BONDS STRUCTURED FINANCEDespite what is set to be the busiest post-
crisis January for securitisations in sterling
- two RMBS were priced last week and three
more are marketing – there appears plenty
of money to be put to work after a quiet end
to 2017 in both primary and secondary.
“Spreads tightened a lot last year but
people are starting to realise RMBS is still
very cheap compared to corporate risk, and
LOTSûOFûMONEYûISûmOWINGûIN vûSAIDûONEû
INVESTORûh"UTûIFûWEûSEEûlVEûORûSIXûNEWûDEALSû
every couple of weeks, that will end up
hitting spreads. The market is hot - but not
so hot that everyone will keep buying
everything at these prices.”
Charter Court’s new deal is the eighth
FROMûTHEû0-&ûSHELFûWHICHûlRSTûISSUEDûINû
- These have mainly securitised prime
BTL and non-prime owner-occupied
mortgages.
However last year, as well as regular BTL
issue PMF 2017-1, Charter Court also
BROUGHTûITSûlRSTûPRIMEûOWNER
OCCUPIEDûDEAL û
Charter Mortgage Funding 2017-1. It has
enough of these prime mortgages on its
books to bring a repeat in 2018.
On Tuesday it said BAML would buy
retained junior portions from the 2017
debut, allowing it to fully de-recognise the
securitised mortgages and reduce risk-
weighted assets by £97m.
BAML will pay £26.5m for the Class Z,
SUBORDINATEDûNOTESûANDûRESIDUALûCERTIlCATESû
from Charter Mortgage Funding 2017-1.
New-issue details last year showed the Class
Z at £2.977m and paying 8%, and the
subordinated notes at £5.888m, paying 10%.
“Freeing up capital gives us more
headroom,” said Maloney. “Spreads are tight
in every part of the capital structure and
there are times when, if the bid is solid,
there are more natural holders of the equity
than us.”
Wednesday’s new issue came well inside
levels from PMF 2017-1, priced in April last
year, with the Triple As 10bp tighter. The
tranche was 4.1x covered at its plus 65bp
print.
Below the seniors, the Aa1/AA (M/F)
tranche came at 3mL+100bp, 70bp inside
the last deal. The A2/A was 3mL+140bp,
75bp tighter, and the Baa3/BBB Class Ds
were 3mL+180bp, which is 105bp inside last
year.
Oversubscription levels on Classes B to D
were 5.5x, 4.4x and 3.8x. These are small
tranches, however: Classes B and C are each
sized at £7.38m and the Class D is just
£4.92m.
The WALs are also a year shorter than the
previous deal, at 2.93 years on the seniors
and 3.88 years on the rest. Charter Court
IDENTIlEDûINVESTORûPREFERENCEûFORûTHATû
shorter maturity and selected the portfolio
ACCORDINGLYûTHEûlXED
RATEûMORTGAGESûINûTHEûNEWûDEALûSWITCHûTOûmOATING
RATE ûONûAVERAGE û
after 2.8 years, compared with 4.6 years in- Natixis is swap provider and was joint
lead with BAML and Lloyds.
The deal was sold to 22 accounts, with
87% taken by UK buyers, 8% other Europe
and 5% others. Asset managers bought 89%,
bank treasuries 10% and CB/OI 1%.
NEW BUY-TO-LET REGULATIONS
4HEûDEALûISû#HARTERû#OURTSûlRSTûSINCEûTHEû
second phase of the Prudential Regulation
Authority’s new underwriting standards was
implemented in September. This followed
changes at the start of 2017 to tighten limits
on interest cover ratios.
The September changes require lenders to
treat borrowers who have four or more BTL
properties as portfolio landlords, meaning
the lender has to underwrite a borrower’s
entire portfolio when it applies for a new
mortgage, even if those other mortgages are
with different lenders.
This is a lot of work for, for instance, a
£150k mortgage application, and market
participants say some high-street lenders
could end up ceding market share to the
specialists.
“There’s no question that it’s
cumbersome,” said Charter Court’s
Maloney. The new regulation “splits the
world into those who make it their business
TOûWRITEûSPECIlCû"4,ûANDûCOMMITûTOûTHEû
more onerous process,” and high-street
lenders who may choose not to take on
borrowers with many BTL mortgages
outstanding with other lenders.WEST BROM BAGS STRONG DEMAND
WITH RMBS RETURNWEST BROMWICH BUILDING SOCIETY returned to
SECURITISATIONûAFTERûALMOSTûlVEûYEARSûONû
Thursday with the third RMBS off its
Kenrick programme.
KENRICK NO.3 had a two-day roadshow,
followed by IPTs at three month Libor plus
low 40s for the 3.46-year WAL Triple As.
With the book over £700m, guidance was
released at plus 37bp-40bp for the tranche
then set at £350m size.
The note priced on Thursday at plus 37bp,
WITHûAûlNALûBOOKûOFûaM ûMAKINGûTHEû
tranche around 1.9 times covered.
The print puts the notes at the same
spread as the last building society deal, Brass
No.6 from Yorkshire in October. Earlier in
2017 Principality sold Friary No.4 at plus
38bp.
Pricing is also inside West Brom’s
previous deal, Kenrick No.2 in 2013, which
came at plus 65bp. Market conditions have
of course changed dramatically since then
but there is also a difference between the
two securitised pools.ALL EUROPEAN ISSUERS
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)
1 Cooperatieve Rabobank 1 1,309.36 30.2
=1 SG 1 1,309.36 30.2
3 BNP Paribas 2 590.47 13.6
4 Citigroup 1 409.99 9.5
5 Lloyds Bank 2 297.86 6.9
6 RBC 1 180.48 4.2
7 Natixis 1 117.38 2.7
=7 BAML 1 117.38 2.7
Total 4 4,332.30
Includes securitisations, credit-linked notes (Euro, foreign, global and
domestics) and excludes CDOs.
Source: Thomson Reuters SDC code: B16n
SECURITISATIONS – ALL EUROPEAN RMBS
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues €(m) (%)
1 Cooperatieve Rabobank 1 1,074.57 34.4
=1 SG 1 1,074.57 34.4
3 BNP Paribas 1 340.78 10.9
=3 Citigroup 1 340.78 10.9
5 Natixis 1 96.34 3.1
=5 BAML 1 96.34 3.1
=5 Lloyds Bank 1 96.34 3.1
Total 3 3,119.73
Including Euro, foreign, global and domestics, excluding CDOs.
Source: Thomson Reuters SDC code: B10a ALL INTL ISSUERS (EXCLUDING SELF-FUNDED)
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues US$(m) (%)
1 Cooperatieve Rabobank 1 1,309.36 17.9
=1 SG 1 1,309.36 17.9
3 BNP Paribas 3 840.43 11.5
4 Morgan Stanley 1 807.32 11.0
5 BMO 2 583.28 8.0
6 Citigroup 2 504.99 6.9
7 BAML 2 367.34 5.0
8 JP Morgan 1 333.32 4.5
=8 Wells Fargo 1 333.32 4.5
10 Lloyds Bank 2 297.86 4.1
Total 8 7,329.41
Includes securitisations, PFI bonds and credit-linked notes. Excludes US
global ABS/MBS, CDOs and self funded issues.
Source: Thomson Reuters SDC code: J10d
GLOBAL SECURITISATIONS IN STERLING
BOOKRUNNERS: 1/1/2018 TO DATE
Managing No of Total Share
bank or group issues £(m) (%)
1 BNP Paribas 2 436.22 34.6
2 Citigroup 1 302.89 24.0
3 Lloyds Bank 2 218.24 17.3
4 RBC 1 133.33 10.6
5 Natixis 1 84.91 6.7
=5 BAML 1 84.91 6.7
Total 3 1,260.50
Including Euro, foreign, global and domestics, excluding CDOs.
Source: Thomson Reuters SDC code: B16i