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Bi-weekly private credit digest – market news & updates from March 2023

In this issue of the Bi-Weekly Private Credit Digest, we will review the main news and updates from Italy, UK, and the US.

Italian market contributes to financing Europe’s energy transition

The Italian branch of Toyota Financial Services closed the first Auto ABS deal in Europe consisting only of loans for alternative fueled vehicles

The deal is backed by a portfolio of loans for new, low CO2 emission vehicles originated in Italy, and the pool is composed for the 98% of hybrid vehicles. The transaction was carried out through the SPV Koromo Italy srl who has issued two ABS notes, a senior note worth around €470mln and a junior note worth around €69mln

This transaction received a lot of interest from investors and it’s a clear sign of how the ABS market could play a key role in financing Euorope’s energy transition.

Klarna reports loss of $1bn

Klarna, one of the pioneers into the BNPL market, has recently published their results for 2022 and it reported a loss of $1bn. This highlights the negative trend affecting the BNPL industry. Although Buy Now Pay Later products’ popularity is increasing among investors, the industry is struggling: in 2022 it was hit by falling valuations and stock prices, as well as layoffs

A key challenge for BNPL providers is adjusting their business model to the rising interest rates scenario along with improving the assessment of client’s creditworthiness. The industry is also facing regulatory pressure: Britain set out a draft legislation to regulate BNPL credit, stating that the sector poses potential harm to consumers if careful affordability checks are not implemented.

Brentall Green Oak closes another UK Secured Lending Fund

The global real estate investment firm Brentall Green Oak successfully closed its third UK Secured Lending Fund, with a total of ÂŁ1.4 bn of capital commitment from over 25 global institutional investors. 

The fund’s strategy will focus on providing direct lending on a range of real estate assets classes in the UK, including office, logistics and multi-family residential properties. This closing is part of a series of new real estate focused initiatives we have seen lately on the European markets. In fact, given the falling values of the properties, surged by the increase of interest rates, traditional banks are pulling back from real estate lending and alternative lenders are trying to fill the gap.

Despite the volatility of Europe’s real estate market, investors see potential to generate high returns with manageable risks, as European economies are holding up and employment rates are not dropping: this is seen as a sign that tenants are likely to keep paying

US market: stalled debt’s levels increase

After the crush of Silicon Valley Bank that led to financial system turbulence, the amount of stalled debt has quickly increased, and it has reached the highest level since the first quarter of last year, when the war in Ukraine erupted.

Since spreads have been difficult to pin down, some issuers have preferred to pause their offerings until there is better clarity, postponing bond issuance and loan sales.

Let’s look at some of the main withdrawn deals that were about to be closed in last two weeks:

  • $942mln sale of auto loans backed bonds from Santander consumer USA
  • $900 auto fleet leases backed sale from Automotive Rentals
  • $500mln mortgage linked bonds issuance from the home loan company Fannie Mae

This was the last news for this months episode! Thank you for reading and don’t forget to visit the Cardo AI blog to read all the latest news and insights on the private credit market, or subscribe to our podcast for on-the-go updates!