Asset Securitization Report - May/June 2020

Second Chance

PACE sponsors are raising capital and promoting plans to retroactively fund stalled CRE projects amid the COVID-19 outbreak, giving a potential boost to ABS activity in the space.

Speculative-grade borrowers are different because they made a conscious choice to take on more debt in the hopes of generating bigger returns for equity holders. They did this even though they knew it would make them more vulnerable in an economic downturn.

There’s no reason to punish companies for failing to see a history-changing, once-in-a-century pandemic, or anticipate the shutdowns that would result.

According to a new academic research report, CLO managers have taken advantage of S&P's ratings methodology for a ratings boost on lower-rated tranches - enabling them to offer more return for what seemed like less risk.

Moody’s Investors Service has placed hundreds of non-senior U.S. CLO tranches under review for downgrade, affecting 358 broadly syndicated loan-backed portfolios as Moody’s measures the ongoing economic shocks of the coronavirus outbreak.

A quarterly survey shows a major cross-section of portfolio managers it may be more than a year before global credit conditions return to normalcy from the economic havoc unleashed by the COVID-19 pandemic.

Falling used-car values, loan forbearance programs and economic uncertainty are weighing on the lower-end of the subprime auto finance sector.

Hertz and Avis will likely each have to seek to relief from lenders – including asset-backed securities investors that make up the bulk of funding for both companies’ fleets, Moody’s stated in research reports.

The agency said it is aligning policies for Fannie Mae- and Freddie Mac-backed loans in forbearance so that servicers are only responsible for advancing four months of missed payments.

Mounting economic fallout from the pandemic is fueling apartment landlords' concerns that more tenants will struggle to make their rent payments, even after most managed to come up with the money for April.

More details have emerged about the damage the coronavirus pandemic is inflicting on the hospitality industry. One servicer alone has received 2,000 workout requests in the past month.