65
October 27, 2020 U.S. And Canada Structured Finance Surveillance Chart Book Mark Risi James Manzi John Detweiler Brenden Kugle U.S. and Canada Structured Finance
October 27, 2020
U.S. And Canada Structured FinanceSurveillance Chart Book
Mark RisiJames ManziJohn DetweilerBrenden KugleU.S. and Canada Structured Finance
U.S. And Canada Structured Finance Highlights
2
– As of Oct. 16, 2020, we have 2,125 structured finance tranches in the U.S. that have experienced a rating action due to the COVID-19 pandemic and/or the decline in oil and gas prices. No rating actions have been taken on Canadian structured finance tranches, which are backed by prime consumer collateral. The rating actions make up approximately 5.8% of the outstanding S&P Global Ratings-rated tranches in the U.S. and Canada. Reductions of supplemental unemployment payments in the U.S. and Canada pose risks to consumer collateral performance if the labor markets do not return to normal. Of the 2,125 ratings, 109 (5%) remain on CreditWatch with negative implications
– ABS: Extensions in U.S. public auto loan ABS declined for the fourth consecutive month in August, based on loan-level data filed with the SEC. The vast majority of loans that have come out of extension status continue to perform and remain current. Combined forbearance and delinquency levels for monthly reporting student loan FFELP transactions have returned to their pre-COVID-19 levels; it remains to be seen whether this is temporary as borrowers may look to access other forbearance/income-based repayment (IBR) options allowed under the FFELP guidelines. Combined forbearance and delinquency levels, on monthly reporting private transactions, peaked during COVID-19 at 3.8x, but have now declined to 1.5x of pre-COVID-19 levels. U.S. and Canadian credit card trusts’ delinquency decline is slowing, and losses are normalizing. Unsecured consumer ABS continued to experience stable performance with no material changes in delinquencies and loss performance through September.
– RMBS: The percentage of U.S. loans in forbearance continues to decline. The Mortgage Bankers Association reported that just 6.32% of borrowers were in forbearance as of Oct. 4, 2020. Performance across our rated portfolio has been generally stable, with delinquencies relatively flat to slightly down in September from the prior month’s remittance. Prepayment speeds remain elevated, driven by the historically low interest rate environment.
– CMBS: The U.S. CMBS overall delinquency rate decreased by 16 basis points (bps) month over month, to 8.13% in September 2020. The share of loans that are 60-plus days delinquent is 84% of total delinquent loans. Servicers continue to work through a surge in requests for relief from borrowers, primarily related to lodging and retail properties. While initial forbearance agreements have generally been confined to three months and involved accessing reserve funds to meet debt service obligations, we are noticing an uptick in longer-duration forbearance agreements, including one as long as 12 months.
– CLO: Since early March, when the first COVID-19-related rating actions appeared within U.S. CLO collateral pools, around one-third of U.S. broadly syndicated loan (BSL) CLO collateral has been downgraded or placed on CreditWatch negative. The average U.S. BSL CLO 'CCC' bucket (including loans from ‘B-’ companies on CreditWatch negative) has gradually decreased and now sits at just over 9.4% of the average BSL CLO’s assets, compared to just over 4% exposure prior to COVID-19, and a peak of more than 12% back in May 2020.
– Non-traditional: The performance of U.S. timeshare loans backing outstanding ABS transactions rated by S&P Global Ratings continued to show signs of improvement, with delinquencies trending down to 4.15% in August from 4.18% in July and 4.71% in June. The government support package directly covered principal, interest, and fees on small business administration (SBA) loans for the six months ended in September. As a result, in the coming months, we expect to see an increase in delinquencies and defaults. We assigned preliminary ratings to the class A, B, and C notes from Business Jet Securities 2020-1 LLC, the first aircraft ABS transaction that we have rated since the onset of COVID-19.
– ABCP Muni Structured: U.S. ABCP outstandings have declined since April 2020, but we expect increased utilization rates from existing programs as well as new conduit activity to support our projected levels of approximately $260 billion by year end. We anticipate no material impact on our ratings in the second half of 2020.
Source: S&P Global Ratings
Collateral Performance
OutlookRating Trends
Collateral Performance
OutlookRating Trends
Residential mortgages Structured credit
RMBS Somewhat weaker Stable to negative CLOs Somewhat weaker Stable to negative
RMBS - servicer advance Somewhat weaker Stable Timeshares Somewhat weaker Stable to negative
Commercial mortgages Small Business Weaker Stable to negative
CMBS - N.A. conduit/fusion Somewhat weaker Stable to negative Tobacco Somewhat weaker Stable
CMBS - LL/SASB Somewhat weaker Stable to negative Transportation - Aircraft Weaker Negative
CMBS - LL/SASB (retail) Weaker Stable to negative Transportation - Container Somewhat weaker Stable
CMBS - LL/SASB (lodging) Weaker Stable to negative Transportation - Railcar Somewhat weaker Stable
Asset-backed securities Whole Business Weaker Stable to negative
ABS - Prime auto loans Somewhat weaker Stable Triple Net Lease Somewhat weaker Stable
ABS - Subprime auto loans Weaker Stable to negative
ABS - Auto lease Somewhat weaker Stable
ABS - Auto dealer floorplan Somewhat weaker Stable to negative
ABS - credit cards Somewhat weaker Stable
ABS - unsecured consumer loans
Weaker Stable to negative
ABS - FFELP student loan Somewhat weaker Stable
ABS - private student loan Somewhat weaker Stable to negative
ABS - commercial equipment Somewhat weaker Stable
Asset-backed commercial paper
Somewhat weaker Stable
U.S. Structured Finance 12-Month Outlook | Q3 2020
3
Source: S&P Global Ratings.
- Of the North American rating actions mentioned on the previous slide, most of have affected speculative-grade classes, albeit with some sectors experiencing movement in the low investment-grade realm and others seeing more idiosyncratic actions at high investment-grade categories. Some sectors or subsectors that have experienced actions and/or continue to be areas of focus include CMBS with high exposure to retail and lodging, auto dealer floorplan ABS, non-qualified mortgage RMBS, aircraft ABS, subprime auto ABS, CLOs, whole business ABS, small-business ABS, and timeshare ABS.
COVID-19 Activity In U.S. And Canada Structured Finance | As of October 16, 2020
4
Source: S&P Global Ratings
U.S. And Canada Rating Actions Overview
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. ABS includes auto loan, auto lease, auto dealer floorplan. Non-traditional includes aircraft, triple-net lease, whole business, and timeshare . ABCP/muni structured includes tender option bonds, repack, and variable-rate demand obligations. Source: S&P Global Ratings.
5
Cumulative Number Of Tranches Impacted By COVID-19
ABS RMBS CMBS CLO Non-traditional
ABCP/munistructured
Number of outstanding ratings 3,801 17,830 2,574 4,095 1,238 6,859
Ratings on CreditWatch 24 13 1 7 4 44
Ratings downgraded 16 623 202 485 67 231
Ratings downgraded and remaining on CreditWatch 5 - 7 - 2 2
Rating actions affected (% of total) 1.7 4.3 10.5 14.9 9.8 4.3
Affirmations of ratings previously on CreditWatch 19 127 52 120 48 19
Negative CreditWatch Resolutions
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. In the chart on the right, rating actions exclude weak-linked ratings. ABS includes auto loan, auto lease, auto dealer floorplan. Non-traditional includes aircraft, triple-net lease, whole business, and timeshare . ABCP/muni structured includes tender option bonds, repack, and variable-rate demand obligations. Source: S&P Global Ratings.
6
By Sector(i) By Rating Category(i)
0 200 400 600 800
ABS
RMBS
CMBS
CLO
NT
ABCP/Muni Structured
Remains on CreditWatch Downgraded and remains on CreditWatch
Downgraded Affirmed
Withdrawn
0 100 200 300 400 500 600 700
CCC & CC
B
BB
BBB
A
AA
AAA
Remains on CreditWatch Downgraded and remains on CreditWatch
Downgraded Affirmed
Withdrawn
Severity of COVID-19 Related Downgrades
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. ABS includes auto loan, auto lease, auto dealer floorplan. Non-traditional includes aircraft, triple-net lease, whole business, and timeshare . ABCP/muni structured includes tender option bonds, repack, and variable-rate demand obligations. Source: S&P Global Ratings.
7
No. of Notches
0 100 200 300 400 500 600
ABS
RMBS (New Era)
RMBS (Legacy)
CMBS
CLO
NT
ABCP/Muni Structured
1 2 3 4 to 6 > 6
ABS
Frank TrickAnalytical Manager – ABS Secured+1 (212) [email protected]
Kate ScanlinAnalytical Manager - ABS Unsecured+1 (212) [email protected]
Amy MartinSector Lead – ABS Secured+1 (212) [email protected]
John AnglimSector Lead – ABS Unsecured+1 (212) [email protected]
ABS Secured—Sector Update
9
Auto loan/lease/floorplan and commercial equipment
– Extensions in U.S. public auto loan asset-backed securities (ABS) declined for the fourth consecutive month in August, based on loan-level data filed with the SEC. Across the 17 prime shelves tracked by S&P Global Ratings', extensions dropped 27% to 0.63% from 0.86% in July. For the four subprime shelves in our analysis, extensions decreased 39% to 3.22% from 5.29% in August. Ofnote, the balance of loans remaining in extension status decreased 42% to 0.99% for prime loans (from 1.71% in July) and 34% for subprime loans to 7.88% (from 11.90% in July). This is an especially informative metric given that many of the prior months’extensions were for multiple months--four months at a time in some cases.
– While the majority of those loans in the prime and subprime categories who received an extension in August made no payment (53% and 61%, respectively), 47% and 39% (in dollar terms), respectively, made some form of payment. In prime, the 47% that made a payment consisted of 27% full payment, 17% partial, and 8% advance. In subprime, the 39% that made a payment consisted of 19% full payment, 13% partial, and 7% advance payment.
– The vast majority of loans that have come out of extension status--80% in the prime sector and 59% in subprime--continue to perform and remain current. The level of 60-plus-day delinquencies for previously extended loans (from March to August) whose deferral periods have ended was 1.58% (up from 1.29% in July) for the prime segment, and 4.27% (up from 3.46% in July) for subprime as of Aug. 31, 2020. While delinquencies on previously extended loans remain low, they are growing month to month. Prime 60-plus-day delinquencies on previously extended loans rose 23% to 1.58% from 1.29% as of July. The 1.58% level was 8.2x the level of 60-plus-day delinquencies (DQs) on non-extended loans (0.19%) as of August month end. In subprime, 60-plus-day DQs increased 23% to 4.27% from 3.46%, which was 1.7x the level of 60-plus-day DQs for non-extended subprime loans as of August month end (2.53%). We view rising delinquencies as an early warning sign that losses are also poised to rise.
– Twenty-four U.S. subprime auto ABS ratings remain on CreditWatch negative. The original CreditWatch listings resulted from the COVID-19 economic downturn, which we expect to negatively affect the performance of all auto loan originators. Although we expect increasing extensions to be temporary and the economy to begin to rebound in the second half of the year, we believe thiswill still lead to higher cumulative net losses and reduced excess spread over the life of each transaction. We are continuing to assess the impact of COVID-19 on collateral performance, including the impact of extension rates, delinquencies, recovery rates and economic stimulus.
Source: S&P Global Ratings
ABS Unsecured—Sector Update
10
Student loan, credit card, and unsecured consumer
– Student loans: Combined forbearance and delinquency levels for monthly reporting FFELP transactions have returned to their pre-COVID-19 levels; it remains to be seen whether this is temporary as borrowers may look to access other forbearance/IBR options allowed under the FFELP guidelines. Combined forbearance and delinquency levels, on monthly reporting private transactions, peaked during COVID-19 at 3.8x, but have now declined to 1.5x of pre-COVID-19 levels. While unemployment levels for individuals with at least a bachelors degree more than quadrupled during the COVID-19 pandemic, the level has fallen to levels below 3x that of the pre-COVID-19 data. Looking forward, we expect combined forbearance and delinquency levels to improve for the private student loan collateral over the next several years as unemployment levels improve. We would not expect the same improvement for the FFELP transactions given their return to pre-COVID-19 levels. That said, movement of loans from forbearance to delinquency in FFELP transactions can help a transaction’s liquidity as the trust receives the guarantee payment once borrowers move from delinquency to default.
– Credit cards: As anticipated, U.S. and Canadian Trusts’ delinquency decline is slowing and losses are normalizing. In comparison to pre-COVID levels (February 2020) performance variable levels have improved, with the exception of yield, which is affected bythe decline in spending and reduction in interchange. As obligors pay down their credit balance and reduce spending, “carrying balance” is reduced, and, in turn, trusts’ receivables balances are declining, offset by some trusts’ addition of receivables. Credit card collateral performance remains steady, benefiting from originators' COVID-19 forbearance and government assistances programs, as well as collateral credit quality. Reductions of supplemental unemployment payments continue to pose risks to credit card collateral performance if the labor markets do not return to normal. Nevertheless, our base-case and stressed assumptions for credit card charge-offs, payment rate, and yield--which was recalibrated to the ‘08-‘09 crisis and includes stress scenarios for bankrupt retailers--continues to adequately reflect the risks of each program. In general, we expect stable-to-marginal deterioration in performance trends as forbearance periods come to an end. After that, accounts that are not regularized will result in increased delinquency and charge-offs in late 2020/early 2021.
– Unsecured: Despite the July expiration of the federal benefits under the CARES Act, unsecured consumer ABS continued to experience stable performance with no material changes in delinquencies and loss performance through September. Payment deferments have normalized from their March/April peaks. We expect non-prime obligors to be vulnerable to default with the drop in government support and as deferment periods expire. However, our loss assumptions incorporate a stressed environment scenario in which there is sufficient cushion to absorb near term loss spikes.
Source: S&P Global Ratings
Cumulative Number Of Tranches Affected By COVID-19(i)
ABS—Rating Actions
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
11
Auto loanAutolease
Dealerfloorplan Equipment MH/RV
Student loan
Credit cards and
unsecured consumer
Number of outstanding ratings 1,321 151 80 181 98 1,626 344
Ratings on CreditWatch 24 - - - - - -
Ratings downgraded 8 1 6 - - 1 -
Ratings downgraded and remaining on CreditWatch - - - - - 5 -
Ratings affirmed 4 2 13 - - - -
Rating actions (% of total) 2.7 2.0 23.8 - - 0.4 -
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. ABS includes auto loan, auto lease, auto dealer floorplan, equipment, MH/RV, student loan, credit card, and unsecured consumer. Source: S&P Global Ratings.
12
ABS—Rating Actions By Category
Total outstanding Rating action (no.) Rating action (%)
‘AAA’ 1,462 16 1.1
‘AA’ 1,244 11 0.9
‘A’ 494 - -
‘BBB’ 220 1 0.5
‘BB’ 111 23 20.7
‘B’ 73 13 17.8
‘CCC-CC’ 127 - -
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
13
ABS—Rating Actions Due To COVID-19
0 5 10 15 20 25
CCC & CC
B
BB
BBB
A
AA
AAA
By Category
Remains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
ABS—Severity Of COVID-19-Related Downgrades
COVID-19 rating activity as of Oct. 16, 2020.S&P Global Ratings.
14
No. of Notches By Rating Category
0 2 4 6 8 10 12
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
15
Auto Lease Residual Value Losses And GainsPrime And Subprime Auto Loan Extensions And Losses
Dealer Floorplan ABS Performance Equipment ABS CNL And Delinquencies
U.S. Secured ABS—Key Performance Metrics
Source: S&P Global Ratings
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Feb Mar Apr May June July Aug Sept
CNL % 60+ delinq %
0.0%
20.0%
40.0%
60.0%
80.0%
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
Jan Feb Mar Apr May Jun Jul Aug Sept
Collection Period
Pool balance ($ bil) (left axis) Principal collections ($ bil) (left axis)Monthly payment rate (right axis) 3-mo avg payment rate (right axis)
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jan Feb Mar Apr May June July Aug
1-month avg 3-month avg 6-month avg 12-month avg
0.57%
0.59%0.67%
0.55% 0.50% 0.39%
0.25%
8.63%
8.37% 9.32%
6.22%
4.20%
3.16%
2.93%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Feb March April May June July Aug
Prime ext Subprime extPrime losses (right axis) Subprime losses (right axis)
U.S. Unsecured ABS—Key Performance Metrics
16
N.A CCQIs – Charge-off Rate (% Change) N.A CCQIs - 60+ day delinquency rate (% Change)
1Represents transactions that report forbearance and delinquencies on a monthly basis. Forbearance + Total Delinquencies is captured to account for different servicing practices (some automatically provided forbearance to those in delinquency, some provided forbearance to those in delinquency at the request of the borrower). Source: S&P Global Ratings
-20.0%-15.0%-10.0%
-5.0%0.0%5.0%
10.0%15.0%
Jan Feb March April May June July Aug
Cad U.S. Bank U.S. Retail
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
Jan Feb March April May June July Aug
Cad U.S. Bank U.S. Retail
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Unemployment Levels by School Type vs Forbearance And Total Delinquencies1
Unemployment Levels - Some college /associate degree
Unemployment Levels - Bachelor's degree andhigher
Forbearance + Delinquencies (FFELP)
Forbearance + Delinquencies (Private)
ABS—Key Publications
17
Relevant Rating Actions
– Ten Ratings Affirmed On Two DT Auto Owner Trust Transactions; Two Tranches Removed From CreditWatch Negative, Oct. 8, 2020
– Six Prestige Auto Receivables Trust 2019-1 Ratings Affirmed; Class E Removed From CreditWatch Negative, Sept. 23, 2020
– Ratings Affirmed On Four Classes From Two Volkswagen Auto Loan Enhanced Trust Transactions, Aug. 14, 2020
– Twenty-seven Ratings From 20 U.S. Subprime Auto ABS Transactions Remain On CreditWatch Negative, Aug. 10, 2020
– Various Rating Actions Taken On Six CPS Auto Receivables Trust Transactions, Aug. 7, 2020
Related Research
– U.S. Auto Loan ABS Tracker: August 2020 Performance, Oct.14, 2020
– U.S. Credit Card Quality Index: Monthly Performance--August 2020, Oct 1, 2020
– Canadian Credit Card Quality Index: Monthly Performance--August 2020, Oct. 1, 2020
– Pace Of New U.S. Auto Loan ABS Extensions Continued To Decline In July. But Delinquencies Inched Up, Sept. 22, 2020
– To Pay or Not To Pay: Navigating Through U.S. ABS Auto Loans As They Roll Off Extension Status, Aug. 14, 2020
– U.S. Auto Loan ABS Tracker: June 2020 Performance, Aug. 14, 2020
– U.S. And Canadian Credit Card ABS Performance Risk Increases As Unemployment Supplements Wane, Aug. 6, 2020
– Though Still Elevated, Drops in May Extensions Are the First Signs Of A Possible Road To U.S. Auto Loan ABS COVID-19 Recovery, July 16, 2020
– Prime/Nonprime Auto Loan ABS Ratings Avoid CreditWatch For Time Being, May 21, 2020
– Effects Of COVID-19 On U.S. Student Loan ABS, April 30, 2020
– COVID-19 Elevates Risks For U.S. Auto Dealer Floorplan ABS, April 27, 2020
– U.S. Commercial Small-Ticket ABS Will Be First In Sector To Feel Impact Of COVID-19, April 13, 2020
– The Potential Effects Of COVID-19 On U.S. Auto Loan ABS, March 26, 2020
RMBS
James TaylorAnalytical Manager - RMBS+ 1 (212) 438 [email protected]
Jeremy SchneiderSector Lead - RMBS+ 1 (212) 438 [email protected]
Vanessa PurwinAnalytical Manager - RMBS+ 1 (212) 438 [email protected]
RMBS—Sector Update– The percentage of U.S. loans in forbearance continues to decline. The Mortgage Bankers Association
reported that just 6.32% of borrowers were in forbearance as of Oct. 4, 2020. The drop was observed in all sectors, though the forbearance level of Ginnie Mae and portfolio/private-label loans stand at more than twice those of Fannie Mae and Freddie Mac.
– Performance across our rated portfolio has been generally stable, with delinquencies relatively flat-to-slightly down in September from the prior month’s remittance. Prepayment speeds remain elevated, driven by the historically low interest rate environment.
– We have completed our reviews related to the April 17, 2020, revision in our 'B' rating level foreclosure frequency assumption. In total, the reviews yielded 125 one-notch downgrades (including 68 exchangeable classes) to classes within the non-qualified mortgage (QM) and credit risk transfer (CRT) sub-sectors (see RMBS – Key Publications slide). In general, the downgrades affected the more junior classes from recent vintages that have yet to experience adequate deleveraging.
– On August 12, we placed the ratings on 13 classes from three non-QM transactions issued by Galton Funding Mortgage Trust on CreditWatch with negative implications. On August 20, we placed our rating on class 2M-1 from Connecticut Avenue Securities Trust 2020-R02 on CreditWatch with negative implications (see RMBS – Key Publications).
– We assigned ratings to four new issue RMBS across multiple collateral types (non-QM/credit-risk transfer/servicer advance receivables) since the prior update (see RMBS – Key Publications).
19
Source: S&P Global Ratings
RMBS—Rating Actions
20
Non-qualified mortgage Prime 2.0 Credit risk transfer Legacy (pre-2009)
Number of outstanding ratings 663 1,493 810 14,511
Ratings on CreditWatch 13 - - -
Ratings downgraded 53 - 72 498
Ratings downgraded and remaining on CreditWatch - - - -
Ratings affirmed 97 - 30 -
Rating actions (% of total) 24.6 - 12.6 3.4
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
21
RMBS—Rating Actions By CategoryCumulative Number Of Tranches Affected By COVID-19(i)
Total outstanding(no.)
Negative rating actions (no.)
Negative rating actions (%)
Total outstanding(no.)
Negative rating actions (no.)
Negative rating actions (%)
‘AAA’ 1,470 - - 574 3 0.5
‘AA’ 309 - - 1,948 69 3.5
‘A’ 146 4 2.7 1,202 134 11.1
‘BBB’ 242 37 15.3 860 68 7.9
‘BB’ 368 92 25.0 912 68 7.5
‘B’ 431 132 30.6 1,219 55 4.5
‘CCC’ to ‘CC’ - - - 5,580 100 1.8
New Era Legacy
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
22
RMBS—Rating Actions Due To COVID-19
0 20 40 60 80 100 120 140 160 180 200
CCC & CC
B
BB
BBB
A
AA
AAA
By Category
Remains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
RMBS—Severity Of COVID-19-Related Downgrades
COVID-19 rating activity as of Oct. 16, 2020. S&P Global Ratings.
23
No. of Notches By Rating Category
0 20 40 60 80 100 120 140 160 180
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
Source: S&P Global Ratings.
24
RMBS—Key Performance Metrics
− The charts show S&P Global Ratings-rated transactions issued post-2012 only.
− Credit risk transfer remittance data reflects a one- to two-month lag in borrower behavior.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
CP
RDQ
Prime 2.0
30+ days DQ 60+ days DQ CPR
0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
CP
RDQ
Credit Risk Transfer
30+ days DQ 60+ days DQ CPR
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
1.0%
4.0%
7.0%
10.0%
13.0%
16.0%
19.0%
22.0%
25.0%
CP
RDQ
Non-QM
30+ days DQ 60+ days DQ CPR
Source: S&P Global Ratings.
25
RMBS—Key Performance Metrics Cont.
0.0
3.0
6.0
9.0
12.0
15.0
18.0
21.0
24.0
27.0
30.0
Feb-2020 Mar-2020 Apr-2020 May-2020 Jun-2020 Jul-2020 Aug-2020 Sep-2020
(%)
Legacy DQ 30+ pct
Prime Pre-2005 Prime 2005-08 Alt-A Pre-2005 Alt-A 2005-08
Neg-Am 2005-08 Sub-Prime Pre-2005 Sub-Prime 2005-08
RMBS—Key Publications
26
Relevant Rating Actions– Presale: Verus Securitization Trust 2020-5, Oct. 16, 2020
– Various Rating Actions Taken On 82 Ratings From 13 U.S. RMBS Non-QM Transactions, Oct. 13, 2020
– Various Rating Actions Taken On 56 Ratings From Seven U.S. RMBS Non-QM Transactions, Oct. 13, 2020
– Presale: Freddie Mac STACR REMIC Trust 2020-DNA5, Oct. 8, 2020
– Presale: Imperial Fund Mortgage Trust 2020-NQM1, Oct. 6, 2020
– Presale: NRZ Advance Receivables Trust 2015-ON1 (Series 2020-T3), Sept. 28, 2020
– Presale: J.P. Morgan Mortgage Trust 2020-7, Sept.17, 2020
– Presale: Freddie Mac STACR REMIC Trust 2020-HQA4, Sept. 13, 2020
– Various Rating Actions Taken On 139 Ratings From Five U.S. RMBS Credit Risk Transfer Transactions, Aug. 20, 2020
– Various Rating Actions Taken On 139 Ratings From Five U.S. RMBS Credit Risk Transfer Transactions, Aug. 20, 2020
– Ratings On Thirteen Classes From Three U.S. RMBS Transactions Placed On CreditWatch Negative, Aug. 12, 2020
Related Research– Can COVID-19 Cause A Cash Crunch For Certain U.S. RMBS, Aug. 21, 2020
– Non-Qualified Mortgage Loans Summertime Blues Continue Despite Improved July Delinquencies, July 29, 2020
– Non-QM RMBS And COVID-19: Locking Down States' Exposure, June 1, 2020
CMBS
Ryan ButlerAnalytical Manager - CMBS+ 1 (212) 438 [email protected]
Senay DawitSector Lead - CMBS+ 1 (212) 438 [email protected]
James DigneyAnalytical Manager - CMBS+ 1 (212) 438 [email protected]
CMBS—Sector Update– The U.S. CMBS overall delinquency rate decreased by 16 bps month over month, to 8.13% in September 2020.
Despite the decline, the DQ rate continues to be higher than what we have seen since we started tracking the comprehensive CMBS portfolio DQ rate in January 2017. Though the overall DQ rate is down, the share of loans that are 60-plus days delinquent is 84% of total delinquent loans. In addition, one-third of the 60-plus days delinquent loans are 120 plus-days delinquent.
– The delinquency rates for all the major property types decreased, including multifamily by 21 bps, industrial by 16 bps, retail by 14 bps, lodging by eight bps, and office properties by two bps.
– On Oct. 13, we published our observations for third-quarter CMBS conduit new issuance metrics and COVID-19 effects, some of which include:
– New issuance loan metrics were mixed, but generally weaker as a whole. These included the following:
– Leverage rose by nearly two percentage points, to 94.8%, quarter over quarter.
– Debt service coverage (DSC) ratios rose by about 0.15x, to 2.48x, and remain at a high level. We note that historically low rates and high interest-only (IO) loan percentages are clearly contributing to elevated DSC ratios.
– IO loan percentages rose somewhat quarter over quarter for both the full-term and partial-term components. The combined total (92.0%) represents a CMBS 2.0 peak.
– Our average cash flow and value variance to issuer values both increased.
– Quarter over quarter, effective loan counts (as measured by Herfindahl-Hirschman Index score) were slightly lower, while average actual loan counts and deal sizes were up modestly.
– Servicers continue to work through a surge in requests for relief from borrowers, primarily related to lodging and retail properties. While initial forbearance agreements have generally been confined to three months and involved accessing reserve funds to meet debt service obligations, we are noticing an uptick in longerduration forbearance agreements, including one as long as 12 months.
28
CMBS—Rating Actions
29
Conduit SASB/LL Other (incl. CTL)
Number of outstanding ratings 1,266 1,273 35
Ratings on CreditWatch 1 - -
Ratings downgraded 93 109 -
Ratings downgraded and remaining on CreditWatch 7 - 1
Ratings affirmed 22 29 -
Ratings withdrawn - 7 -
Rating actions (% of total) 9.7 11.4 2.9
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
30
Total outstanding Rating action (no.) Rating action (%)
‘AAA’ 963 16 1.7
‘AA’ 482 23 4.8
‘A’ 333 29 8.7
‘BBB’ 338 57 16.9
‘BB’ 222 78 35.1
‘B’ 190 57 30.0
‘CCC-CC’ 25 9 36.0
CMBS—Rating Actions by CategoryCumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
31
CMBS—Rating Actions Due to COVID-19
0 10 20 30 40 50 60 70 80 90
CCC & CC
B
BB
BBB
A
AA
AAA
By CategoryRemains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
CMBS—Severity of COVID-19 Related Downgrades
COVID-19 rating activity as of Oct. 16, 2020. S&P Global Ratings.
32
No. of Notches By Rating Category
0 10 20 30 40 50 60 70
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
Source: S&P Global Ratings.
33
CMBS—Key Performance Metrics
0
10
20
30
40
50
60
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Jan-
17Fe
b-1
7M
ar-1
7A
pr-
17M
ay-1
7Ju
n-17
Jul-
17A
ug-1
7S
ep-1
7O
ct-1
7N
ov-1
7D
ec-1
7Ja
n-18
Feb
-18
Mar
-18
Ap
r-18
May
-18
Jun-
18Ju
l-18
Aug
-18
Sep
-18
Oct
-18
Nov
-18
Dec
-18
Jan-
19Fe
b-1
9M
ar-1
9A
pr-
19M
ay-1
9Ju
n-19
Jul-
19A
ug-1
9S
ep-1
9O
ct-1
9N
ov-1
9D
ec-1
9Ja
n-20
Feb
-20
Mar
-20
Ap
r-20
May
-20
Jun-
20Ju
l-20
Aug
-20
Sep
-20
Delinquent balance (bil. $)
Delinquency Rate And Delinquency Balance
DQ balance DQ rate
DQ---Delinquency.
(%)
Source: S&P Global Ratings.
34
CMBS—Key Performance Metrics Cont.
0.0
5.0
10.0
15.0
20.0
25.0
Jan-
17Fe
b-1
7M
ar-1
7A
pr-
17M
ay-1
7Ju
n-17
Jul-
17A
ug-1
7S
ep-1
7O
ct-1
7N
ov-1
7D
ec-1
7Ja
n-18
Feb
-18
Mar
-18
Ap
r-18
May
-18
Jun-
18Ju
l-18
Aug
-18
Sep
-18
Oct
-18
Nov
-18
Dec
-18
Jan-
19Fe
b-1
9M
ar-1
9A
pr-
19M
ay-1
9Ju
n-19
Jul-
19A
ug-1
9S
ep-1
9O
ct-1
9N
ov-1
9D
ec-1
9Ja
n-20
Feb
-20
Mar
-20
Ap
r-20
May
-20
Jun-
20Ju
l-20
Aug
-20
Sep
-20
Delinquency Rate By Property Type
Multifamily Lodging Industrial Office Retail
(%)
Source: S&P Global Ratings.
35
CMBS—Key Performance Metrics Cont.
0 10 20 30 40 50 60 70 80 90 100
Jul-20
Aug-20
Sep-20
(%)
July 2020 to Sept 2020 DQ Breakdown %
30 days 60 days 90+ days 120+ FCL REO Non Performing Matured Balloon
CMBS—Key Publications
36
Relevant Rating Actions
– Ratings On 96 Classes From 30 U.S. CMBS Conduit Transactions Placed On CreditWatch Negative, June 3, 2020
– Ratings On 123 Classes From 22 U.S. CMBS SASB And Large Loan Transactions Placed On CreditWatch Negative, May 6, 2020
– Various Rating Actions Taken On 24 U.S. CMBS Transactions Due To Exposure To Underperforming Retail Loans, March 20, 2020
Related Research
– U.S. CMBS Conduit Update Q3 2020: New Issue Credit Metrics Mixed And The Effects Of COVID-19 Continue To Be Monitored, Oct. 13, 2020
– U.S. CMBS Delinquency Rate Drops To 8.13% Despite The Number Of Seriously Delinquent Loans Increasing, Oct. 6, 2020
– U.S. And European CMBS COVID-19 Impact: Retail And Lodging Are The Hardest Hit, Sept. 28, 2020
– Student Housing In The COVID-19 Pandemic Era: School's Out, But For How Long?, July 9, 2020
– U.S. Lodging-Backed CMBS Bracing For The Impact Of COVID-19, March 23, 2020
– U.S. CMBS: Rent Declines Could Weaken Retail Loan Performance In The Big Apple, Feb. 18, 2020
– U.S. CMBS: Manhattan – A Tale Of The Big Apple's Three Office Markets, Feb. 10, 2020
– U.S. CMBS: Supply Gains Take A Bite Out Of Hotel Performance In The Big Apple, Jan. 29, 2020
– Shop With Caution – CMBS Mall Loans Worth Watching, Jan. 8, 2020
Non-TraditionalIldiko Szilank
Analytical Manager - Non-Traditional
+ 1 (212) 438 2614
Belinda Ghetti
Sector Lead – Non-Traditional
+ 1 (212) 438 1595
Non-Traditional—Sector Updates– Whole business securitization: On Oct. 16, we determined that our ratings on FOCUS Brands Funding LLC series 2017-1 and
2018-1 notes remain on CreditWatch negative, where they were placed on April 21, 2020. This reflects our view that the brands' recovery may be more prolonged than other restaurant brands due to their outsized exposures to malls and other travel-related locations that have been negatively affected by the COVID-19 pandemic. FOCUS manages the brands Auntie Anne's, Cinnabon, Moe's Southwest Grill, Schlotzsky's, Carvel, Jamba, and McAlister's Deli. Although the FOCUS brands have demonstrated solid growth in off-premise sales since mid-March, nearly all of the brands have relatively few locations with drive-thru capabilities, and thus did not experience the recovery that the drive-thru-focused quick service restaurants did over the past two quarters.
– Timeshare: The performance of timeshare loans backing outstanding ABS transactions rated by S&P Global Ratings continued to show signs of improvement, with delinquencies trending down to 4.15% in August from 4.18% in July and 4.71% in June. We rated five transactions post-COVID-19: HGV 2020-A , MVW 2020-1 LLC, Sierra 2020-2, HINTT 2020-A, and BXG 2020-A. Strong investor demand for new issuance, as well as the sector’s proven track record, appear to be driving down coupons on the notes, particularly at the top of the capital structure. In October, the ‘AAA (sf)’ rated tranche of BXG-2020-A priced at 1.55%, compared with 1.39% for HINTT 2020-A, 1.33% for Sierra 2020-2, 1.74% for MVW 2020-1, and 2.74% for HGV 2020-A.
– Small business: The government support package directly covered principal, interest, and fees on SBA loans for the six months ended in September. As a result, in the coming months, we expect to see an increase in delinquencies and defaults. We will continue to closely monitor the sector for longer-term credit implications, including modifications and bankruptcies, as well ascertain industry concentrations that we currently view as being more at risk.
– Aircraft: We assigned preliminary ‘A’, ‘BBB’, and ‘BB’ ratings to the class A, B, and C notes, respectively, from Business Jet Securities 2020-1 LLC. This is the first aircraft ABS transaction that we have rated since the onset of COVID-19. Upon acquisition, the assets will consist of 56 loans and leases related to 55 business jets with a weighted average age of 7.3 years. The loans and leases are made on a triple-net basis to corporates and high-net worth individuals. Unlike a typical commercial aircraft ABS lease transaction, the industry concentration among lessees and borrowers is diversified. The maximum exposure to any one industry is approximately 12.7% of the asset value. The business jets market forms a small, niche market within the aviation sector. The market offers a wide variety of business jets models based on the cabin size (light, medium, super-mid, and large) that cater todifferent customer specifications. COVID-19 resulted in a decline in utilization, but activity is increasing as travelers seek alternatives to commercial air travel. We expect a continued gradual recovery to pre-COVID-19 usage levels.
38
Source: S&P Global Ratings
Non-Traditional—Rating Actions
39
Smallbusiness Aircraft Timeshare Triple-net lease Whole business All other
Number of outstanding ratings 83 84 139 37 65 830
Ratings on CreditWatch - - - - 4 -
Ratings downgraded 2 61 - - 4 -
Ratings downgraded and remaining on CreditWatch - - - - 2 -
Ratings affirmed - 16 - 29 3 -
Rating actions (% of total) 2.4 91.7 - 78.4 20.0 -
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
(i)Non-traditional includes aircraft, triple-net lease, whole business, small business, and timeshare . Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
40
Total outstanding Rating action (no.) Rating action (%)
‘AAA’ 226 - -
‘AA’ 26 2 7.7
‘A’ 439 50 11.4
‘BBB’ 352 42 11.9
‘BB’ 51 20 39.2
‘B’ 48 4 8.3
‘CCC’ to ‘CC’ 59 3 5.1
Non-Traditional—Rating Actions By CategoryCumulative Number Of Tranches Affected By COVID-19(i)
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
41
Non-Traditional—Rating Actions Due To COVID-19
0 10 20 30 40 50 60
CCC & CC
B
BB
BBB
A
AA
AAA
By Category
Remains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
42
Non-Traditional—Severity Of COVID-19-Related Downgrades
0 5 10 15 20 25 30
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
No. of Notches By Rating Category
Source: S&P Global Ratings.
43
Non-Traditional—Key Performance Metrics
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%30-day 60-day 90-plus-day Total
Timeshare Average Delinquency Rates (%)
Source: S&P Global Ratings.
44
Non-Traditional—Key Performance Metrics Cont.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Small Business Weighted Average Delinquency Rates
30-day 60-day 90-plus-day Total
45
Non-Traditional—Key Performance Metrics Cont.
– The debt service coverage ratio (DSCR) compares collected available funds against the monthly debt service due on the notes for that period.
– Even in the trough reflected in April, the liquidity performance demonstrated by DSCR did not breach the 1.30x cash trap DSCR threshold established to divert excess proceeds to the reserve account. Liquidity in July remained steady after June and recovery reported in May.
Source: S&P Global Ratings.
1.00
1.10
1.20
1.30
1.40
1.50
1.60
1.70
1.80
1.90
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Monthly DSCR (x) Across Rated NNN Transactions
NNN WA monthly DSCR (i) DSCR cash trap/sweep threshold (i)
(i) weighted by bond balance
Non-Traditional—Key Publications
46
Relevant Rating Actions
– Ratings On FOCUS Brands Funding LLC Series 2017-1 And 2018-1 Notes Remain On CreditWatch Negative, Oct. 16, 2020
– Presale: Business Jet Securities 2020-1 LLC, Oct. 16, 2020
– Ratings On Applebee's Funding LLC/IHOP Funding LLC Notes Series 2019-1 Affirmed, Removed From CreditWatch Negative, Sept. 18, 2020
– Planet Fitness Master Issuer LLC Series 2018-1 And 2019-1 Ratings Lowered; Off CreditWatch, Sept. 18, 2020
– A Deal-By-Deal Look Behind The Aircraft And Aircraft Engine ABS Rating Actions As Of Sept. 15, 2020, Sept. 15 2020
– Various Actions Taken On Aircraft And Aircraft Engine ABS Transaction Ratings Previously On Watch, Sept. 15, 2020
– Thirty-Seven Single-Tenant Triple-Net Lease-Backed Ratings From Six Deals Affirmed; 29 Off CreditWatch, July 31, 2020
– Twenty-Nine Ratings On Six Single-Tenant Triple-Net Lease-Backed Securitizations Placed On CreditWatch Negative, May 4, 2020
– Four Ratings On Two FOCUS Brands Funding LLC Series Placed On CreditWatch Negative Due To COVID-19 Stress, April 21, 2020
– Nine Ratings On Three Whole Business Securitizations Placed On Watch Negative Due To Stress From COVID-19, March 24, 2020
Related Research
– Small Business ABS Credit Quality Hinges On Pandemic Duration And Stimulus Efficacy, April 28, 2020
– Container And Railcar Leasing ABS Risks In Light Of COVID-19, April 15, 2020
– COVID-19 Containment Measures Put U.S. Timeshare Loan Payments To The Test, April 2, 2020
– Insurance-Backed Securitizations Likely To Show Near-Term Resilience To COVID-19 , March 25, 2020
CLO
Jimmy Kobylinski
Analytical Manager - CLO
+ 1 (212) 438 6314
Stephen Anderberg
Sector Lead – CLO
+ 1 (212) 438 8991
Brian O’Keefe
Analytical Manager - CLO
+ 1 (212) 438 1513
CLO—Sector Update– After peaking in late March/early April, negative rating actions on corporate entities issuing loans in U.S. CLOs
have slowed dramatically, reflecting the first credit effects of the COVID-19 containment measures.
– Since early March, when the first COVID-19 rating actions appeared within U.S. CLO collateral pools, around one-third of U.S. BSL CLO collateral has been downgraded or placed on CreditWatch negative.
– However, a handful of companies have seen rating upgrades in recent weeks, reflecting second-quarter earnings that surprised on the upside or other factors.
– In addition, some companies have seen ‘B-’ ratings removed from CreditWatch negative, removing them from CLO ‘CCC’ buckets (which assume that ratings on CreditWatch negative have been lowered).
– The average U.S. BSL CLO 'CCC' bucket (including loans from ‘B-’ companies on CreditWatch negative) has gradually decreased and now sits at just over 9.4% of the average BSL CLO’s assets, compared to just over 4% exposure prior to COVID-19, and a peak of more than 12% back in May 2020.
– Additionally, the proportion of CLO assets from companies with ratings on CreditWatch negative has decreased, currently less than 2.3% of assets compared to a peak of more than 10% back in late April.
– Stabilizing CLO collateral pool metrics, combined with recovering loan prices, have taken much of the pressure off of CLO junior overcollateralization (O/C) tests; the average CLO junior O/C test cushion is currently 1.78%, up from their nadir of 1.13% in mid-June.
– About 600 CLO ratings were placed on CreditWatch negative due to COVID-19, representing about 14% of total U.S. CLO ratings. A large majority (about 85%) of these CreditWatch placements were on speculative-grade CLO tranches, and no ‘AAA’ CLO ratings were affected.
– Substantially all of these CreditWatch placements have been resolved, with around 22% being affirmed at their current rating level and around half seeing a one-notch downgrade.
48
Source: S&P Global Ratings
CLO—Rating Actions
49
Broadly syndicated loans Middle market
Number of outstanding ratings 3,594 501
Ratings on CreditWatch 7 -
Ratings downgraded 479 6
Ratings downgraded and remaining on CreditWatch - -
Ratings affirmed 117 3
Rating actions (% of total) 16.8 1.8
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
50
CLO—Rating Actions Due To COVID-19
0 50 100 150 200 250 300 350
CCC & CC
B
BB
BBB
A
AA
AAA
By Category
Remains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
CLO—Severity Of COVID-19-Related Downgrades
COVID-19 rating activity as of Oct. 16, 2020. S&P Global Ratings.
51
No. of Notches By Rating Category
0 50 100 150 200 250 300
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
52
Total outstanding Rating action (no.) Rating action (%)
‘AAA’ 1,032 - -
‘AA’ 861 2 0.2
‘A’ 712 18 2.5
‘BBB’ 687 105 15.3
‘BB’ 592 305 51.5
‘B’ 184 172 93.5
‘CCC’ to ‘CC’ 25 10 40.0
CLO—Rating Actions By CategoryCumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
Source: S&P Global Ratings.
53
CLO—Key Performance Metrics
Reinvesting U.S. BSL CLO Transactions: Collateral Pool Metrics
Date
Loans from companies rated: Loans from companies with ratings on:
Avg. CLO junior O/C test
cushion (%)
Average price of loans in
portfolio ($)
CLO par loss since Jan. 1 (%)
‘B-’ (%) ‘CCC’ (%) Below ‘CCC-’ (%)
Watch negative (%)
Negative outlook (%)
1-Mar-20 20.16 4.13 0.63 1.61 17.18 3.76 95.83 -0.07
29-Mar-20 23.23 8.43 0.72 9.89 20.86 3.74 80.92 -0.09
26-Apr-20 24.47 12.1 1.65 10.07 32.18 3.00 86.80 -0.17
31-May-20 25.71 12.12 1.27 9.04 35.52 1.29 90.12 -0.31
28-Jun-20 24.83 11.73 1.37 6.15 38.06 1.30 91.49 -0.37
26-Jul-20 24.33 11.08 1.66 5.73 38.08 1.46 92.61 -0.44
30-Aug-20 24.35 10.17 1.37 5.05 38.35 1.54 93.71 -0.65
27-Sep-20 24.39 9.55 1.53 3.14 38.15 1.69 94.33 -0.69
18-Oct-20 24.66 9.41 1.39 2.23 38.03 1.78 94.43 -0.70
Source: S&P Global Ratings.
54
CLO—Key Performance Metrics Cont.
0.0%5.0%
10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%
Average 'B-', CCC Category & Non-Perform Exposure
Non-perform category CCC category B-
020406080100120
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Average Junior OC Cushion During COVID & Count Of Jr OC Fails
count of fails 2015 and prior 2016 & 2017
2018 2019 average
2400
2500
2600
2700
2800
2900
3000
3100
0.0%5.0%
10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%
Average S
PW
AR
F
Ave
rage
Exp
osur
e (%
)
Average CWNEG & Outlook Neg & SPWARF
CWNEG Outlook Neg SPWARF
-0.8%
-0.7%
-0.6%
-0.5%
-0.4%
-0.3%
-0.2%
-0.1%
0.0%
Average Portfolio Par Change Since Start Of 2020
CLO—Key Publications
55
Related Research
– CLO Insights: How Middle Market CLOs Are Faring During COVID; Second Quote Book Published, Oct. 16, 2020
– Quote Book: Gleaning Sector Trends For BSL CLO Market Participants (As Of Oct. 16, 2020), Oct. 16, 2020
– Settling For Less: Covenant-Lite Loans Have Lower Recoveries, Higher Event And Pricing Risks, Oct. 13, 2020
– From Crisis To Crisis: A Lookback At Actual Recoveries And Recovery Ratings From The Great Recession To The Pandemic, Oct. 8, 2020
– S&P Global Ratings COVID-19 Related Actions On U.S. CLO Ratings, Sept. 17, 2020
– 2019 Annual Global Leveraged Loan CLO Default And Rating Transition Study, Sept. 2, 2020
– CLO Spotlight: Sector Averages Of Reinvesting U.S. BSL CLO Assets: COVID-19 Caused Significant Deterioration In Second-Quarter 2020, Aug. 31, 2020
– Credit Trends: A Round-Trip Ticket: Some Companies Downgraded To 'CCC+' Could Be Headed To 'B-' As The Economy Recovers, Aug. 7, 2020
– U.S. Leveraged Finance Q2 2020 Update: Recovery Ratings Maintain Social Distance From Credit Impact Of COVID-19 Pandemic, July 23, 2020
– COVID-19 Heat Map: Post-Crisis Credit Recovery Could Take To 2022 And Beyond For Some Sectors, June 24, 2020
– Under Stress: Assessing CLO Manager Performance During COVID-19, June 1, 2020
– The U.S. Speculative-Grade Corporate Default Rate Is Likely To Reach 12.5% By March 2021, May 28, 2020
– Acosta Inc.'s Modern Day Bankruptcy: A CLO-Distressed Funds Clash, May 7, 2020
– Scenario Analysis: How Credit Distress Due To COVID-19 Could Affect U.S. CLO Ratings, April 24, 2020
ABCP Muni Structured—Sector Update– U.S. ABCP outstandings have declined since April 2020, but we expect increased utilization rates from
existing programs as well as new conduit activity to support our projected levels of approximately $260 billion by year end. We anticipate no material impact on our ratings in the second half of 2020. (See "Inside Global ABCP,” published Oct. 8, 2020).
– The issuer credit rating on Mercy Health, Mo. was lowered to ‘A+’ from ‘AA-’ on Sept. 17, 2020, to reflect Mercy’s light financial profile, including several years of weak and uneven operating performance. This is a non-COVID-19-related rating action and resulted in two tender option bonds (TOBs) downgraded. (See “Mercy Health, Missouri,” published Sept. 17, 2020).
– The long-term rating and underlying rating (SPUR) on Philadelphia International Airport’s (PHL) revenue bonds, Hawaii State Airport System’s (HAS) revenue bonds and subordinate-lien certificates of participation (COPs), and Tampa International Airport’s (TPA) senior-lien revenue bonds were downgraded and removed from CreditWatch to reflect the expectation of PHL’s and HAS’ unpredictable anemic growth due to COVID-19. These rating actions resulted in three TOBs downgraded. (See “Philadelphia International Airport,” published Sept.18, 2020).
– Transamerica Life Insurance Co.’s issuer credit and financial strength ratings were downgraded due to stagnant business volumes, high ongoing restructuring costs and hedging effects, and intensifying competition from larger competitors. As a result, the long-term rating on Virginia Beach Development Authority, supported by investment contracts with Transamerica, was lowered on Oct. 13, 2020. This is a non-COVID-19-related rating action on Virginia Beach and resulted in one custodial receipt downgraded. (See “Virginia Beach Development Authority, Virginia,” published May 27, 2020, and “Transamerica Life Insurance Co. Various Supported Bond Series,” published Oct. 13, 2020).
– On Sept. 23, we withdrew our ratings on the short-term notes issued by Collateralized Commercial Paper Co. LLC and Collateralized Commercial Paper II Co. LLC, administered by Global Securitization Services LLC and sub-administered by JPMorgan Chase Bank N.A., at their request.
57
Source: S&P Global Ratings
ABCP Muni Structured—Rating Actions
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. VRDO--Variable-rate demand obligation. TOB--Tender option bond. Source: S&P Global Ratings.
58
ABCP VRDO TOB Repack
Number of outstanding ratings 166 3,199 3,371 123
Ratings on CreditWatch - - 44 -
Ratings downgraded - 6 213 12
Ratings downgraded and remaining on CreditWatch - - - 2
Ratings affirmed - - 19 -
Rating actions (% of total) - 0.2 8.2 11.4
Cumulative Number Of Tranches Affected By COVID-19(i)
59
Total outstanding Rating action (no.) Rating action (%)
‘AAA’ 695 - -
‘AA’ 4,721 241 5.1
‘A’ 947 41 4.3
‘BBB’ 108 1 0.9
‘BB’ 23 3 13.0
‘B’ 3 2 66.7
‘CCC’ to ‘CC’ 7 7 100.0
ABCP Muni Structured—Rating Actions By Category
Cumulative Number Of Tranches Affected By COVID-19(i)
(i)Number of outstanding ratings as of March 1, 2020. Cumulative actions since March 1, 2020. COVID-19 rating activity as of Oct. 16, 2020. Source: S&P Global Ratings.
COVID-19 rating activity as of Oct. 16, 2020. Rating actions in this sector are typically weak-linked. Source: S&P Global Ratings.
60
ABCP/Muni-Structured—Rating Actions Due To COVID-19
0 50 100 150 200 250 300
CCC & CC
B
BB
BBB
A
AA
AAA
By CategoryRemains on CreditWatch Downgraded and remains on CreditWatch Downgraded Affirmed Withdrawn
ABCP/Muni-Structured—Severity Of COVID-19-Related Downgrades
COVID-19 rating activity as of Oct. 16, 2020. Rating actions in this sector are typically weak-linked. Source: S&P Global Ratings.
61
No. of Notches By Rating Category
0 20 40 60 80 100 120 140 160 180 200
CCC & below
B
BB
BBB
A
AA
AAA
1 2 3 4 to 6 > 6
ABCP Muni Structured—Key Publications
Relevant Rating Actions
– Rating on Greystone Multifamily Mortgage Trust II, VA Certificates Lowered, Oct. 16, 2020
– Mesirow Financial Inc. Series 2018-XM0701 Receipt Ratings Lowered to ‘A+/A-1’ and ‘A+’, Oct. 9, 2020
– FMSbonds, Inc. Series 2019-XF0765 Receipt Ratings Lowered to ‘A+/A-1’ and ‘A+’, Oct. 2, 2020
– Loop 2018-XL0080, George K. Baum 2017-XG0154 Ratings Lowered to 'A+/A-1', 'A+‘, Sept. 22, 2020
– George K. Baum & Co. Series 2017-XG0159 Ratings Lowered to 'AA/A-1'. 'AA', and 'AA‘, Sept. 22, 2020
Related Research
– Inside Global ABCP: Issuance Growth Tempered As Economic Recovery Takes Shape, Oct. 8, 2020
– Take Notes: Not-For-Profit Health Care SBPA-Backed VRDOs During COVID-19 (Podcast), Aug. 27, 2020
– Checkup On Not-For-Profit Health Care SBPA-Backed VRDOs In The COVID-19 Era, Aug. 24, 2020
– TOB Ratings Recap As Of June 2020: How COVID-19 Has Affected The Secondary Derivative Market, July 31, 2020
– Credit FAQ: How COVID-19 Is Affecting ABCP, June 12, 2020
– How COVID-19 Is Affecting Bank Ratings: June 2020 Update, June 11, 2020
62
Appendix
EMEA Structured Finance
64
For similar information in EMEA structured finance, please download the most recent EMEA Surveillance Chart Book by clicking here.
Copyright © 2020 by Standard & Poor’s Financial Services LLC. All rights reserved.
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.
Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.
To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.
S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process.
S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.
Australia: S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings' credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
STANDARD & POOR'S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor's Financial Services LLC.
spglobal.com/ratings
65
