ABS

Global financial market euphoria over the last two months of 2023 is overdone, according to members of the International Association of Credit Portfolio Managers, who expect inflation, rates to stay elevated.

The real estate investment trust — which counts the private equity firm C-III Capital Partners among its top shareholders — owes more than $100 million to creditors but has less than $50 million of assets, according to a Chapter 11 petition.

The riskiest tier of the junk bond market, CCC, has gained nearly 20% year to date on a total return basis, making it the best-performing asset class in the U.S. fixed-income market.

The pool is well seasoned with a weighted-average seasoning of over 10 years for almost the full pool, according to S&P Global Ratings.

The certificates are backed by a single loan for 10 retail centers in nine states. AMC Theatres is the portfolio's largest tenant, representing 10.4% of the portfolio's base rent.

PRPM 2023-NQM3 Trust has issued residential mortgage-backed securities that are supported by 516 loans, 23% of which were originated by Newfi Lending.

Banks began marketing the loan, which funded a 47% stake purchase in Everise in early November. But the sale for the B3 rated debt struggled and dragged on for over a month. 

Classes A, B, C, D, E, and F have initial credit enhancement levels of 67.25%, 49.00%, 33.50%, 17.90%, 8.55% and 1.50%, respectively.

Bostic said he expects the US central bank will cut rates twice in 2024 — in the second half of the year — as inflation continues to slowly decline.

It is the first securitization for the company, and represents only a subset of the types of loans that the company has originated.

Initial hard credit enhancement ranges from 24.40% on class A notes to 7.70% on the class D notes. At closing, overcollateralization will be 6.70%, building to a target of 12.50%.

Deliveries would get an added boost should China resume importing the 737 Max after a nearly five-year halt, as air travel rebounds and trade relations thaw with the US.

Originators funded 72.6% of the loans in 2023, while 16.7% of the loans were funded in 2022 and originators funded the rest between 2021 and 2018.

ABS for 2023 is expected to drop 21.2% from 2022 volume, but the industry total for 2024, could give it a 4.1% increase.

Some 54 contracts and 39 obligors, with an average contract balance of about $14.46 million, and the average exposure to an obligor is about $22.79 million.

Any capital injection from GIC would follow an effort by Apollo to raise capital that enables Atlas SP's balance sheet to grow to more than $50 billion from about $40 billion in February.

While the Fed chief said officials are ready to hike further if needed, he also noted policy is "well into restrictive territory." Two-year yields sank 13 basis points to 4.55%.

But Mary Daly, president of the San Francisco bank, said it's premature to declare victory against inflation and that the central bank isn't contemplating rate cuts at all right now.

The decision narrows scope of impacted transactions and participants, to the market's relief.

The collateral pool had an average account balance of $1,620, lower than that of credit card securitization trusts that the Big Six banks sponsor, and the ABS notes benefit a 26% subordination level.