A busy March pushed up Q1 issuance volumes in the European structured finance space to a decent total of around €22bn-equivalent of bonds placed. This covers all asset sectors, including consumer assets, CLOs, CMBS and secured corporates.
There were 40 deals at least part-placed with investors, according to IFR numbers, with 21 coming in March alone. By comparison, Q1 2014 yielded 33 deals for around €15bn-equivalent – again across all asset classes.
UK issuers account for over half of this quarter’s volume across 19 deals, including prime, buy-to-let and non-conforming RMBS, autos, credit cards and secured issuance. The next largest single exposure was from the Netherlands, with just under 12% of issuance. European CLOs accounted for 15% of deals, but these issues are multi-jurisdictional.
By type, owner-occupied RMBS accounted for 29% of issuance, with two deals each from the Netherlands and the UK (master trust) and a reoffered Portuguese RMBS. Challenger bank/specialist lenders also had a good showing in the UK market, accounting for almost 10% of issuance.
Deals in this list included Paragon issuing its first euro tranche since the crisis, Bluestone Group refinancing funding from Macquarie Bank with its inaugural buy-to-let deal, Blackstone/TPG securitising Kensington Mortgage Company assets, Charter Court Financial Services printing its fourth deal and a restructured Eurosail deal being reoffered.
By comparison, UK issuance accounted for about 30% of issuance in Q1 2014. Prime RMBS dominated again but by a smaller margin at 27%. The second largest exposure was CLOs with around 16%, just ahead of autos with 15% last year.
A notable increase in overall volume and strong end to the quarter is welcome news for the market, but the ECB’s purchase programme is yet to spur a significant increase in prime euro paper eligible for its scheme.
The ECB did register its largest weekly purchase this year of ABS last week, however, at €638m, taking the scheme to a total of €4.6bn. By comparison, it has bought €62.8bn of covered bonds and €41bn of public sector debt.
JP Morgan analysts estimate that the ECB currently owns about 1.7% of the eligible €237bn ABS universe – and 14.8% of the eligible €656bn covered bond market, although that number includes purchases from the previous two covered programmes.
Despite the paltry amounts compared with the covered purchases, the bank’s researchers said the ABS programme provides the asset class with an important boost to rehabilitating its brand, while being less disruptive for both issuers and investors than the covered bond initiatives.
And bankers are expecting more issuance.
“As an originator, we’re spending a lot more time having conversations on securitisation with our clients, but this is not translating into new printing yet,” said Peter J Mason, head of FIG debt capital markets EMEA at Barclays.
“Some clients have never really considered securitisation before, so there’s a lot of learning going on at the moment.”
“The hope is that we’ll see better deal flow from the second quarter and that these discussions will go from academic talks to something more concrete,” he said.
There is currently one ABS deal in the pipeline - the credit card ABS from Natixis Financement.
In the USD market, Isbank of Turkey has finalised another round of DPR bonds. It has raised a total of US$555m, split US$480m of five-year debt, US$60m in seven-years and US$15m in 15-years, according to a stock exchange notice.
Fitch has rated the tranches A- and affirmed the ratings of series 2011 to 2013 too.
