International Financing Review March 7 2020^45STRUCTURED FINANCEHowever outlet villages, which also
feature in Italian CMBS, have a larger
turnover in rental agreements. DBRS
EXPECTSûTHEMûTOûBEûHARDESTûHITûWITHûOUTmOWSû
of local shoppers and tourists cut.
“Outlet sales should bounce back but in
the short term, sales performance would be
under severe pressure,” DBRS says.
û4HEûlRSTû#-"3ûWITHûLOANSûTOûMATUREûAREû
from Blackstone’s Pietra Nera Uno, due in
May this year although they have three one-
year extension options. One of four
properties, Montova Outlet Village, is in
Northern Italy.GEDESCO GETS DEBUT TRADE
RECEIVABLES ABS AWAYSole lead Morgan Stanley priced non-bank
Spanish lender GEDESCO‘s debut trade
receivables ABS on Thursday, two-and-a-half
weeks after releasing initial price thoughts.
As market conditions deteriorated those
IPTs were forced wider. But although STS-
compliant, the unusual nature of the asset
CLASSûANDûTHEûlRST
TIMEûISSUERûSTATUSûOFû
Gedesco would have prevented the deal,
GEDESCO TRADE RECEIVABLES 2020-1, from being a
straightforward sale even in a stable market.
Revised IPTs before pricing included
€51m interest from Morgan Stanley in the
€225m Class A, which is rated Aa3/AAA by
Moody’s and KRBA. That Class A had original
IPTs for 100bp to low 100s, which were
revised to the 115bp area on Thursday
before pricing at a 125bp discount margin
over one-month Euribor.
The €15m Baa2/AA Class B had original
IPTs of the 200bp area to low 200s which
were revised to the 250bp area before
pricing at 240bp. And the €15m B2/A Class
# ûWHICHûWASûlRSTûTALKEDûATûTHEûBPûAREAû
to low 300s and then 390bp–400bp, came at
390bp. Three lower-rated tranches were
shown as “call desk” throughout before
pricing at 540bp, 700bp and 1,000bp.
The portfolio comprises 59.6% direct
lending, 30.4% promissory notes and 10.0%
factoring receivables.
These are short-dated assets: the
weighted-average remaining term is just
102 days. The implied weighted average
coupon is 13.9%.EMEA CLO
TRIPLE DIGITS FOR TRIPLE A CLOSCLO spreads have taken a thumping over
the past 10 days with new-issue Triple As
back out into triple digits, and paper rated
Triple B and below particularly hard hit.
The widening was most evident in the
pricing for PGIM‘s DRYDEN 74, where priceGUIDANCEûWASûlRSTûRELEASEDûINûMID
&EBRUARY û
in far more supportive conditions.
Revised guidance last week put those
levels much wider ahead of pricing, via
Goldman Sachs, on Thursday.
The Triple As came at 100bp over Euribor,
out from 92bp–95bp guidance. Less than
two weeks earlier, KKR’s new issue Avoca
CLO XXI had sold seniors at 89bp, the
tightest print of 2020.
h7HILEû!!!SûAREûRELATIVELYûlRMûINûTHEû
context of a higher intrinsic Euribor value
mOORû
ûYEARûNOWûATûBPûVERSUSûBPûONû
February 21), prices are 30–40 cents lower,”
according to a note on Friday from Deutsche
Bank’s European ABS research head Conor
O’Toole.
The Triple B, Double B and Single B
tranches for Dryden came at 400bp, 725bp
and 1000bp. Those are 85bp, 175bp and
165bp wider than KKR’s Avoca.
And spreads have widened in the
underlying loan market, with the hotel,
gaming and leisure sector hardest hit.
Deutsche Bank said the loans of Spanish
theme park operator Parques Reunidos,
among credits with the highest market
value impact on the CLO universe, were bid
down to 93.5 points from 100.08 on
February 21.
However Fitch said on Thursday that
European CLO ratings are well-placed to
weather a potential downturn caused by the
coronavirus, with the deals having
performed well during the recent benign
credit environment.
“As a result the vast majority of EMEA
CLOs are at or close to their target par with
healthy cushions under over-
collateralisation tests,” Fitch said.
Fitch said that although around 25% of the
European leveraged credit issuers it
monitors were from sectors that are subject
to preventative measures around
coronavirus, the CLOs it rates have an
average 11% exposure to those credits.
A new CLO was announced on Thursday,
with BLACKSTONE/GSO bringing new issue
VERSEY PARK CLO via BofA Securities. The deal
was slated to price last Friday or on Monday
this week.
The Triple As are shown as “call desk”,
while the Double A, Single A and equity are
all subject. Price guidance is high 300s for
the BBB/BBB–, 700bp area for the BB–/BB–
and 1,000bp area for the B–/B– tranche.US MBS
US CONDUIT CMBS DRAWS STRONG
DEMAND IN VOLATILE MARKETA large US multi-sector commercial
property deal attracted strong investordemand last Monday even as fears of the
spreading coronavirus continued to upset
market sentiment.
The CMBS issue came on a day that saw
US credit primaries open in earnest after the
Dow last Monday recorded its biggest single-
day gain since 2009 and the Fed cut rates by
half a percentage point to stem a slowdown
in growth due to the coronavirus.
The US$1.02bn conduit offering, BANK
2020-BNK26 ûBACKEDûBYûûLOANSûONûûOFlCE û
hotel, retail, manufacturing housing and
self-storage properties, was “well
oversubscribed”, a source familiar with the
deal said.
Orders for the lower-rated tranches
ranged from seven to nine times their
offered size, as fund managers sought
higher yielding paper amid a rally in US
Treasury yields that saw the 10-year dip
below 1%.
The US$45.603m 10-year tranche, rated
A–/A–, cleared at a spread of 195bp over
swaps for a yield of 3.0706%.
Yet despite robust demand for one of the
WEEKSûlRSTû#-"3ûDEALS ûSPREADSûCAMEûWIDERû
or matched secondary levels seen at the end
of the previous week against what remains a
volatile backdrop.
The AAA/AAA 10-year paper came in at
swaps plus 93bp, in line with secondary
levels seen at the end of the previous week
by Well Fargo analysts.
A month earlier, prior to the market
turmoil, the spread of Triple A 10-year CMBS
debt was 16bp–19bp tighter than current
levels, according to Wells Fargo.
The spread on the A–/A– 10-year tranche
was also 5bp wider than the 190bp seen late
the previous week. This was 20bp wider
than a month earlier.
Morgan Stanley, Wells Fargo and Bank of
America were the joint lead underwriters and
book managers for BANK 2020-BNK26.
Academy Securities and Drexel Hamilton were
the co-managers.
CMBS issuance has remained resilient in
the face of current market volatility, while
supply in other credit sectors had dried up
two weeks ago before it stabilised somewhat
last week.
In the year to-date, private label CMBS
supply has totalled US$20.5bn, up nearly
60% from the same period a year ago,
according to JP Morgan.REFINANCING SURGE SEEN TAMPING US
MORTGAGE BOND MARKET7ORRIESûABOUTûAûmOODûINûHOMEûRElNANCINGû
in the coming weeks due to record-low
mortgage rates are rocking US mortgage-
backed securities, which have been
supported by solid job growth and a resilient
housing market.6 IFR Bonds 2323 p 25 - 53 .indd 45 06 / 03 / 2020 19 : 18 : 08