Banking

Leveraged loans and collateralized loan obligations do not represent an "existential" threat to the global economy or to the U.S. banking system, as some recent highly charged reports have suggested.

Westlake Automobile Receivables Trust 2020-2 pools a portfolio of loans for mostly high-mileage used-vehicles financed by the privately held Westlake through independent and franchise dealers. The deal includes a $370.9 million triple-A tranche (as preliminarily rated by S&P Global Ratings and DBRS Morningstar) that benefits from 42.75% initial credit enhancement.

The leveraged loan market, long favored by private equity firms to fund LBOs, has lagged. The largest buyers of the debt - vehicles known as collateralized loan obligations - are not purchasing as much as they used to as they deal with the wave of downgrades that has hit many of the companies they already hold.

A budget item establishing a new agency to protect consumers from predatory lenders has been put on hold as state officials deal with the coronavirus response and other priorities. But it could be revived in legislative talks later this summer.

The online small-business lender’s temporary halt to loan originations contributed to a breach of a minimum asset level for its Series 2019-1 collateral pool, according to Kroll.

As revenue-starved retailers fall further behind on rent payments, landlords' cash flow will be strained, and defaults on commercial real estate loans could rise.

The central bank is only now nearing the launch of the credit facilities after the effort was announced in April. But Chairman Jerome Powell said loans have been available through other means.

The venture with Goldman Sachs represents the first time Amazon has let a third party control the underwriting process of one of its financing offerings.

If delinquency rates rise, all four stand-alone firms would have a capital shortfall.

Potential COVID-19 stresses include a rising tide of unemployed borrowers missing payments and seeking extensions, as well as falling used-car values.

The central bank will increase support for credit issued through the Main Street Lending Program while providing midsize firms with more flexibility on the amounts they receive.

About 9% of government-insured loans in forbearance have low equity, which could hamper post-forbearance servicing.

The captive-finance lender for General Motors is providing lower expectations for the vehicles' future residual values, compared to its prior lease ABS deals, in recognition of the likely severe recessionary impact of the coronavirus outbreak.

But there was an increase in private-label mortgages in forbearance.

The firm will offload parts of its business including its business development company, Garrison Capital Inc., and other credit vehicles.

The race to provide coronavirus relief for small businesses is opening new routes to fund payments, including underused credit lines.

“Since April, the decline in corporate credit has resulted in a significant number of downgrades among the assets underlying some CLOs,” a Moody’s press release stated on Wednesday.

Shut out from many coronavirus relief programs, private equity companies have found a back door at HHS, where they have borrowed at least $1.5 billion.

Global Lending Services, a subprime auto lender that has ramped down its expansion plans for 2020 amid the coronavirus outbreak, is proceeding with its second auto-loan securitization of the year.

The changes being sought would benefit both small businesses and banks, which would avoid the cost of servicing many low-yielding loans.