Meaty mandates
It was supposed to be the year that European securitisation got back to business as usual, but 2022 turned out to be dominated by new challenges. For sinking its teeth into the market’s meatiest problems and coming out on top, Bank of America is IFR’s EMEA Structured Finance House of the Year.
It had all started so promisingly. Despite concerns about inflation and monetary policy, conditions were good at the beginning of 2022 and there were signs that UK high street banks and building societies were ready to return to securitisation as they looked to wean themselves off central bank funding.
Take Nationwide Building Society, which in January served up the first prime RMBS for two years from its Silverstone master trust issuer shelf. It achieved the tightest pricing on any new issue from the programme at 29bp over Sonia.
Not only that, but Nationwide was persuaded to rekindle relationships with US investors by including a US dollar-denominated tranche, a bold move which was vindicated by the strong demand it received. BofA was one of four joint leads on the milestone transaction.
But it turned out to be the calm before the storm. The invasion of Ukraine on February 24 had a dramatic impact on market sentiment.
“Everyone, in the background, had an idea that inflation was on the cards, but not on the cards to the extent of being coupled with a war in Europe,” said Greg Petrie, Bank of America’s head of EMEA ABS and RMBS.
And so the bank dusted off the crisis playbook it had successfully deployed in the early months of the coronavirus pandemic and set about identifying whatever pockets of liquidity were still available.
“It was a case of going back to first principles with some of those investors and leaning very much on pre-placement to give issuers certainty before going out with a public trade,” said Tristan Cheesman, head of European ABS syndicate.
From then on, the year would be characterised by narrow issuance windows that called for deft decision-making, especially for less straightforward deals.
Issuers repeatedly entrusted those tricky mandates to BofA. Their faith was rewarded with solid execution.
The team’s successes in the immediate aftermath of the Russian invasion of Ukraine included two deals backed by Italian collateral – not the easiest jurisdiction to sell at the best of times – including the first CMBS of the year in Cassia 2022-1, a Blackstone-sponsored securitisation of last-mile logistics properties.
The CMBS had already been in the works in the run-up to the Ukraine conflict. After war broke out, BofA went back to the issuer with a frank market update. The size of the transaction would need to be reduced and the pricing would be higher than before, but a deal could still be done.
The issuer went for it, printing €273.55m with the seniors pricing at 250bp over Euribor. It looked quite expensive at the time, admitted Matthias Baltes, head of commercial real estate structured finance at BofA, before adding: “Six months later, the sponsor looked like a genius.”
The deal makes BofA one of very few banks to have racked up public securitisations in all of the major asset classes in Europe last year, including CLOs, where it remained a major player.
But its meatiest assignment still lay ahead: a jumbo £2.1bn UK RMBS that refinanced non-conforming mortgages from four existing securitisations, for sponsor Davidson Kempner during the height of summer.
On August 25, acting as arranger, BofA priced Stratton Hawksmoor 2022-1, and pulled out all the stops. It worked closely with a large Triple A investor over several months to find a new home for the seniors before bringing in its own mortgage trading desk to backstop the syndication of the mezzanine notes. The result was a remarkable triumph in difficult market conditions and the deal is IFR's EMEA Structured Finance Issue of the Year.
Given the trust that issuers placed in BofA to tackle their biggest and toughest mandates, it is no surprise to see the bank at the top of the 2022 league table (by deal volume), having worked on 26 deals for US$8.2bn of credit, according to Refinitiv data.
“We thought that [2020] was a bad year and an outlier, and we called that ‘A Year Like No Other’,” said Petrie, reflecting on another year in which BofA won this award. “I think we should call 2022 ‘A Year Like No Other 2.0’.”
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