U.S. And Canada Structured Finance Surveillance Chart Book - May 4, 2021 James Manzi Tom Schopflocher John Detweiler Brenden Kugle U.S. and Canada ...
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James Manzi
U.S. And Canada Structured Finance Tom Schopflocher
John Detweiler
Surveillance Chart Book Brenden Kugle
U.S. and Canada
Structured Finance
May 4, 2021
U.S. And Canada Structured Finance Highlights
– We characterize our current SF outlook as stable to improving, especially as the vaccine rollout progresses and the overall macro-economy improves with
respect to growth and the unemployment rate, including a boost from the recently passed stimulus package (and perhaps another boost from a potential
infrastructure package) . That said, recovery is expected to be uneven, and pockets of weakness, such as retail-related CMBS, may linger. We continue to
assess performance data for loans emerging from forbearance agreements. On the issuance side, CLOs have been especially active, ABS is running ahead of
our annual forecast pace, RMBS is roughly on track to meet our initial expectations, and CMBS has been relatively less active.
– ABS: February extensions on auto loans in public ABS fell to their lowest levels since the pandemic started but on average remained higher year over year (y/y).
60-plus-day delinquencies and losses were down month over month (m/m) and y/y for both the prime and subprime auto ABS segments in February. Levels of
combined forbearance and the delinquency rate for FFELP and Private student loans have returned to pre-COVID-19 levels, while unemployment levels remain
double that of pre-COVID-19. Credit card and unsecured loan ABS performance remains largely steady. Auto lease residual values remain strong, dealer
floorplan payment rates remain robust, and commercial equipment delinquencies remain low.
– RMBS: The housing market remains robust. Prices were up 12% in January y/y based on the FHFA Purchase-Only Index and market participants generally
expect further appreciation in 2021. The number of borrowers on COVID-19-related forbearance plans has plateaued after peaking mid-2020. Similarly, we
continue to observe dampening of delinquencies/forbearances in our rated portfolio of U.S. RMBS.
– CMBS: The U.S. CMBS overall delinquency (DQ) rate decreased by 28 basis points (bps) m/m to 5.8% in March 2021, down considerably from the peak but still
well above pre-pandemic levels. Though the overall DQ rate is down, the share of delinquent loans that are delinquent 60-plus days is 88%. Q1 2021 rating
actions predominantly focused on a few single asset-single borrower and large loan transactions with concentrations of retail assets that saw appraisal
values that were materially below our expectations.
– CLO: We have seen a modest but material improvement in the credit metrics of broadly syndicated loan (BSL) CLOs, continuing a trend that began in the
second half of 2020. For issuers with loans held in U.S. BSL CLOs during the first quarter of 2021, rating upgrades have outpaced downgrades by about two to
one (71 to 35). In addition, for the first time since the onset of the pandemic more than a year ago, S&P Global Ratings recently placed many U.S. CLO ratings on
CreditWatch positive, primarily reflecting an increase in credit support following paydowns of the senior tranches. CLO issuance has been robust, especially
regarding refinancings and resets.
– Nontraditional ABS: Whole-business securitization issuers have generally stabilized performance and continue to grow. Timeshare ABS continued to show
signs of improvement, with delinquencies trending down. The rail and container transportation segments saw steady utilization well above 90%, with
container utilization particularly bolstered by high demand for limited available units amid supply dislocations still being felt from the prior year. Small
business securitization performance has generally remained stable. The COVID-19 pandemic and resulting collapse in world travel continues to pressure the
liquidity and long-term credit of airlines, whose lease payments partially secure aircraft and aircraft engine lease securitizations.
– ABCP: The Texas storm was a good example of how environmental impacts can have consequences on structured finance transactions.
– ESG: We published ESG Report Cards in various structured finance sectors. Additionally, there were 46 ESG-related rating actions taken in Q1.
– LIBOR: In April, New York State passed a LIBOR transition law, providing assistance to ‘tough legacy’ contracts.
Source: S&P Global Ratings
2U.S. Structured Finance Issuance | Through April 30, 2021
BSL—Broadly syndicated loan. MM—Middle market. Infra—Infrastructure. CRT—Credit risk transfer. SASB—Single asset single borrower. Source: S&P Global
Ratings.
3Frank Trick
Analytical Manager – ABS Secured
+1-212-438-1108
Frank.trick@spglobal.com
ABS Amy Martin
Sector Lead – ABS Secured
+1-212-438-2538
Amy.martin@spglobal.com
Kate Scanlin
Analytical Manager – ABS Unsecured
+1-212-438-2002
Kate.scanlan@spglobal.com
John Anglim
Sector Lead – ABS Unsecured
+1-212-438-2385
John.anglim@spglobal.comABS Secured—Sector Update
Auto loan
– Extensions: Extensions in February on auto loans in public ABS fell to their lowest levels since the pandemic started but on average remained
higher than year-ago levels. For the public prime pools, tracked using Reg AB II loan level data, the monthly average extension rate decreased
6 basis points (bps) to 0.40% from 0.46%, and for public subprime pools, it dropped 110 bps to 2.40% from 3.50%. The Percentage of loans in
active extension status decreased in February. The percentage of prime and public subprime loans remaining in extension status continued to
decline to 0.60% and 4.54%, respectively, from 0.78% and 6.80%. Looking at the universe of COVID-19-related extended loans from March
through February 2021, we've observed that of those prime segment loans that have been extended since March, 77.92% are in repayment
status, 15.76% have prepaid or matured, 4.03% in still in active extension status, 2.07% have charged off, and 0.22% have been repurchased.
Within the public subprime segment, of those loans that have been extended since March, 73.67% were in repayment, 10.60% remain in
active extension status, 9.00% have matured or prepaid, 6.59% have charged off, and 0.13% have been repurchased.
– Delinquencies: The prime 60-plus-day delinquency rate of 0.34% in February was stable month over month but declined from 0.40% in
February 2020. The subprime 60-plus-day delinquency rate decreased to 3.57% in February from 3.71% and 4.94% in January 2021 and
February 2020, respectively, and was the lowest February rate since 2014.
– Losses: Prime net losses decreased to 0.29% in February from 0.39% in January 2021 and 0.56% in February 2020, making it the lowest
February loss rate in our composite's history. Meanwhile, subprime net losses decreased to 4.67% in February 2021 from 5.73% in January
2021 and 8.63% in February 2020, which was the lowest February level since 2012. It also marked the first monthly decline following
increases for five consecutive months from September to January.
– Recoveries: Prime recoveries increased to 70.08% in February 2021 from 67.02% in January 2021 and 58.16% in February 2020. This was the
highest reported February level since 2012. Subprime recoveries also increased to 46.12% in February 2021 from 44.20% in January 2021 and
41.32% in February 2020. The strong month-over-month and year-over-year increases reflect improved consumer confidence that has
contributed to an increase in demand and prices for used vehicles. Furthermore, the supply constraints caused by manufacturing stoppages
last year due to the COVID-19 pandemic and stoppages this year because of semiconductor chip shortages also contributed to higher new
vehicle prices. This, in turn, supported higher used vehicle prices as well. Seasonal tax refunds and the latest round of federal stimulus
payments in January also drove demand for used vehicles, resulting in higher recovery rates across both the prime and subprime sectors.
Auto lease, dealer floorplan, and commercial equipment
– Auto lease residual values remain strong, with double digit gains since June 2020.
– Dealer floorplan payment rates also remain robust, averaging nearly 60% per month since June 2020.
– Commercial equipment delinquency rates have remained below 2% since June 2020.
Source: S&P Global Ratings
5ABS Unsecured—Sector Update
Student loan, credit card, and unsecured consumer
– Student loans: Levels of combined forbearance and delinquency rates for FFELP and Private student loans have returned to pre-
COVID-19 levels, while unemployment levels remain double that of pre-COVID-19 levels. At a more granular level, FFELP
forbearance levels are slightly elevated, and delinquencies are slightly below pre-COVID-19 levels. The normalization of
delinquency levels in FFELP is expected to improve trust cashflow levels, as the U.S. Department of Education’s 97% guarantee
(i.e., prepayment of the loan) is triggered at 270 days delinquency. While certain unemployment levels are approximately twice
that of pre-COVID-19 levels, it is possible that combined delinquency and forbearance levels are at pre-COVID-19 levels due to
COVID-19-related government support for borrowers and that forbearance use was initially granted/elected to allow borrowers
payment flexibility at the beginning of the pandemic when the near-term impact was more uncertain.
– Credit cards: Performance remains largely steady, benefiting from government assistances programs, collateral credit quality,
and originators' COVID-19 forbearance programs. Although the percent of change month over month increased in February, the
absolute/actual delinquency and loss rates remain below pre-COVID-19 levels at historical lows. Current loss rates are well
below our base-case assumptions. Trust receivables continue to exhibit a declining trend due to the overall decrease in consumer
spending and some sponsors’ removal of receivables from the trusts to optimize funding sources. We expect stable to marginal
deterioration in performance trends for 2021 as there remains uncertainty about the evolution of the COVID-19 pandemic and its
economic effects. 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.
– Unsecured: Unsecured consumer ABS continued to show stable credit performance year to date for 2021. Payment deferments
have generally normalized to pre-pandemic levels. Rising delinquencies and losses have yet to materialize in our rated
transactions, indicating that borrowers have resumed making loan payments. Nonetheless, given its relatively limited
performance history in comparison to more-established ABS sectors, there is some uncertainty as to how the unsecured
consumer ABS sector will fare through the recovery. We expect the recent fiscal stimulus to bolster collateral performance across
the consumer-related sectors through the third quarter of 2021 and generally expect subprime and nonprime obligors to be most
vulnerable to default following the termination of enhanced government support programs and issuer-specific deferment
options. We believe our base-case and stressed assumptions adequately capture the risks to the receivables, though we
continue to monitor performance and update our assumptions as needed in response to the evolving recovery.
Source: S&P Global Ratings
6U.S. Secured ABS—Key Performance Metrics
Prime And Subprime Auto Loan Extensions And Auto Lease Residual Value Losses And Gains
Losses
Prime ext Subprime ext 1-month avg 3-month avg 6-month avg 12-month avg
Prime losses (right axis) Subprime losses (right axis)
14.0% 10.0% 25.0%
12.0% 20.0%
8.0%
10.0%
15.0%
8.0% 6.0%
10.0%
6.0% 4.0%
4.0% 5.0%
2.0% 0.0%
2.0%
0.0% 0.0% -5.0%
-10.0%
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21
Dealer Floorplan ABS Performance Equipment ABS CNL And Delinquencies
Pool balance (bil. $) (left axis) Principal collections (bil. $) (left axis)
CNL % 60+ delinquencies %
Monthly payment rate (right axis) 3-mo avg payment rate (right axis)
2.5%
$50.0 70.0%
60.0% 2.0%
$40.0
50.0%
$30.0 1.5%
40.0%
$20.0 30.0% 1.0%
20.0%
$10.0 0.5%
10.0%
$0.0 0.0% 0.0%
Collection period
Source: S&P Global Ratings.
7U.S. Unsecured ABS—Key Performance Metrics
Unemployment Levels By School Type Vs
Forbearance And Total Delinquencies(i)
35.0% 16.0% Bachelor's degree and higher
30.0% 14.0%
Some college or associate degree
25.0% 12.0%
FFELP Forbearance
10.0%
20.0% FFELP Total Delinquency
8.0%
15.0% FFELP ( Delinq + Forbearance )
6.0%
10.0% 4.0% Private ( Delinq + Forbearance )
5.0% 2.0%
0.0% 0.0%
U.S. Credit Cards Bank Cards — Charge-Off Rate (% Change) U.S. Credit Cards Bank Cards — Average 60+ Day Delinquency
Rate (% Change)
CAD US Bank US Retail CAD US Bank US Retail
10.0%
10.0%
5.0%
5.0%
0.0%
0.0%
-5.0% -5.0%
-10.0% -10.0%
-15.0% -15.0%
-20.0% -20.0%
(i)Represents 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.
8ABS—Key Publications
Related Research
– SF Credit Brief: Loan Deferrals in U.S. Auto Loan ABS Reach Their Lowest Levels Since COVID-19 Began; Deeper Dive Into Charge-Offs
On Extended Loans, April 27, 2021
– U.S. Auto Loan ABS Tracker: February 2021 Performance, April13, 2021
– Canadian Credit Card Quality Index: Monthly Performance--February 2021, April 5, 2021
– U.S. Credit Card Quality Index: Monthly Performance--February 2021, April 1, 2021
– SF Credit Brief: January Fiscal Stimulus Led To Lower Loan Deferrals In U.S. Auto Loan ABS, March 10, 2021
– SF Credit Brief: The Majority Of December's Delinquent Loans In U.S. Auto Loan ABS Had Received A COVID-19-Related Extension, Feb.
23, 2021
– U.S. Auto Loan ABS Is Navigating Through COVID-19 With Better-Than-Expected Performance, Feb. 10, 2021
– SF Credit Brief: What The Federal Student Loan Forbearance Extension Could Mean For FFELP Student Loan ABS, Feb. 10, 2021
– 2021 U.S. And Canadian Credit Card ABS Review, Jan. 29, 2021
9James Taylor
Analytical Manager – RMBS
+1-212-438-6067
james.taylor@spglobal.com
RMBS Vanessa Purwin
Analytical Manager – RMBS
+1-212-438-0455
vanessa.purwin@spglobal.com
Jeremy Schneider
Sector Lead – RMBS
+1-212-438-5230
jeremy.schneider@spglobal.comRMBS—Sector Update
– The housing market remains robust year-to-date. Prices were up 12% in January from the prior year
based on the FHFA Purchase-Only Index, and market participants generally expect several points of
appreciation for 2021. While refinance activity has fallen as interest rates have increased, overall
volumes remain high thanks to healthy purchase activity. The Mortgage Bankers Association (MBA)
projects a strong year for originations at around $3.28 trillion.
– The number of borrowers on COVID-19-related forbearance plans has plateaued after peaking mid-2020.
The MBA’s Forbearance and Call Volume Survey reported forbearance levels of 4.50% as of April 11, 2021,
with the share of GSE loans in forbearance at 2.55%, while the private label securities share was 8.34% .
– Similarly, we continue to observe dampening of delinquencies/forbearances in our rated portfolio of U.S.
RMBS. March securitization remittance reports showed 30+ day delinquencies levels of 2.7%, 4.6%, and
10.3% for prime jumbo 2.0, credit risk transfer (CRT), and non-qualified mortgage (non-QM), respectively.
– We assigned ratings to 18 new issue RMBS across multiple collateral types (prime/non-QM/CRT) during
1Q 2021 (see RMBS – Key Publications for recent presales).
– On April 2, 2021, a review of 22 CRT transactions resulted in 474 upgrades (including 423 modified and
combinable REMICs), 70 affirmations, and 12 discontinuances. The upgrades reflected an average rating
movement of 3.8 notches primarily driven by deleveraging due to high prepayment speeds (see RMBS –
Key Publications).
Source: S&P Global Ratings
11RMBS—Key Performance Metrics
Prime 2.0 Credit Risk Transfer
30+ days DQ 60+ days DQ CPR 30+ days DQ 60+ days DQ CPR
4.0% 51.0%
7.0% 46.0%
3.5% 50.0%
6.0% 45.0%
3.0%
49.0% 5.0% 44.0%
2.5%
48.0% 4.0% 43.0%
2.0%
47.0% 3.0% 42.0%
1.5%
46.0% 2.0% 41.0%
1.0%
0.5% 45.0% 1.0% 40.0%
44.0% 39.0%
Oct-2020 Nov-2020 Dec-2020 Jan-2021 Feb-2021 Mar-2021 Oct-2020 Nov-2020 Dec-2020 Jan-2021 Feb-2021 Mar-2021
Non-QM Legacy 30+ DQ
Prime pre-2005 Prime 2005-08 Alt-A pre-2005
30+ days DQ 60+ days DQ CPR Alt-A 2005-08 Neg-am 2005-08 Sub-prime pre-2005
Sub-prime 2005-08
16.0% 35.0% 24.0%
14.0% 30.0%
22.0%
12.0%
25.0%
10.0% 20.0%
20.0%
8.0% 18.0%
15.0%
6.0%
16.0%
10.0%
4.0%
5.0% 14.0%
2.0%
12.0%
Oct-2020 Nov-2020 Dec-2020 Jan-2021 Feb-2021 Mar-2021 Oct-2020 Nov-2020 Dec-2020 Jan-2021 Feb-2021 Mar-2021
DQ—Delinquent. CPR—Conditional prepayment rate. Non-QM—Non-qualified mortgage. Source: S&P Global Ratings.
12RMBS—Key Publications
Criteria/Guidance
– Guidance On Methodology And Assumptions For Rating U.S. RMBS Issued 2009 And Later Updated, Dec. 8, 2020
Related Research
– Credit FAQ: How The New Qualified Mortgage Rule Could Impact U.S. RMBS, March 1, 2021
– U.S. Residential Mortgage And Housing Outlook: Positive Momentum Carries Into 2021, Jan. 22, 2021
– U.S. RMBS--After The Credit Risk Transfer Forbearance Plateau, Oct. 23, 2020
Rating Actions
– Presale: PRMI Securitization Trust 2021-1, April 16, 2021
– Presale: Freddie Mac STACR REMIC Trust 2021-DNA3, April 15, 2021
– Presale: Verus Securitization Trust 2021-2, April 9, 2021
– Presale: MFA 2021-NQM1 Trust, April 9, 2021
– Presale: PSMC 2021-1 Trust, April 5, 2021
– Presale: OBX 2021-NQM1, March 16, 2021
– Presale: Verus Securitization Trust 2021-R2, March 11, 2021
– Presale: Wells Fargo Mortgage Backed Securities Trust 2021-1, March 8, 2021
13Ryan Butler
Analytical Manager – CMBS
+1-212-438-2122
ryan.butler@spglobal.com
CMBS James Digney
Analytical Manager – CMBS
+1-212-438-1832
james.digney@spglobal.com
Senay Dawit
Sector Lead – CMBS
+1-212-438-0132
Senay.dawit@spglobal.comCMBS—Sector Update
– Issuance: There was roughly $15 billion in first-quarter 2021 new issuance ex-commercial real estate CLOs, with a
60/40 split between single asset-single borrower and conduit. Our full-year forecast remains at $70 billion.
– Delinquencies: The U.S. CMBS overall delinquency (DQ) rate decreased by 28 basis points (bps) month over month to
5.8% in March 2021. 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
delinquent loans that are delinquent 60-plus days is 88%, as grace period levels sharply receded over the last couple
of months. Furthermore, the loans that are delinquent 120-plus-days account for almost 41% of all delinquent loans.
– The DQ rates for three of the major property types—retail, lodging, and industrial—decreased by 95 bps, 41 bps, and
8 bps, respectively. Meanwhile, the DQ rates for multifamily and office property types increased by 26 bps and 13 bps,
respectively.
– The first-quarter 2021 rating actions predominantly focused on a few single asset-single borrower and large loan
transactions with concentrations of retail assets that saw delayed release of 2020 appraisal values that were
materially below our expectations.
– In addition to the ongoing challenges facing retail and lodging, questions have been raised on the future of the office,
especially in densely populated cities such as New York, Boston, and San Francisco. The COVID-19 pandemic only
accelerated the work-from-home trend that began prior to the crisis. We will continue to monitor office demand,
renewal rates, submarket vacancy, and availability rates, as well as leasing activity in the various markets, in the next
few years.
– While not an immediate concern, we have observed some material performance and occupancy declines in several
large NYC multifamily loans due mainly to COVID-19. With the vaccine rollouts and gradual reopening of the economy,
we expect this displacement to be temporary and will continue to monitor the performance trends in the next few
quarters.
– Forbearance: As initial forbearance periods burn off for various retail and lodging loans, servicers continue to work
with borrowers seeking additional forbearance, including longer-term options like loan modifications, until property
net cash flows rebound.
15CMBS—Key Performance Metrics
DQ Rate And Balance DQ Rate By Property Type
DQ balance DQ rate Multifamily Lodging Industrial Office Retail
10.0% $60.0 25.0%
9.0%
$50.0 20.0%
8.0%
7.0%
$40.0
6.0% 15.0%
5.0% $30.0
4.0% 10.0%
$20.0
3.0%
2.0% 5.0%
$10.0
1.0%
0.0% $- 0.0%
Jul-20
Jan-20
May-20
Aug-20
Feb-20
Mar-20
Apr-20
Jun-20
Sep-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Oct-20
Jul-20
Jan-20
May-20
Feb-20
Mar-20
Aug-20
Mar-21
Apr-20
Jun-20
Sep-20
Nov-20
Dec-20
Jan-21
Feb-21
Oct-20
July 2020 To March 2021 DQ Breakdown %
30 days 60 days 90+ days 120+ FCL REO Non-performing matured balloon
Mar-21
Feb-21
Jan-21
Dec-20
Nov-20
Oct-20
Sep-20
Aug-20
Jul-20
0 10 20 30 40 50 60 70 80 90 100
DQ—Delinquency. FCL—Foreclosure. REO—Real estate-owned. Source: S&P Global Ratings.
16CMBS—Key Publications
Criteria/Guidance
– Global CMBS Property Evaluation Methodology Guidance, Including Retail Mall Cap Rate Assumptions, Updated, Dec.
4, 2020
Related Research
– U.S. Conduit CMBS Update Q1 2021: Signs of Improvement, April 14, 2021
– U.S. CMBS Downward Delinquency Trend Continues, But The Overall Rate Is Still 440 Bps Higher Than Pre-COVID-19
Levels, April 7, 2021
– ESG Industry Report Card: Commercial Mortgage-Backed Securities, March 31, 2021
– U.S. CMBS Delinquency Rate Continues To Decline As Forbearance Increase And Seriously Delinquent Loan Levels
Remain High, March 8, 2021
– Damage Limitation: Using Enhanced Physical Climate Risk Analytics In The U.S. CMBS Sector, Feb. 19, 2021
– Remote Working Is Testing U.S. Office Landlords' Credit Quality, Feb. 11, 2021
– U.S. CMBS Conduit Update Q4 2020: $70 Billion In New Issuance Expected In 2021, Though Pockets Of Distress Exist,
Jan. 19, 2021
– The U.S. Lodging Sector Faces A Challenging Recovery From The Effects Of The COVID-19 Pandemic, Dec. 7, 2020
– U.S. And European CMBS COVID-19 Impact: Retail And Lodging Are The Hardest Hit, Sept. 28, 2020
17Non-Traditional
Ildiko Szilank Belinda Ghetti
Analytical Manager – Sector Lead – Non-Traditional
Non-Traditional +1-212-438-1595
+1-212-438-2614 belinda.ghetti@spglobal.com
ildiko.szilank@spglobal.comNon-Traditional—Sector Update
– Whole business securitization (WBS): In the first quarter of 2021, WBS issuers have generally stabilized performance and continued to grow. We have
observed that most concepts demonstrated their agility to adjust to dramatic changes and were able to show resilience under new conditions. For
example, the drive-through concept contributed significantly to sales volumes and profits during the height of the pandemic. Looking forward, we
believe there is still some level of uncertainty regarding labor markets and permanent changes in consumer behavior. Specifically, we are monitoring
the potential impact from the extension of unemployment benefits, ongoing COVID-19 concerns, continued need for at-home care, and the reopening
of dining rooms, among others. The car and home maintenance concepts have been performing in line with expectations, and we don’t anticipate
significant volatility in these sectors in the near term.
– 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 3.08% in February 2021 from a high of 5.09% in May 2020. We had increased our base-case
default assumptions in the second quarter of 2020 to address the strain in the lodging sector on account of COVID-19 containment measures and the
weakened U.S. economic outlook. Since then, we have rated five transactions in 2020 and two transactions in Q1 2021 from frequent issuers. With
recovery driven by fast-paced vaccinations and a resurgence in leisure travel, especially to drive-to timeshare destinations, we believe the sector will
have generally stable performance in 2021.
– Railcar and container: The rail and container transportation segments saw steady utilization well above 90%, with container utilization particularly
bolstered by high demand for limited available units amid supply dislocations still being felt from the prior year. This quarter alone, we’ve seen five
new container issuances alongside three new series in the railcar segment. We expect performances for the container sector to remain strong through
the end of the year as availability for units slowly picks up and demand for shipping remains high. For railcar, we expect performances to remain
stable; however, some weakness has been observed with respect to cars and lessees related to the oil and gas sectors.
– Small business: Although the COVID-19 pandemic and the related government mandated closures on businesses and social distancing measures
severely impacted many small businesses, securitization performance has generally remained stable. Securitizations collateralized by SBA 7(a) loans
benefitted directly from the government support package, which covered principal, interest, and fees on Small Business Administration loans starting
from April 2020. We note a brief spike in delinquencies during Q4 2020, which has since stabilized. We are monitoring performance on these loans as
payments are made after the government incentives expire. Thus far, there has been no significant impact to date on SBA 7(a)-backed transactions.
– Aircraft: The COVID-19 pandemic and resulting collapse in world travel continues to pressure the liquidity and long-term credit of airlines whose
lease payments partially secure aircraft and aircraft engine lease securitizations. A decline in rental collections due to ongoing rent deferrals and
modified lease agreements on a power-by-hour basis have caused many transactions to fall behind in payment of scheduled principal. Debt service
coverage ratios, which generally include deferred principal in the denominator of the calculation, have fallen below 1.15x in many transactions,
triggering an early amortization event. As of the February 2021 payment date, none of the transactions rated by S&P Global Ratings have drawn on
their liquidity facilities which typically cover interest on the senior notes, among other things. We continue to monitor available amounts for payment
of senior interest on the notes.
Source: S&P Global Ratings
19Non-Traditional—Key Performance Metrics
Timeshare WA Delinquency Rates (%) Small Business WA Delinquency Rates
30-day 60-day 90-plus-day Total 30-day 60-day 90-plus-day Total
6.0% 16.0%
14.0%
5.0%
12.0%
4.0%
10.0%
3.0% 8.0%
2.0% 6.0%
4.0%
1.0%
2.0%
0.0% 0.0%
Jul-20
Jan-20
May-20
Aug-20
Jan-21
Feb-20
Mar-20
Apr-20
Jun-20
Sep-20
Nov-20
Dec-20
Feb-21
Oct-20
Monthly DSCR (x) Across Rated NNN Transactions(i) Utilization Of Transportation Assets(i)
NNN WA monthly DSCR DSCR Cash trap/sweep threshold Railcar Container
1.90 100.0%
1.80
1.70 95.0%
1.60
1.50 90.0%
1.40
1.30
1.20 85.0%
1.10
1.00 80.0%
(i)Weighted by bond balance. WA—Weighted average. DSCR—Debt service coverage ratio. NNN—Triple-net lease. Source: S&P Global Ratings.
20Non-Traditional—Key Publications
Related Research
– Rating Considerations For New Aircraft ABS Securitizations, March 16, 2021
– Various Rating Actions Taken On 16 Tobacco Settlement-Backed Trust Transactions, Feb. 25, 2021
– Harbour Aircraft Investments Ltd. Ratings Placed On CreditWatch Negative, Feb. 25, 2021
– 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
– 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, April15, 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
21Jimmy Kobylinski
CLO
Analytical Manager – CLO
+1-212-438-6314
jimmy.kobylinski@spglobal.com
Stephen Anderberg
Sector Lead – CLO
+1-212-438-8991
Stephen.anderberg@spglobal.comCLO—Sector Update
– As the corporate loan market continues to recover from the credit effects of the COVID-19
pandemic, we have seen a modest but material improvement in the credit metrics of broadly
syndicated loan (BSL) CLOs, continuing a trend that began in the second half of 2020.
– For issuers with loans held in U.S. BSL CLOs during the first quarter of 2021, rating upgrades
have outpaced downgrades about two to one (71 to 35). Additionally, a handful of loan issuers
have recently seen their ratings raised out of the CCC category.
– Collateral managers have made trades over the past month, increasing CLO portfolio turnover
ahead of the first quarter payment date in April.
– Par increased for many CLOs during the first quarter for the first time since the onset of the
pandemic more than a year ago. Average par relative to the par balance at the start of 2021 has
increased by 1 basis point (bp), reducing the year-to-date par loss to negative 15 bps from the
negative 16 bps reported last month.
– For the first time since the onset of the pandemic more than a year ago, S&P Global Ratings
placed many U.S. CLO ratings on CreditWatch positive (see “54 CLO Ratings On CreditWatch
Positive After Senior Note Paydowns; Three Placed On CreditWatch Negative,” published on April
16th, 2021). The 54 CreditWatch placements primarily reflected an increase in credit support
following paydowns of the senior tranches.
– Finally, CLO issuance in 2021 has been robust, to say the least. Through April 16, the U.S. CLO
market has already seen $43.3 billion of new issue CLOs price (versus $91.8 billion for full-year
2020), and $86.9 billion of CLO refinancings and resets, which is approaching three times the
$33.5 billion total in full year 2020.
Source: S&P Global Ratings
23CLO—Key Performance Metrics
Average 'B-', CCC Category, And Non-Perform Exposure Average Junior OC Cushion
Non-perform category CCC category B- 4.0%
40.0%
35.0%
30.0%
25.0%
3.0%
20.0%
15.0%
10.0%
5.0%
0.0% 2.0%
Jan-21 Feb-21 Mar-21 Apr-21 Jan-21 Feb-21 Mar-21 Apr-21
Average CWNEG & Outlook Neg, And SPWARF Average Portfolio Par Change Since Start Of 2020
CWNEG Outlook Neg SPWARF 0.0%
40.0% 2810
35.0% 2800
30.0% 2790
Average Exposure
Average SPWARF
25.0% 2780
-0.1%
20.0% 2770
15.0% 2760
10.0% 2750
5.0% 2740
0.0% 2730 -0.2%
Jan-21 Feb-21 Mar-21 Apr-21 Jan-21 Feb-21 Mar-21 Apr-21
O/C—Overcollateralization. CWNEG—CreditWatch Negative. SPWARF—S&P Global Ratings weighted average rating factor. Source: S&P Global Ratings.
24CLO—New Issuance Deal Count, 2018-Q1 2021
U.S. CLO Issuance Amount by Year, 2018 - 2021 YTD
New issue Resets and refis
Year Bil. $ Number Bil. $ Number
2018 $128.865 241 $155.032 314
2019 $118.317 246 $43.168 92
2020 $91.760 216 $33.455 119
2021 (through 4/16) $43.327 90 $86.940 195
New issue CLOs (#) Reset and refi CLOs (#)
120
100
80
60
40
20
0
May-18
Aug-18
May-19
Aug-19
May-20
Aug-20
Jun-18
Sep-18
Oct-18
Nov-18
Jun-19
Sep-19
Oct-19
Nov-19
Jun-20
Sep-20
Oct-20
Nov-20
Jan-18
Feb-18
Mar-18
Jul-18
Jul-19
Jan-21
Apr-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
Dec-19
Jan-20
Feb-20
Mar-20
Jul-20
Apr-20
Dec-20
Feb-21
Mar-21
Source: S&P Global Ratings.
25CLO—Key Publications
Related Research
– SF Credit Brief: CLO Insights 2021 U.S. BSL Index: Credit Metrics Have Improved For Three Quarters, April 26, 2021
– U.S. BSL CLO Top Obligors And Industries Report: First-Quarter 2021, April 26, 2021
– 54 CLO Ratings On CreditWatch Positive After Senior Note Paydowns; Three Placed On CreditWatch Negative, April 16, 2021
– SF Credit Brief: CLO Insights 2021 BSL Index: How Collateral Pools Changed One Year After COVID-19 Lockdowns Began, March
22, 2021
– CLO Spotlight: Industry Averages Of Reinvesting U.S. BSL CLO Assets: Fourth-Quarter 2020, March17, 2021
– SF Credit Brief: Introducing The CLO Insights 2021 U.S. MM Index, March 11, 2021
– S&P Global Ratings Webinar Replay: Middle-Market CLOs: COVID-19 And The Road Forward, March 3, 2021
– Scenario Analysis: How Resilient Are Middle-Market CLO Ratings?, Feb. 26, 2021
– SF Credit Brief: Introducing The CLO Insights 2021 U.S. BSL Index, Feb. 9, 2021
– CLO Spotlight: How COVID-19 Affected U.S. Middle-Market And BSL CLO Performance In 2020, Feb. 4, 2021
– CLO Spotlight: U.S. CLO Insights Index 2020 Review: Coping With COVID-19, Jan. 14, 2021
– CLO Spotlight: Fourth-Quarter CDO Monitor Benchmarks Reveal Relative Credit Quality And Diversity Of CLO Portfolios, Jan. 12,
2021
– The Most Widely Referenced Corporate Obligors In Rated U.S. BSL CLOs: Fourth-Quarter 2020, Jan. 7, 2021
– Scenario Analysis: How Credit Distress Due To COVID-19 Could Affect U.S. CLO Ratings, April 24, 2020
26ABCP Muni Structured
Cathy de la Torre
Analytical Manager
+1-212-438-0502
cathy.de.la.torre@spglobal.comABCP Muni Structured—Sector Update
– ABCP Trade Receivables—ESG: Trade receivables are typically revolving, short-term assets and used for capital-market
funding for middle-market clients' working capital needs. Regulated utilities represent a large percentage of trade
transactions in ABCP conduits. During 2020, a larger percentage of the North American regulated utility industry had a
negative outlook or ratings on CreditWatch with negative implications driven by high capital spending and the effects of
various environmental, social, and governance (ESG) factors. While the credit quality for the industry weakened, the
weighted average loss coverage multiples provided by credit enhancement are more than sufficient to cover the loss
performance in ABCP transactions.
– TOBs/VRDOs—ESG: The Texas storm is a good example of how environmental impacts can have consequences on
structured finance transactions. In March, the long-term ratings on two tender-option bond (TOB) trusts were downgraded
in relation to the San Antonio, Texas, electric and gas systems. The Texas storm also acted as a catalyst for the National
Rural Utilities Cooperative Finance Cooperation, which resulted in a downgrade and discontinuance on the ratings on two
variable-rate demand obligation (VRDO) guarantors. As expectations arise through the ESG initiative, it is likely that more
environment-related rating actions may arise.
– TOBs—PF Transportation Sector: As of April 14, 2021, 78 linked rating actions occurred in relation to the U.S. public
finance sectors. The transportation sector, which makes up 17% of the TOB portfolio, effected 78 unique TOB ratings,
raising the outlook from negative to stable. The American Rescue Plan (ARP), enacted March 11, 2021, has had positive
credit effects on numerous U.S. public finance issuers through rating upgrades or outlooks revised from negative to stable.
At the end of 2020, the PF transportation sector comprised the majority of new issuance TOBs. As the ARP and other
federal aids continue to affect the credit stability in the PF transportation sector, the issuance of PF transportation-
related TOBs may continue increasing as rating actions decline in the following months.
– Bank impact—Credit Suisse: S&P Global Ratings currently rates 50 ABCP program issuances. Of these programs, Credit
Suisse AG and related entities provide liquidity and credit support to six ABCP program issuances. On March 30, 2021,
Credit Suisse’s outlook was revised to negative from stable, while ‘A+/A-1’ ratings were affirmed for Credit Suisse AG and
other core operating subsidiaries. Since an outlook assesses the potential direction of a long-term credit rating over the
intermediate term (generally up to two years for investment-grade entities), we do not expect any short-term impact on the
ratings of the six ABCP program issuances. Furthermore, a one-notch downgrade will continue to support the ‘A-1’ short
term rating.
Source: S&P Global Ratings
28ABCP/Muni Structured—Key Performance Metrics
ABCP Investment vs Committed Amounts
Investment amount Committed amount – ABCP issuance continues to
350,000 remain stable, as reflected in
the steady ABCP net
US$ Millions
300,000
investment and commitment
250,000 levels.
200,000
– For partially supported
150,000 programs, asset level ABCP
100,000 net investment composition
50,000 also continues to remain
0 May-20
stable
Aug-20
Jun-20
Sep-20
Oct-20
Nov-20
Jan-20
Feb-20
Mar-20
Jul-20
Apr-20
Dec-20
Jan-21
– We expect this trend to
remain stable.
Investment Amount Of ABCP Programs Asset Type Investment Of Partially Supported Programs
5%
Partially supported Fully supported(i) 5%
Autos
5%
Student loans
16% 5%
Credit cards
Equipment and commercial other(ii)
13% 55% Dealer floorplan
84% Trade receivables
Consumer-other
12% (ii)Commercial other includes commercial
(i)Fully supported transactions (where exposure is directly related to
fleet leases, future flow, CDO, insurance
premium, and manufactured housing.
Source: S&P Global RatingsABCP/Muni Structured—Key Performance Metrics
Rating Actions Nov. 2020-Apr. 2021
Class Rating Action LOC Counterparty RRS Asset Upgrade/Downgrade Ratio Q1 2021 Upgrade/Downgrade Prev. 6 Mo.
60 Upgrade Downgrade Upgrade Downgrade
50
Up/Down
40 9% 9%
30 36%
20
10 64%
0
Downgrade
Downgrade & Removal of
Placement on CW Pos
Downgrade
Placement on CW Neg
Downgrade & Removal
Removal of CW Neg
Downgrade
Downgrade
Placement on CW Neg
Upgrade
Upgrade
Up/Down
64%
from CW Neg
91%
CW Neg
Nov 2020 Jan 2021 Feb 2021 March 2021 April 2021
Q1 Comparison: External Support Substitutions Y/Y VRDO New Issuance By Deal Count
Letter of Credit Standby Liquidity 2021 2020
5 14
12
4
10
3 8
6
2
4
1
2
0 0
2019 2020 2021 Jan Feb March
LOC—Letter of credit. RRS—Reference repackaged securities. CW—CreditWatch. Y/Y—Year over year. VRDO—Variable-rate demand obligation. Source: S&P
Global Ratings.
30ABCP Muni Structured—Key Publications
Related Research
– Inside Global ABCP: Economic Recovery To Underpin Modest Issuance And Stable Ratings, April 28,
2021
– Tender Option Bond Ratings Recap As of January 2021: Overall Steady New Issuance Levels in 2020
Despite COVID-19, Jan. 29, 2021
– Inside Global ABCP: Issuance Growth Tempered As Economic Recovery Takes Shape, Oct. 8, 2020
31LIBOR
John Detweiler
Senior Director
+1-212-438-7319
john.detweiler@spglobal.comLIBOR Transition
– Recent Market Developments
– The U.K. Financial Conduct Authority (FCA) announced the final LIBOR cessation dates on March 5, 2021;
the spread adjustment for each LIBOR setting will be added to SOFR published by Bloomberg. One-month
= 0.11%; Three-month = 0.26%
– The Alternative Reference Rates Committee (ARRC) called the announcement a “benchmark transition
event.”
– The ARRC indicated that there will likely be no term SOFR rate by June or the end of 2021, but the CME
Group launched a term SOFR rate on April 22.
– New York passed a law on April 6 to assist “tough legacy” contracts with LIBOR .
– Federal legislation was also recently introduced to Congress to minimize litigation.
– U.S. regulators will provide guidance for banks to stop using dollar LIBOR by December 2021.
– What To Watch For in 2021
– The FCA will publish terms for how to use “synthetic LIBOR” for sterling and yen settings.
– EMEA and Japan will begin their transition in 2021.
– Credit-sensitive rates and what the market will acceptance be (e.g., Ameribor, Bloomberg’s BSBY, ICE Bank
Yield Index, Markit Credit Rate, etc.) will emerge.
– The CLO market is more likely to adopt credit-sensitive rates in assets than other sectors.
– SOFR securitizations may be seen in the second half of 2021.
– Take Notes: The Impact Of The FCA's Official LIBOR Cessation Dates On Structured Finance
Source: S&P Global Ratings
33Kate Scanlin
ESG Analytical Manager – ABS
Unsecured
+1-212-438-2002
Kate.scanlin@spglobal.com
Matthew Mitchell
Analytical Manager – EMEA SF
+44-20-7176-8581
Matthew.mitchell@spglobal.comESG—Report Cards
– The ESG Pulse: A Spotlight On Structured Finance
– ESG Industry Report Cards For Structured Finance Published
– ESG Industry Report Card: Auto Asset-Backed Securities
– ESG Industry Report Card: Student Loan Asset-Backed Securities
– ESG Industry Report Card: Collateralized Loan Obligations
– ESG Industry Report Card: Commercial Mortgage-Backed Securities
– ESG Industry Report Card: Credit Card Asset-Backed Securities
– ESG Industry Report Card: Residential Mortgage-Backed Securities
Source: S&P Global Ratings
35ESG—Related Rating Actions YTD 2021
CreditWatch Negative Downgrade
CMBS
ABCP/muni structured
Non-traditional ABS
0 5 10 15 20 25 30 35
Non-traditional ABCP/muni
CMBS
ABS structured
Health and safety 34 3 -
Greenhouse gas
- - 6
emissions
Other environmental
- - 3
factors
Total 34 3 9
Source: S&P Global Ratings
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