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Citi Execs Restless Over Leadership Changes Onemain Downplays ABS

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Citi Execs Restless Over Leadership Changes Onemain Downplays ABS MAY 11, 2018 Citi Execs Restless Over Leadership Changes One of Citigroup’s top collateralized loan obligation professionals has left the 2 Forklift-Loan Program In the Works bank amid a restructuring that increasingly is looking like the cause of a broader series of departures. 2 Sprint, T-Mobile Map ABS Program John Clements, who had been co-heading Citi’s CLO team alongside Jim Hughes, 2 Credit Suisse to Package Reperformers jumped ship this week after Hughes was promoted to lead the group a layer above him. Clements’ destination: Barclays, where he will head CLO origination. 4 No Letup in LendingClub Supply Both Clements and Hughes had been on board at Citi since 2001, with Clements arriving from Chase Securities and Hughes coming from BankBoston. 4 CLO Newcomer Adds Key Piece Now, with Clements gone, industry participants are growing more confident 4 Asset Sales Aid CLO Pools in rumors that a recent string of departures from Citi’s securitization team was prompted by a push to streamline the operation’s chain of command. 6 Canadian MBS Deals in the Works Those changes started with the May 2017 promotion ofMickey Bhatia to co-head See CITI on Page 6 6 Auto-Loan Indicators Run Strong 7 DealVector Addresses Libor Issue OneMain Downplays ABS in Funding Shift 7 Canada Firm Hosts Marketplace Pros OneMain Financial wants to rely more on unsecured corporate debt to fund its 10 INITIAL PRICINGS massive portfolio of consumer loans — a shift that would reduce the amount of asset-backed securities it issues. 11 MARKET MONITOR Over the next year or two, the Evansville, Ind., lender plans to increase its issu- ance of high-yield corporate bonds until they meet 50% of its funding needs, up from 40% at yearend 2017. At the same time, it would curtail its securitization vol- THE GRAPEVINE ume by a proportional amount. Asset-backed bonds currently account for 56% of its funding mix, down from 60% at yearend. Carlos Garza is no longer head of collat- The company’s portfolio of unsecured personal loans and auto loans totaled $15 eralized loan obligation trading at Credit billion at the end of the first quarter, compared to $14 billion a year earlier. The Suisse. Garza joined the bank in 2003 as volume of loans on its books is projected to grow 5-10% during 2018. a mortgage-bond trader. He took his most OneMain had been securitizing its loans approximately once every quarter. recent position in 2016 after risk-shed- In light of its new funding strategy, the company likely will be absent from the ding measures led to a series of higher- See ONEMAIN on Page 8 level staff exits. His plans are unknown. Rumor Mill Churns Amid KeyBank Departures Industry veteran Jerry Marriott is retiring. Since 2013, Marriott has been advising cli- A continuing series of staff departures is prompting speculation about the future ents in the U.S. and Canada on regulatory of KeyBank’s structured-product brokerage unit. matters via his Toronto-based Eastmount While there’s no official word on the fate of the operation, some industry partici- Financial. He originated and structured pants see the moves as a sign its days might be numbered. Others suggest the bank asset-backed securities, mortgage bonds merely is paring down to reflect a market-wide decrease in trading activity. and commercial-paper conduit deals at Either way, many of the sales and trading professionals that Key hired while National Bank Financial before that, and establishing the division are gone. held a number of senior positions at DBRS. Chief among them is Michael Corsi, who exited his New York post as co-head of He also spent time in Bank of Montreal’s securitized-product sales in March. While it’s possible Corsi left on his own accord, structured-finance unit. sources said there’s also a chance he was pushed out. The reason: He was arrested in May 2017 for allegedly speeding in his Ferrari while drunk and carrying a loaded Collateralized loan obligation sales spe- pistol. The case is pending in a Connecticut state court. cialist Darryl Smith has joined the New Corsi had arrived in March 2016 from RBC. Earlier, he worked at Knight Capital, See GRAPEVINE on Back Page See KEYBANK on Page 8 May 11, 2018 Asset-Backed 2 ALERT Forklift-Loan Program In the Works cies — that is, segregating lease-payment cashflows from other types of revenue. Such safeguards have been key to Verizon Forklift manufacturer Hyster-Yale Group is exploring securi- earning triple-A ratings for its asset-backed bond offerings. tization as a funding source for its lending arm. “They need to have a distinct separation of those cashflows Executives from the Cleveland company discussed the idea to achieve a top rating,” one analyst said. of starting an asset-backed bond program with bankers in Of course, Sprint and T-Mobile have attempted to merge recent weeks. They also inquired with rating-agency officials in the past without success. The latest proposal, under which about the possibility of achieving triple-A grades for the deals. T-Mobile would pay $26.5 billion in cash and stock to buy Should Hyster-Yale move forward, sources said offerings Sprint, is under review by the Federal Communications Com- could start flowing by midyear 2019 — starting with a transac- mission and Justice Department. tion of some $300 million. Sprint already is the most-active issuer of bonds backed by The proceeds would fund a mix of loans and leases that Hys- wireless-spectrum leases. Since 2016, the company has conducted ter-Yale offers to customers through a subsidiary, HYG Finan- two offerings totaling $7.4 billion. Sources said that history should cial of Irving, Texas. Those receivables currently are financed help when it comes to working with bankers and investors on via a line of credit from Wells Fargo. deals backed by mobile-device payments. Indeed, Moody’s put out Sources said Hyster-Yale is interested in securitization in part a report on May 2 saying the acquisition, if approved, would reduce because it expects to need new financing options as its portfo- the likelihood of default on Sprint’s wireless-spectrum bonds. lio grows. The company was holding $469.5 million of accounts receivable on March 31, up from $453 million at yearend 2017. Credit Suisse to Package Reperformers The discussions coincide with a search for an executive who would hold the title of director of credit. The recruit would Credit Suisse’s purchase of a massive portfolio of reperform- work in Greenville, N.C., as the point person for Hyster-Yale’s ing mortgages from Capital One positions the bank to conduct a wholesale-lending and dealer-financing efforts in North Amer- large-scale series of securitizations. ica and South America. The company is seeking candidates The bank would offer the securities under its DLJ Mortgage with at least five years of securitization experience for the post. Capital label, drawing from a $17 billion loan portfolio it agreed Hyster-Yale is among a number of companies that recently to buy from CapOne on May 7. The first issues are expected to have expressed an interest in securitizing their equipment hit the market soon after the purchase closes, which is likely to receivables or have started doing so. For example, De Lage happen by midyear. Laden Financial has completed two deals totaling $1.4 billion Whatever accounts Credit Suisse doesn’t securitize would since launching an issuance program in November, according be distributed among clients. Indeed, The Wall Street Journal to Asset-Backed Alert’s ABS Database. reported on May 9 that the bank had agreed to sell most of the All told, 12 equipment loan or lease securitizations totaling portfolio to Pimco. That would fit into an effort in which the $6.5 billion have priced this year, up from nine deals for $5.6 bond-fund manager has been buying reperforming mortgages billion a year ago. and then bundling them into bonds that it retains. The CapOne pool, which includes pre-credit-crisis loans the Sprint, T-Mobile Map ABS Program company absorbed via its 2011 purchase of ING Direct, attracted multiple bids. Finance executives at Sprint and T-Mobile are working on Credit Suisse’s side deal with Pimco and its securitization plans to begin securitizing lease payments on their customers’ plan explain how it could absorb such a large portfolio. “I’m mobile devices, should regulators approve T-Mobile’s planned surprised Credit Suisse had the capacity to take down a deal of acquisition of Sprint. that size,” one source said, characterizing it as one of the biggest The two companies separately have spent several years try- non-agency loan portfolios ever to change hands. ing to develop securitization programs to fund billions of dol- The DLJ Mortgage Capital business has taken several forms lars of cell-phone leases, but neither one has completed a deal. over the years, most prominently as a jumbo-mortgage conduit Meanwhile, Verizon has sold $7.5 billion of bonds backed by program. But the operation stopped buying and securitizing mobile-device leases since entering the market in 2016. those loans in 2015 and, aside from two re-Remic transactions, Treasury officials at Sprint and T-Mobile believe the proposed didn’t issue bonds again until 2017 — when it carried out three tie-up would help them bring an asset-backed bond deal to mar- reperforming-mortgage deals totaling $859.3 million, accord- ket, since the combined company would have a substantially ing to Asset-Backed Alert’s ABS Database.
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