The start of 2019 has been slow. We haven't seen one issuance in the first three weeks of the year. Compare this to the same period of 2018 with circa €30bn of deals issued. Finally, after three weeks of a drought, Blackstone is the first to announce a new deal in the Eurozone, a EUR CLO - CROSTHWAITE PARK CLO.
Why the lack of activity?
As of 1 January, the new harmonised securitisation rules have
been applied (STS). Issuers visited the market before the year end
to ensure they didn't delay deals in early 2019 whilst they put
in place the processes and necessary infrastructure to comply with
STS regulations. This resulted in an unseasonal spike in December
issuance.
Alongside this, the European market is still awaiting an outcome on
Brexit. A no-deal scenario, a new government and a second
referendum all hang in the balance. The economic uncertainty is
creating significant volatility in the market and causing secondary
ABS spreads to gap out, making primary issuance unattractive.
What now?
The unfavourable issuing market is likely to mean that Q1 remains sluggish. However, many issuers will still require funding through the public wholesale markets. So, once the details of the new regulations are clear and there's an established pathway to compliance, we expect issuance to pick up. We understand that there's a pipeline of new deals waiting to go – will this trade by Blackstone break the seal and other deals start to trickle through?
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