A year like no other
European securitisations were sorely tested when the Covid-19 crisis hit and it took a steadfast approach from its leading participant to help right the market. For providing that assurance, with a presence across all sectors and winning a dominant market share, Bank of America is IFR’s EMEA Structured Finance House of the Year.
“When we looked at the marketplace in the middle of the storm of Covid-19 we kept asking ourselves, how are we going to get the market back on its feet again?” said Greg Petrie, head of EMEA structured finance origination.
Bank of America made a rapid pivot to a crisis-mode operation to support both its investor and issuer clients. The jump in customer enquiries, especially from investors, was supported by its longstanding research team led by market stalwart Alexander Batchvarov. At the same time the bank’s trading and sales team were scrambling to meet a massive uptick in line items in the BWIC lists that took place from March until year-end – up to 1,887 from 1,383 over the same period in 2019.
The bank also had the balance sheet and internal infrastructure support to meet the challenge of an increase in trading volume and funding support.
European securitisation took longer than most bond markets to reopen after the initial shock of the coronavirus pandemic and with good reason – investors are directly exposed to consumers’ ability to repay mortgages and other loans, not to mention commercial mortgage deals backed by offices and shopping centres.
Those first few weeks of lockdown saw investment banks pulling plans for public issues and scrambling to assess warehouses and other facilities extended to originators.
“We were working with our clients on the lending side trying to figure out very early what was going to happen to collateral and what kind of support they would need to get through the pandemic,” said Prashant Sood, managing director for structured finance origination.
That activity may have all taken place behind the scenes, but BofA was centre stage when the public markets finally reopened and also contributed heavily to the deal flow during the rush of issuance after the summer break. BofA ended the year sitting atop the European issuers securitisation league table with an 11.3% share of the market, underwriting some US$5.63bn-equivalent via 20 deals over the observation period.
BofA was already in an enviable position with European issuers for the period prior to Covid-19. It was joint arranger on Nationwide’s Silverstone 2020-1 RMBS in January, selling a tightly priced £1bn senior note – the largest single tranche of a UK RMBS. In February it sold a hefty €620m Dutch CMBS backed by logistics properties owned by Blackstone, the largest CMBS sold within the window. The bank was also at the helm of the largest ABS – SC Germany Consumer 2020-1 for Santander.
The bank sold three leveraged loan CLOs in the first quarter – enjoying a substantial market lead.
Then the pandemic arrived, and although CLOs were gingerly returning by April, it took until mid-May for consumer securitisation to restart, with the first trade an auto ABS from BMW, one of the cleanest benchmark names in the sector.
There was little sign of the best-regarded programmes from the high-volume RMBS sector returning to market: those bank and building society issuers generally preferred the cheap emergency funding being offered by central banks.
That meant that when the European RMBS sector got going shortly after the BMW’s trade it was through a much more complex securitisation – Fingal Securities, backed by a mixture of buy-to-let and owner-occupied legacy Irish mortgages warehoused by BofA for Pimco. BofA had pre-sounded accounts, allowing it to announce the deal with its €594.95m Class A already covered before opening up that tranche to other accounts.
When the sterling RMBS market reopened one month later it too initially relied heavily on pre-sounding and pre-placements, such as with the Oat Hill No.2 RMBS for TwentyFour Asset Management ,which BofA also arranged.
In the run up to mid-summer most new issuance came from the UK, but when eurozone securitisations joined the party after the short summer break the result was a very busy September where BofA played an outsized role. It was involved in six of the 13 publicly syndicated non-CLO transactions that month, and present too in an even busier October.
Deals from BofA during that period included the return of Premium Credit, the first insurance ABS for three years with a £400m trade, and a £350m UK credit card ABS from NewDay.
BofA was also a co-arranger and joint lead for Lanebrook 2020-1, a £331m buy-to-let RMBS for Shawbrook Bank. All tranches in the deal were pre-placed apart from one Triple A that was retained by the issuer to be used for bilateral funding purposes.
The full-stack nature of the trade – BofA was sole placement agent on the Class X and residual certificates – allowed Shawbrook to achieve full deconsolidation of the mortgages, which it had purchased from The Mortgage Lender.
While BofA was less active than usual in leveraged loan CLOs in 2020, its CMBS team was the most active of all the banks with three new issues, all for commercial real estate giant Blackstone. Two of those deals, involving last-mile logistics properties, came during the pandemic: the £450m Taurus 2020-2 from the UK and the €320m multi-jurisdictional Pearl Finance 2020.
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