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Weekly Wrap: Navient forbearance rates dip

Navient Solutions' second asset-backed transaction involving federally guaranteed FFELP loans in 2020 saw forbearance rates cut by more than half compared to the first transaction priced in August.

According to presale reports from Moody's Investors Service, S&P Global Ratings and DBRS Morningstar, loans in forbearance account for 14.9% of the Navient 2020-2 pool, compared to 33% in Navient 2020-1.

Navient had launched a coronavirus forbearance program that, through June 30, had offered three months of payment deferrals for borrowers who requested relief. After July 1, the relief program was pared back to one month.

For oustanding transactions recently backed by Navient FFELP pools, the forbearance rates have also fallen month-over-month. The peake 31.3% forbearance rate for Navient 2019-4, for example, had been reduced to 20% as of the September reporting period.

On Oct. 5, a bond sale backed by $263 million in rehabilated and non-rehabilitated FFELP sponsored by the New Hampshire Higher Education Loan Corp. included a pool in which 10.8% of the loans were in forbearance. Moody's Investors Service considered that an "elevated" level for a FFELP pool that will traditionally (unrelated to recent COVID-19 programs) have 20% of loans in deferment or forbearance.


Lodging woes extending to hotel lenders

Access Point Financial, a private equity-held specialty finance company for hotel operators, has felt the brunt of the COVID-19 impact on the struggling lodging sector.

Kroll Bond Rating Agency has downgraded three classes securitization notes for Access Point Funding I 2017-A, the company's second asset-backed transaction, due to the "signficant increases in delinquencies and defaults" on Access Point's loans and leases to hotel obligors backing the bonds.

Most of the loans are equipment loans and leases in that that finance furniture and fixtures upgrades and renovations for franchisees of major hotel brands, as well as independent boutique hotels across the U.S.

Kroll downgraded the Class B, C and D notes on the original $221 million transaction one notch apiece, following the review of the transaction's performance in September showing a "spike" in defaults and late pays in the portfolio as declining hotel occupancy rates impeded several obligors' monthly payment obligations. The Class B notes (with an $11.5 million balance) were downgraded to BBB from BBB+; the $15.55 million in Class C notes went to B from BB+; and $15.7 million in Class C notes were revised to CCC from B+.

All notes have been placed on a downgrade watch in June. The $168.97 million in Class A notes sold when the deal was launched three years ago were paid down in January following the original amortization schedule.

Approximately 31 delinquencies were reported in September, representing 59.6% of the eligible pool, Kroll reported. Defaulted loans and leases (those exceeding 180 days past due) exceeded 20%.

According to Kroll, Access Point granted three payment modifications covering quarterly payments due in March and April. And while no modifications were granted in June (which covered the July and August performance periods), Kroll said it is "anticipated that additional modifications will be granted during the September 2020 reporting period."

Despite the erosion in payments, investors have yet to feel the pinch: all principal and interest payments have continued for the three subordinate note classes.

Special servicing escalates again

While delinquency rates continue a downward trend, reports Trepp, special servicing rates on CMBS loans continues to climb month-over-month.

In a report issued Wednesday, Trepp noted the special servicing rate climbed to 10.48% in September, compared to just 2.83% in March -- driven greatly by a CMBS loan forbearance tally that rose to $31.2 billion across 800 loans.

For retail sector loans, the special servicing rate rose to 18.32% from 17.31% in August, and the lodging specail servicing came "came in at 26.04%, up from 24.99% in August," noted Trepp. Both rates are the highest on record.
Businessmen are paying compensation to partners. or Businessmen are receiving dividends from investments.;
Businessmen are paying compensation to partners. or Businessmen are receiving dividends from investments.;

Leveraged loans paying dividends (literally)

Blackstone Group Inc. is looking to reap the benefits from a surge in online dating in a global pandemic and a rebound in demand for risky leveraged loans as investors seek higher-yielding assets.

The private equity firm, which bought a majority stake in the owner of dating app Bumble last year when it was known as MagicLab, is now seeking a payout from a $200 million loan. The deal, along with cash on balance sheet, will fund a $285 million dividend to Blackstone, as well as other co-investors and shareholders, according to a note from Moody’s Investors Service.

Citigroup Inc., which is leading the deal, is sounding out investors at a spread of 3.25 to 3.50 percentage points over the London interbank offered rate, said people with knowledge of the matter who asked not to be identified discussing a private transaction.

The debt is being offered with a 0.50% floor and a discounted price of 99 cents to 99.5 cents on the dollar, and follows a $575 million issue in January that was boosted in size twice with borrowing costs slashed.

The sale is the latest in a slew of dividend recapitalizations that have hit the leveraged loan market as companies take advantage of low borrowing costs fueled in part by liquidity-boosting policies by the Federal Reserve, as well as rising demand from yield-starved investors. About $12.6 billion of loans funding payouts to shareholders were launched in September, the most for any month in about six years, data compiled by Bloomberg show.

Domino pieces standing in a row. 3D illustration
Domino pieces standing in a row. 3D illustration.

New deal pipeline

Issuers filing ABS-15G registrations for new-issue U.S. ABS for the week of Oct.2-8 (per Finsight.com):
Verus Securitization Trust 2020-5 VMC Asset Despositor LLC RMBS
MDCP 2020-4 MidCap Financial Trust ESOT
MFA 2020-NQM2 Trust MFRA NQM Depsitor RMBS
FRETE 2020-ML07 Trust Freddie Mac CMBS
Benchmark 2020-B20 Mortgage Trust JPMorgan CMBS
AFFRM 2020-Z2 Affirm Inc ESOT
CARMX 2020-4 CarMax Inc AUTO
CAALT 2020-3 Credit Acceptance Corporation AUTO
PART 2020-1 Prestige Financial Services Inc AUTO
Barclays Commercial Mortgage Securities LLC Barclays CMBS
BRAVO Residential Funding Trust 2020-TAC1 TOCU Residential Funding RMBS