Another Fine Mezz Powers of retention
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Apr 10, 2025 George Smith and Tom Hall delve into the chaos surrounding tariffs and its potential fallout on the European asset-backed securities market. They discuss the cautious yet optimistic shift from equities to fixed income due to geopolitical uncertainties. The impact of defaults on financial trades and the unstable used car market raise investor concerns. The duo also explores strategies for managing lease defaults and reviews critical regulatory updates in securitization that could reshape the legal landscape.
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European ABS Market Resilience
- The European ABS market remains resilient despite disruptions from global trade uncertainties and tariffs chaos.
- Investors hold cash ready to deploy, and fixed income space is attracting flows amid geopolitical volatility.
Hiltman ABS Downgrades Explained
- Moody's downgraded the BC and D notes on four recent Hiltman auto ABS deals due to worsening defaults tied to used car market softness.
- The senior notes remain affirmed, showing selective rating pressure on riskier tranches.
ESA Report Triggers CLO Market Shift
- The 3-year ESA report on securitization regulation prompted no new laws but emphasized binding interpretations on risk retention, causing scrambling in the CLO market.
- This highlights how regulator guidance can unexpectedly impact market practices beyond formal rule changes.