Another Fine Mezz

After a manic Monday on which some ABS bankers wondered whether we would even have a market by the end of the week, the Another Fine Mezz team is happy to report that we do.Yet again, ABS reporter George Smith appears to have deserted his post just when all hands are needed. He spent the week driving through the Scottish Highlands blissfully unaware of volatility indices, while host Tom Lemmon and the CLO duo of Victoria Thiele and Austin Barnes held the fort. Despite fears of a new global meltdown, Santander managed to add yet another prime RMBS from its Holmes Master Issuer shelf. It was only a day later than expected, and looked rather elementary by the end. Meanwhile in European CLOs, a market perhaps more directly affected by the meltdown that wasn't, the impact on sentiment really depended on who you asked. Nevertheless, by the end of the week a cautious optimism had taken hold — as Sona, Polus and Palmer Square all priced deals.As for the US CLO market, spirits rebounded remarkably quickly despite one banker's Armageddon forecast on Monday. By the end of the week, it was back to the usual rhythm. 

On this week's episode of Another Fine Mezz, it was something akin to podcasting musical chairs with CLO reporter, Victoria Thiele, taking over from usual host Tom Lemmon, alongside the return of new CLO reporter Austin Barnes while George Smith stayed firmly put as ABS reporter. With August now upon us, it was perhaps no surprise that there were no publicly placed deals in European ABS this week. However, George did manage to find time to rage at the low-quality opinions circulating LinkedIn on significant risk transfer (SRT) deals. Meanwhile, in CLOs the resets keep on coming. The triple-As may be wider but with such dramatic tightening on the mezz this year, the overall costs keep the arbitrage working and managers printing. However, looking further ahead, loan shortages might soon start to scupper the euro CLO market. And finally, last week, Austin left listeners hanging over where his weird accent comes from and this week he reveals all... did you guess right?

This week on Another Fine Mezz, the usual suspects of host, Tom Lemmon and CLO reporter, Victoria Thiele were a man down owing to European ABS reporter, George Smith losing his voice - of all things. However, GlobalCapital now has a securitization podcasting production line not dissimilar to Australian cricket's fast bowling ranks, which meant it was time for a debut (more on the Australian cricket references later). George's absence paved the way to welcome the newest CLO reporter, Austin Barnes to the show.In European securitization, just one deal was priced, Bletchley Park Funding 2024-1, by specialist buy-to-let lender Quantum Mortgages. And with so little activity in Europe, an Australian reverse mortgage RMBS took the limelight. The deal, by Household Capital, was the biggest Australian reverse mortgage RMBS in a decade at A$263m ($172m), but the Aussie securitization market as a whole appears capable of teaching the European market a thing or two. Meanwhile in CLOs, resets and refinancings were the dominant force in the US, particularly as triple-A spreads are stuck in the 135bp over Sonia range. It's better news for Euro managers though, as third party equity appears to be back for good in Europe, at least for the tier one managers. 

On this week's Another Fine Mezz, usual host Tom Lemmon was taking a well-earned break to play golf, but it seems his enthusiasm for the sport has spread to European ABS reporter, George Smith. Perhaps he was also inspired by the professionals in Troon this weekend. Away from golf, it seems European CLO equity may be getting easier to sell too. It's not quite "gimme" distance but for the biggest players, it is starting to feature in conversations more, CLO reporter, Victoria Thiele said. In European ABS, it was a delightful week for debut issuers with three out in the market for the first time. In 2024, there has been a notable increase in debut deals, in part because the market has been so treacherous in recent years. But it could also be a further sign that securitization is becoming a viable funding option once again. 

GlobalCapital's CLO reporter, Victoria Thiele, returned to her desk just in time from her trip to Germany this week, in what was a collection of the weary thanks to international football and growing babies. With a less hectic week in the primary ABS market, securitization editor, Tom Lemmon, and European ABS reporter, George Smith discussed whether fine wine ABS might soon be a thing after an interview with a wine-backed lending platform.With the dust just about settling following the EU election, UK election and French parliamentary election, the big story of the week looked at how the momentum for regulatory reform in securitization would change in this new political dynamic. French president Emmanuel Macron may be weakened, but all is not lost, according to some market participants. On CLOs this week, managers glided inside 130bp over three month Euribor with deals from CVC Partners and Spire the first to get below the barrier. In addition, Victoria also explained how the economics of resets can still work even if its not a direct tightening on the triple-A notes. Finally, the Another Fine Mezz team had its fourth member play them out on the tambourine. 

At last, the Another Fine Mezz team's CLO Series is back with a bang after to chatting to potentially the hottest property in CLOs. That is John Kerschner, head of US securitized products and portfolio manager at Janus Henderson. Also known as the man behind the mammoth CLO ETFs, JAAA and JBBB. Together, the two CLO ETFs have just under $12bn in assets under management, roughly doubling in size since the start of 2024. On the episode, Kerschner explained how ETFs work in a CLO context and the challenges they will still face. One of the biggest challenges is educating investors, whether they be new to CLOs or new to ETFs. And he also touched on Janus Henderson's plans for a European CLO ETF.As ever in the CLO Series, Kerschner spoke about how he went from an ecology graduate to a securitization investor, the keys to being a good investor, and how to stay as calm when things get hairy. 

Holiday season is in full flow it seems for the Another Fine Mezz team. Last week, usual host, Tom Lemmon, was enjoying an early Summer break, and so this week he stepped into cover for European ABS reporter, George Smith. This was a week characterised by election excitement, with every issuer still in the market looking to be done sooner rather than later. Deals from Cerberus and Ford's German branch followed with no hiccups but the visible pipeline is now quiet. In the meantime, building from Bank of America Research's report on insurance companies using European securitization, which showed it to be pitifully low, there were signs in the UK that insurers are starting to take a closer look once more. It's a small change, but it is yet another morsel of evidence that suggests the resistance to European securitization is thawing, albeit slowly. In CLOs, Arini priced yet another successful Euro CLO to go along with its growing reputation despite its infancy, while a number of resets and refinancings got away well too. CLO reporter, Victoria Thiele also released a first half of the year league table for both the US and Europe. Both markets experienced a better than expected year with tightening and lots of issuance, the only question is how much more will come in the second half of the year. 

The weird and wonderful world of European securitization was in full view last week with a number of issuers showing off their creative sides through their penchants for animal-themed shelfs. Hyundai had an Auto ABS named Pony, while ING came out with yet another Green Lion, but most interesting of all in the animal ABS kingdom was from Cerberus' buy-to-let RMBS, Edenbrook Mortgage Funding.It's a one-off deal from a portfolio of loans that was not included in Cerberus' sale of CHL Mortgages to Chetwood Financial, and is expected to price on Wednesday. The €1bn Green Lion 2024-1 is the second edition of ING's rare Dutch prime RMBS that is, as the name suggests, aligned with the Icma Green Bond Principles for Green Use of Proceeds and Green Collateral. This time around, it's also aligned with the EU taxonomy on energy performance and climate risk. Meanwhile in CLOs, the market continues to trend tighter after Fidelity's 131bp over three month Euribor print on Thursday. And issuance could pick up soon with a wave of repricings in the loan market accompanied by new money loans as well.Both markets are keeping an eye on the elections in both the UK and France, with little new supply expected this week. However, with barely any predictions for anything other than a Labour victory in the UK, sterling issuance should pick up by July 8. The rise of Marie Le Pen in France is somewhat more difficult to grasp, as CLO reporter Victoria Thiele is at pains to point out.

What a week it was for European securitization, filled with both encouraging and worrying events for the Another Fine Mezz team to get stuck into. Firstly, host Tom Lemmon stepped into his old European ABS shoes to cover the exciting news that some form of public renewable energy ABS might soon be a reality in Europe. On June 14, Hometree, a UK-based residential renewable energy provider completed the first ever renewable securitization warehouse in the UK, in a £250m deal with Barclays. That means the UK is now in a three-way race to be the first to issue in the public market with Germany and Spain. But a bit like the football, the Germans look favourite to cross the line first. Meanwhile, all is not well in European CMBS. Senior noteholders in a European CMBS stand to lose principal for the first time since the global financial crisis of 2008 on UK retail deal Elizabeth Finance 2018. "It's a bit of a shock," said one source close to the deal. Finally, in an otherwise quiet week for European CLOs, Palmer Square managed to drag investors to the tightest print of the year. However, despite all the tightening, long-term hurdles remain in the market. 

Stellantis grabbed the attention of the Another Fine Mezz team this week after pricing a huge €1.2bn Italian auto ABS with investors desperate to get their hands on it. The buzz from Barcelona is still continuing it seems with strong demand for a range of ABS paper, including Nationwide's second 'stock and drop' deal and yet more Italian paper, in the form of consumer ABS. Meanwhile in CLOs, the market is reopening at a slightly more leisurely pace. But Bain's decision to get out early has paid off, pricing at 141bp over three-month Euribor on Thursday. Finally, the team basked in the glory of finally acquiring a professional production editor.