Click here to sign up to the mailing list

‍

European holidays are the envy of the world. For schoolchildren in countries like Italy, Spain, Greece and many of the Baltics, they’re accustomed to 12 week summer breaks. While the historically Protestant nations like Germany, Holland and the UK are more in the 6-week bracket.

‍

Meanwhile for workers, 2-3 weeks off in one stretch is normal, coinciding with public holidays like Ferragosto, which signifies a time of rest and relaxation after the harvest. At the other extreme, in America, paid time off work is still seen as a luxury. And Europe’s time by the beach is often chastised as a major factor holding back its economies.

‍

So it was fitting perhaps, that Blackstone – the powerhouse of American private equity, provided the first bit of action in European ABS for 3 weeks with its fully private £1.625bn UK CMBS, Caister Finance.

‍

Although it is somewhat ironic that the only way to stir the European market is through selling a CMBS backed by 39 holiday parks and the HQ of Haven Group!

‍

Elsewhere, I regret to inform you that even Euro CLOs look to be slowing down. There were just two new issues, from Onex and Invesco, while Five Arrows priced a reset of its 2018 reset, Contego CLO III.

‍

And finally, I urge you once more to fill out the Freshly Squeezed Summer Survey. It takes two minutes, and I’ll be collating the results this week!

‍

Complete the Freshly Squeezed Summer Survey here!

‍

Bourne to the rescue

So, to the most exciting bit of news we’ve had this month, Caister Finance.

‍

Blackstone is the sponsor of the £1.625bn CMBS, which is secured against a single loan backed by 39 holiday parks and the Haven Group’s headquarters. This is all owned by Blackstone after it purchased Bourne Leisure in 2021.

‍

Outside of the CMBS, there are other senior loans, taking the debt total to £2.856bn versus a CBRE valuation of £3.87bn giving it a cumulative LTV (CLTV) of 74%.

‍

The CMBS structure is quite unusual, with a mixture of CMBS notes and loan notes across tranches A-D.

‍

Then, the BB-rated E tranche is quite chunky at £326.6m, which is about 20% of the capital stack. This is designed to absorb a wide risk slice, which you can see on the big jump between the BBB- rated D tranche and the E tranche. Note to value (NTV) goes from 63.7% to 83.1%.

‍

Unlike the tranches above it, the E tranche has no loan split, which is probably because it’s easier to place that way rather than having multiple thinner sub-BB tranches or loan splits. But at the same time, it keeps the D tranche at BBB- with the required subordination.

‍

The loan splits from A-D are most likely due to investor preference around capital requirements. Banks might get lower risk-weights, while insurers may get favourable matching-adjustment treatment.

‍

And the final point to note is that the bonds have a 5-year WAL, while the loans are for an initial 2-year term + four 1-year extension options.

‍

According to Concept ABS, Blackstone is retaining around 54% of the senior loan parts, while DBRS said the Class A1s have been taken by a single investor.

‍

‍

Final Word

‍

That’s all from me this week, but while I have you I will once again call out the Freshly Squeezed Summer Survey!

Complete the Freshly Squeezed Summer Survey here!

‍

And, if you’re looking for a new role as an analyst, our sister company ARC Ratings is hiring – click here to read my post about what a brilliant place to work ARC is.

‍

Have a great week

‍

Tom

Click here to sign up to the mailing list

‍