Amid a busy week for regulatory developments, deal activity and some hiring, there have been a few landmark moments for European securitization issuers.
First, long standing Obvion, owned by Rabobank, returned to the market this week with its 50th deal — a storming achievement.
After a humbler five deals, Enra priced its first first-lien only deal at a remarkably tight 72bp over Sonia (with George Smith successfully pitching the deal for GlobalCapital cartoon). The spread and the assets are sign of the lender’s maturity.
The demand for the deal — £273m of placed triple-As finished 2.7 oversubscribed — showed investors believe in the firm and its underwriting. Splitting out first lien and second lien lending seems the superior way to go, since it brings clear pricing advantages. One source estimated Enra could access 12 extra investors this time.
But the challenge will be that doing a pure second lien deal requires a sizeable book. Together, which began separating the mortgages in 2021, has done three deals. Second lien originations have been strongly lately, due to the path of interest rates, with new RMBS issuers and shelves springing up.
If rates fall, maybe the mixed deals will return, as seconds origination drops off. For its part, Enra aims to separate them, but doesn’t rule out going back to mixed.
Another specialist lender reaching maturity is Capital on Tap. After funding itself through warehouse agreement and two standalone securitizations, the firm launched finally launched a master trust.
It is not controversial to say that master trusts are by far the superior format for financing credit cards in ABS, and the preferred format of most.
Capital on Tap’s standalone deals were always temporary solutions, to keep the funding tap on. The only other firm in Europe that has done anything comparable lately is WiZink Bank, with its standalone deals Vasco 1 and 2.
But since credit cards can be drawn on at any stage, the different drawings of each customer have to be separated out and no drawings can be added once the revolving period ends.
The master trust is far cleaner and, given Capital on Tap’s rapid growth, about due. It will give them cheaper and quicker access to market. It is also the first non-bank master trust created since 2015.
Spreads are tight and the market is alive with innovation — a good time to be a specialist lender.