term Funding Scheme focused on SME
lending (TFSME). And they say further
VOLATILITYûCOULDûSEEûSUPPLYûCUTûFURTHER
For BofA research, most of the expected
decline is on the eurozone side, where it expects
BANKSûWILLûHAVEûAûREDUCEDûNEEDûTOûSECURITISEû
And it says that drop in supply, in addition to
measures from the ECB, will support spreads.“The market turmoil will likely make the
EXECUTIONûOFûNEWûDEALSûMOREûDIFlCULT ûWILLû
extend the period of portfolio ramp up,
while the new measures by the monetary
authorities will make liquidity abundant
and will relax some of the capital
constraints on the banks,” BofA says.
“With all these factors in play we expect
NEWûDEALûmOWûTOûBEûLOWERûTHANûINITIALLYû
expected and we expect the immediate need
to execute securitisation to decline.”
"OF!ûSAYSûPRIVATEûREPOûUNWINDSûMAYûHAVEû
caused some selling pressure in the
STRUCTUREDûlNANCEûMARKET ûWITHû4RIPLEû!û
repos now potentially unwinding – but that
SECTORûOFûTHEûMARKETûISûTOOûPRIVATEûTOûBEûSUREEMEA CLO
EUROPEAN CLO SPREADS WIDEN AT
BREAKNECK SPEED%UROPEANûLEVERAGEDûLOANû#,/ûSPREADSû
widened dramatically last week as fears
grow for those lower-rated and highly-
LEVEREDûCORPORATEûBORROWERSûWHOSEûLOANSû
make up the deals’ portfolios.
“You can assume there’ll be a raft of
downgrades,” said one syndicate banker,
expecting corporate downgrades to occur
and then feed through to CLOs.
On Wednesday, US trade body, the Loan
Syndications and Trading Association
(LSTA) felt it necessary to release a
statement stressing that CLOs are not
marked-to-market and that neither
downgrades nor lower loan prices would
force a CLO to sell assets or liquidate
portfolios.
In Europe, market participants say
Triple A CLO paper is now bid around
BPûOVERû%URIBOR ûAûBREAKNECKûWIDENINGû
FROMûTHEûBPûLEVELûACHIEVEDûBYûAûNEW
û
issue print from CSAM on March 12.
That deal sold its Double Bs at a 820bp
discount margin, and the bid for that rating
is now seen at 1,100bp to 1,200bp.h7EVEûNEVERûSEENûANYTHINGûLIKEûTHISû
happen so quickly,” said a CLO trader.
!û#,/ûINVESTORûREPORTEDûEXTREMELYûTHINû
liquidity in the secondary market.
“Trades are happening though,” he said.
“BWICs are getting done, but there is not
much price transparency coming out of
them.”
And those BWICs are not necessarily
getting executed in full.
“BWICs are horrible at the moment,
nobody wants to show their hand in a weak
MARKETûANDûEVERYONEûISûLOW
BALLING vûSAIDû
the CLO trader.
The primary market appears completely
shut, and last week equity noteholders in a
û%UROPEANûLEVERAGEDûLOANû#,/û
BLUEMOUNTAIN FUJI EUR CLO IIûREVERSEDûAûDECISIONû
to call the deal.
A stock exchange announcement on
February 28 said the deal would be
redeemed in full on its upcoming April 1
optional redemption date. But an
announcement on Wednesday said the
subordinated noteholders had rescinded the
redemption notice.
The CLO is managed by US-based hedge
fund BlueMountain Capital Management.
Deutsche Bank European research
analysts said on Friday the ECB should make
Triple A European CLO tranches as eligible
collateral under its temporary framework,
FOLLOWINGûTHEû&EDERALû2ESERVESûDECISIONûTHISû
week to make US Triple A CLO paper eligible
for its Primary Dealer Credit Facility.
h4HISûCOULDûHAVEûAûSIGNIlCANTûANCHORINGû
IMPACTûONûTHEû#,/ûMARKET ûANDûWILLûPROVIDEû
additional liquidity to banks holding CLO
AAAs,” Deutsche said.
/VERûTHEûPASTûYEAR ûCERTAINûCOMMENTATORSû
HAVEûPINPOINTEDûLEVERAGEDûLOANû#,/SûASûAû
potential spark for an end-of-cycle collapse,
much like sub-prime CDOs in 2007 and
2008.
Many CLO specialists acknowledged that
the quality of the underlying loans had
WORSENEDûOVERûTHEûPASTûCOUPLEûOFûYEARS ûASû
THEûFUNDINGûWHICHû#,/ûINVESTORSûFUNNELLEDûNEW ASSET–BACKED SUMMARY DETAILS: WEEK ENDING 20/3/2020
Issuer Amount (m) WAL Coupon (%) Bookrunner(s) Rating Asset type
Dowson 2020–1 £147.4 1.40 SONIA+150bp Citigroup Aaa/AA/NR ABS
Dowson 2020–1 £41.8 2.50 SONIA+275bp Citigroup A1/A–/NR ABS
Dowson 2020–1 £12.1 2.50 SONIA+325bp Citigroup Baa3/BBB/NR ABS
Dowson 2020–1 £9.9 2.50 SONIA+450bp Citigroup Ba2/BB–/NR ABS
Dowson 2020–1 £8.8 2.50 SONIA+600bp Citigroup B3/CCC/NR ABS
FREMF 2020 K–106 US$135.929 7.41 1.783 Barclays/JP Morgan NR/NR/AAA CMBS
FREMF 2020 K–106 US$852 9.90 2.069 Barclays/JP Morgan NR/NR/AAA CMBS
FREMF 2020 K–106 US$54.548 9.79 1.779 Barclays/JP Morgan NR/NR/A+ CMBS
FREMF 2020 K–106 US$48.488 9.91 3.708 Barclays/JP Morgan NR/NR/BBB+ CMBS
FREMF 2020 K–106 US$30.304 9.91 3.708 Barclays/JP Morgan NR/NR/BBB+ CMBS
SBIC DB 2020–10A US$1,007.335 – 2.078 Goldman Sachs/Credit Suisse/JP Morgan NR/NR/NR ABS
Series 2015–1 REDS Trust A$142.70 – 1mBBSW+125bp ANZ/NAB/Westpac NR/AAA/AAA ABS6 IFR Bonds 2325 p 23 - 45 .indd 40 20 / 03 / 2020 19 : 59 : 41