BONDS STRUCTURED FINANCEDistribution statistics for last week’s new
issue showed asset managers buying 46.4%,
BANKSû ûANDûCENTRALûBANKSûANDûOFlCIALû
institutions 14.5%. UK investors took 87.3%,
France 6.7%, and Germany 6%.
The deal is backed by a static portfolio of
21,914 loans for a total £395.8m. Diesel
vehicles make up 56% of the pool. Seasoning
is 15 months, and the new/used split is
70%/30%.
All loans are to private clients and all are
structured personal contract purchase
agreements.
Under a PCP contract, after a series of
monthly payments borrowers then have the
OPTIONûEITHERûOFûMAKINGûAûlNALûBALLOONû
payment and taking ownership of the
vehicle, or of returning it in lieu of that
PAYMENTû4HISûEXPOSESûTHEûSECURITISATIONûTOû
residual value risk if the vehicle is then sold
for less than the balloon amount.
Standard & Poor’s said in a report on
Monday that the increased popularity of PCP
contracts has been the main catalyst behind
5+ûCARûlNANCINGûGROWTHûSINCEû
S&P forecasts only a moderate increase in
OBLIGORûDEFAULTSûBUTûEXPECTSûTHATûRESIDUALû
value risk in PCP deals will increase. The
value of secondhand diesel vehicles is
DECLININGûANDû30ûEXPECTSûTHEûHIGHûNUMBERû
of PCP agreements due to mature in 2018
and 2019 could lead to an oversupply of used
vehicles.
“In addition, negative equity may create
INCENTIVESûFORûCONSUMERSûTOûEXERCISEûTHEIRû
right of voluntary termination under the UK
Consumer Credit Act, which could lead to
higher voluntary termination losses,” the
report said.
SUPPLY STILL PUSHING SPREADS WIDERSpreads continued to widen last week as
bankers blamed oversupply, as well as the
SECURITISATIONûMARKETûlNALLYûCATCHINGûUPû
with wider credit market weakness.
“Unless a big wall of money comes in I
don’t see the widening trend stopping until
the primary pipeline stops,” said a trader.
“Now we’re going into summer,
everyone’s rushing to get deals done at the
same time,” he said, adding that some
issuers had been hoping for tighter levels
after the Barcelona conference in early June
and might have delayed coming to market
until now.
The mini-glut of supply has been in
sterling, allowing picky investors to demand
pricing concessions in the knowledge that
more paper is on the way.
“Unfortunately in our market there aren’t
actually that many people,” the trader said.
“There is a bit more cash coming into the
market, but the number of actual investors
hasn’t really increased in the last year or
two.”
This week a new UK auto ABS from BMW
Financial Services priced 18bp wide of its
October deal, while non-prime UK auto deal
Azure Finance No.1 widened IPTs to get
done.
In the CLO arena Triple As from a NIBC
Bank deal priced at 91bp and although
investors described it as an outlier, recent
NEW
ISSUEû4RIPLEû!SûAREûlRMLYûINTOûTHEûSû
AFTERûBRIEmYûDUCKINGûBELOWûBPûATûTHEûSTARTû
of this year.
The CLO market in particular is weighed
DOWNûBYûAûHEAVYûPIPELINEûAMIDûAûmOODûOFû
new managers readying debut deals, talk of
over 20 deals currently in warehouses, and a
RUSHûTOûRESETûANDûRElNANCEûEXISTINGû#,/SûONû
their July interest payment dates.
“The CLO market is not widening
aggressively, but gradually, so it could widen
for a long period of time,” said an investor.
h#ONSUMERûDEALSûMAYûBENElTûFROMûPEOPLEû
looking for safe-haven assets and they are
typically short at around three years, so
THOSEûDEALSûMAYûlNDûAûCEILINGûTOûHOWûWIDEû
spreads can go,” he said. “But CLOs are
longer and are high-beta assets.”Even in the euro-denominated consumer
space, benchmark Dutch RMBS name Storm
has seen spreads effectively double in the
secondary market. Previously bid under
10bp - with ECB buying seen responsible for
driving levels tight - the paper is now closer
to 20bp, bid.
h$EALERSûAREûDElNITELYûMOREûRELUCTANTûTOû
pick up paper,” another investor said. “Bid-
offers are starting to widen, offers are
cheaper, and bid sizes are getting smaller. A
lot of the desks that took paper a month ago
haven’t been able to recycle it,” he said.
However market participants stress there
has been no disordered rush to sell in the
secondary market.
)TûISûNOTûASûACTIVEûASûYOUûMIGHTûEXPECT vû
said the trader. “Usually there’s not a huge
amount of volume as we move wider or
tighter and then once we’ve established a
level things start going through again.”
“I don’t see any immediate stop [to the
widening] but in the medium to long term I
think you’d rather be a buyer than a seller
right now,” said the second investor, referring
to the consumer market. “This pipeline is
going to dry out and there is a lot of money
coming in. From January onwards the capital
charges will be lower so I think it’s a good time
to be a buyer in a weaker market.”GERMAN AUTO ABS SILVER ARROW
9 ANNOUNCEDMERCEDES-BENZ BANK announced German auto
ABS SILVER ARROW 9 on Wednesday.
Commerzbank and UniCredit are joint leads,
and DZ Bank, MUFG and SMBC Nikko are co-
managers.
The deal is offering Triple As only: a
€750m 1.44-year tranche with a pre-set
coupon at 40bp over one-month Euribor.
0RICINGûISûEXPECTEDûTHISûWEEK
The originator’s previous Silver Arrow
trade sold €1.1bn 1.44-year Triple As at 15bp
over one-month Euribor in June last year.GLOBAL STRUCTURED FINANCE IN EUROS
BOOKRUNNERS: 1/1/2018–30/6/2018
Managing No of Total Share
bank or group issues €(m) (%)
1 SG 6 2,906.52 12.8
2 Credit Agricole 6 2,300.19 10.1
3 BNP Paribas 6 1,643.96 7.2
4 UniCredit 7 1,497.73 6.6
5 BAML 4 1,461.65 6.4
6 Cooperatieve Rabobank 2 1,355.98 6.0
7 Commerzbank 2 1,271.38 5.6
8 JP Morgan 2 1,108.31 4.9
9 Citigroup 4 992.76 4.4
10 Santander Global 4 837.94 3.7
Total 35 22,696.85
Includes securitisations, credit-linked notes (Euro, foreign, global and
domestics) and excludes CDOs.
Source: Thomson Reuters SDC code: B16gALL EUROPEAN ISSUERS
BOOKRUNNERS: 1/1/2018–30/6/2018
Managing No of Total Share
bank or group issues US$(m) (%)
1 BAML 14 3,909.51 9.1
2 SG 6 3,550.71 8.3
3 Lloyds Bank 12 3,359.14 7.8
4 BNP Paribas 12 3,100.11 7.2
5 Credit Agricole 6 2,842.07 6.6
6 Citigroup 9 2,502.29 5.8
7 UniCredit 7 1,814.67 4.2
8 JP Morgan 4 1,744.58 4.1
9 Cooperatieve Rabobank 2 1,640.72 3.8
10 Commerzbank 2 1,557.03 3.6
Total 60 42,838.01
Includes securitisations, credit-linked notes (Euro, foreign, global and
domestics) and excludes CDOs.
Source: Thomson Reuters SDC code: B16n
ALL INTL ISSUERS (EXCLUDING SELF-FUNDED)
BOOKRUNNERS: 1/1/2018–30/6/2018
Managing No of Total Share
bank or group issues US$(m) (%)
1 JP Morgan 57 15,453.66 10.3
2 Citigroup 60 12,985.47 8.7
3 BAML 53 12,352.82 8.3
4 Credit Suisse 56 12,222.14 8.2
5 Wells Fargo 44 11,127.03 7.4
6 Deutsche Bank 48 9,606.05 6.4
7 Barclays 31 7,698.76 5.1
8 Goldman Sachs 26 7,518.54 5.0
9 Morgan Stanley 24 5,947.10 4.0
10 SG 11 4,975.87 3.3
Total 266 149,518.85
Includes securitisations, PFI bonds and credit-linked notes. Excludes US
global ABS/MBS, CDOs and self funded issues.
Source: Thomson Reuters SDC code: J10d