Europe ABS Brief: Westfield CMBS returns, quarter-end caps flows

11 min read
EMEA
Anil Mayre

Joint leads CA-CIB and Deutsche Bank are marketing the deal on Thursday and Friday this week, with a view to pricing next week.

The £750m single tranche deal is backed by a five-year loan on the Westfield shopping centre. And as with the first time around, the issuer is of the opinion that the deal is not a securitisation for the purposes of Article 405 of the CRR and Article 17 of the AIFMD, which means it will not have to meet risk retention requirements.

Deutsche Bank also priced its Deco 2014-Tulip CMBS, showing the €170m Class A with a coupon of 3mE+98bp, the €20m Class B at 120bp, the €20m Class C at 155bp, the €20m Class D at 170bp and the €20.04m Class E at 210bp.

Other € deals in the pipeline include Saecure 15, Cars Alliance Auto Loans France V 2014-1, FCT Gingko Compartment Sales Finance 2014-1 and some CLOs.

In the UK, Walsall Housing Group printed a £250m 31-year social housing bond via Lloyds and Santander well inside price talk on Monday afternoon. The leads opened the book for whg Treasury plc at 130-135bp over the 4.25% 2046 Gilt, and tightened to 125bp as the book exceeded £450m.

As is quite common in this sector, the issuer retained some of the notes, to the tune of £75m. The bonds printed with a 4.25% coupon at a price of 99.471, to yield 4.281%. The A2 rated notes are due in October 2045.

The deal comes three weeks after Cambridgeshire Housing Capital’s Cross Keys £150m 31-year issue. That was benchmarked over the same Gilt, and priced at 99.199 to yield 4.297%, which at the time gave a spread of 120bp.

Pub operator Enterprise Inns, meanwhile, is gearing up to issue some new bonds after announcing the results of its tender offer.

It received valid tenders of £249.521m for its 6.5% 2018 whole business securitisation notes, and now intends to issue a minimum £200m of new bonds due 2023.

However, if it decides to issue less than £249.521m of new notes, it expects to set the final acceptance amount at the same level, accepting valid tenders on a pro-rata basis. Deutsche Bank (tender agent) and RBS are dealer managers.

Staying in the pub sector, Punch Taverns issued another reminder (following the Sept 26 notice) to investors to certify their status ahead of the 5pm deadline on Wednesday to implement the restructuring agreed two weeks ago.

Investors have been warned that a failure to submit an instruction in relation to the certification process will result in them being ineligible to receive any new notes or ordinary shares that form part of the restructuring.

The entitlement of ineligible holders to new notes or shares will be issued to a custodian and sold in the market on their behalf.

Punch still requires consent from RBS (liquidity facility provider in Punch A and B and provider of hedge arrangements in Punch B) and Lloyds (liquidity facility provider in Punch A), and says the process continues.

Punch aims to close the restructuring on Oct 8, subject to these consents.

Secondary market flows, meanwhile, are relatively quiet as desks mark their books for month- and quarter-end. The market remains strong in the face of widening pressures that hit broader credit markets in previous days.

New issues continue to do well too, with Obvion’s Storm 2014-III Dutch RMBS quoted inside its pricing level. A trader said the A2 note was in the low 30s region, having printed at 35bp last week. He said an offer was shown in the street at 100.20 but then pulled, so he was unsure of whether it traded or not.

Aegon, which is due to market its new Saecure 15 deal from Wednesday to Friday, is quoted in a similar region for its previous deal. Saecure 14 NHG priced with an A2 tranche at 72bp in March, and is around 34bp now, he said.

Around 70% of the trade is backed by NHG mortgages, and so while that portfolio composition differs from both Storm and the prior Saecure, those secondary levels do at least provide it with a reference point in the tighter environment.

Elsewhere, the Atlantes SME No.4 Portuguese deal from Banif is nearing 90bp after printing at 98bp a week ago. It is bid at 100.10, another contact said.

In other peripheral news, Spanish RMBS arrears continue to decline, as the improvement in the macro environment slowly filters through. Arrears exceeding three months (excluding defaults) fell to 1.9% in Q3 2014, down from 2.2% the previous quarter but still way off the pre-crisis level of 0.2%.

Some of this can be attributed to long-term arrears rolling into default, but the agency does also highlight a 50bp drop from the Feb 2014 peak in the constant default rate.

“The latest data suggests that several corners have been turned in the long-suffering Spanish mortgage market,” says Sanja Paic, Senior Director in the RMBS team.

“Cases of new arrears are down and fewer late stage arrears are rolling into default. Also, the property market is now more liquid and transparent, although the price discounts to original valuations needed to achieve sales of properties taken into possession remain around peak levels of 70%.”

Morgan Stanley analysts have also commented on the sector in their latest research note, saying arrears performance began showing signs of stabilisation late last year and trends have been positive year-to-date.

They remain constructive on the sector, due to steadying fundamentals, and say that senior tranche spreads are nearing their year-end target of 70-80bp heading into the ECB announcement on Thursday.

Fitch, meanwhile, says that the use of factoring law can boost Italian structured finance transparency, to bring Italy in line with other European jurisdictions.

The agency yesterday ranked Auto ABS Italian Loans Master, from Banque PSA Finance, which it says uses this law. This allows it to transfer a sub-pool of eligible assets from the loan book to the SPV. Before the amendment, the only way to transfer assets was to move all assets that met eligibility criteria to the SPV.

This method allows issuers to keep eligibility criteria constant during the revolving period, and not have to keep it open-ended or repeatedly amend it to allow for subsequent transfers of additional assets. This deal is permitted to revolve until Jan 2016.

The second contact said that A-BEST 9, the Italian auto from FGA Capital, was quoted around 60bp, a price of 100.20. It printed at 75bp with a 1.27-year average life in May.

E-MAC struggles to find margin estimates

The E-MAC NL 2007-IV issuer will provisionally retain amounts that would have been paid as extension margins on the bonds as it has not been able to obtain quotes for what an appropriate margin should be. These higher margins are paid to investors in the event of the issuer not being able to complete the put.

RBS is the extension margin agent, and an investor notice states that it requires “five leading European securitisation underwriters” to give quotes for the extension margin.

The base prospectus says the margin estimates should be based on certain assumptions relating to CPR, delinquencies, changes to the underlying mortgage rates/portfolio composition and conditions of the notes. The mean of the quotes is then taken to arrive at the final extension margin. The issuer and security trustee will now assess their options.

Deutsche Bank, as extension margin agent on E-MAC DE 2007-I, is experiencing similar issues. The first put date for this trade is Nov 24, but it is yet to receive quotes from five underwriters and so the extension margins have not been calculated yet, according to a notice from Friday.

Class A group to assess NHP sale

Special servicer Capita is forming and ad-hoc committee of Class A noteholders of Titan Europe 2007-1 NHP to consider and evaluate certain issues relating to the sale of the NHP borrower group.

The sale of NHP had been shelved at the start of last month following continuing disagreement with swap provider Credit Suisse over how to maximise recoveries. The swap provider has previous said more time should be allowed for the work-out strategy to produce results.

There were also disagreements about entitlement to guarantees under the swap agreements, with Credit Suisse warning that the special servicer could not waive or release the guarantors from their commitments, and also threatened to apply to court to seek direction.

Capita, which had received two bids before it cancelled the sale amid these legal concerns, said last month it would continue to explore the sale of the borrower group through an asset sale and would invite the bidders to take part. This asset sale, Capita said, would not require releasing the guarantors for their obligations to the swap provider.

In today’s issuer notice it maintains the view that exploring a sale of the borrower is in accordance with the servicing standard and correct course of action, at present, to maximise recoveries. And it has appointed Brookland Partners as financial adviser to assist it in the process.

The committee is now being formed to restart the disposal process, with Class A investors that hold discussions with the special servicer, the borrower and the swap provider being required to enter into confidentiality agreements.

Westfield Shopping Centre