Commercial lending

Cannabis, though still illegal at the federal level, continues to inch into the financial mainstream. Small credit unions and lenders as large as Valley National and East West have moved beyond just taking deposits from marijuana companies.

Fears of widespread credit losses have largely subsided, but demand for new commercial real estate loans remains lackluster because many companies are sitting on so much cash they don’t need to borrow. Meanwhile, competition from private equity groups and other nonbank lenders is escalating.

After a colossally “brutal” period in the beginning of the COVID-19 outbreak last year, a recent report from Kroll Bond Rating Agency noted that business development corporations mostly rebounded by year-end 2020 to bring a sense of renewed optimism into the alternative-lending space.

Investment Management Corp. of Ontario is investing $400 million to a customized portfolio, with the goal of capitalizing on Are’s all-weather approach, taking advantage of opportunistic dislocations and market inefficiencies. The remaining $100 million will be allocated to the flagship Ares Pathfinder fund.

Avant Loans Funding Trust 2021-REV1 is a $200 million note offering backed by loans underwritten through its Avant platform. The $500 million OneMain Financial Issuance Trust 2021-1 is the first deal of the year for OneMain, which has previously issued 23 consumer loan securitizations and five auto-loan ABS deals.

Raising the capital gains tax and code changes could have more of an impact on the public debt market than rising interest rates, according to a panelist at the Urban Land Institute's Spring event.

Some worry the Senate’s rejection of the OCC rule hampers efforts to clarify legal standards for banks selling loans to fintechs.

The bonds backed by the primarily non-prime unsecured receivables have preliminary ratings of BBB (low) from DBRS Morningstar and BBB- from Kroll Bond Rating Agency.

More opportunistic borrowers may come as investors continue to pour money into U.S. leveraged loan funds, which have seen the longest positive streak since 19 weeks between February and June 2018.

Deals, trends and research in structured finance and asset-backed securities for the week of April 30-May 6

Goeasy would join the likes of Canadian non-prime lender Fairstone Financial Inc., which sold its inaugural ABS transaction in 2019. Also that year, Home Capital Group Inc. priced the first deal pooling non-prime Canadian home loans since 2007.

Defaults and delinquencies are below pre-pandemic levels for online consumer loans held in securitization pools, but Fitch is concerned normalization may be shortlived as expanded unemployment benefits and other stimulus support programs draw to a close.

The difference between yields on investment-grade debt and junk bonds doesn’t bode well. It’s a sign that leverage in the system is rising.

Deals, trends and research in structured finance and asset-backed securities for the week of April 23-29

Citigroup said a full review conducted after the lender mistakenly sent $900 million to a group of investment firms concluded the bank didn’t need to claw back any pay from executives.

The subprime consumer lender will also collateralize loans from its newly launched secured-loan platform in its second securitization of 2021.

Both agencies cited the increasingly sunny economic outlook driven by the reach of COVID-19 vaccination efforts.

Strong growth, continued low-cost borrowing and an oil rally are all contributing to a friendly backdrop for high-yield issuance.

OnDeck Asset Securitization Trust III comes to market for its fifth term securitization.

STWD 2021-FL2 is pricing a $1.27 billion managed commercial real estate commercial loan obligation that allows the issuer to reinvest principal proceeds.