HALISTER1: Single Family Rental Bonds Offer Limited Upside, WFS Says

Single Family Rental Bonds Offer Limited Upside, WFS Says

(Bloomberg) -- Tranches of single family rental bonds offer attractive relative value vs credit risk transfer bonds and non-agency RMBS, though there’s limited upside in SFR when compared with single-borrower/large loan CMBS, Wells Fargo analysts Gary Zhu, Neil Delap and Marielle Jan de Beur write in research note.
  • “We recommend AAA/AA SFR bonds as a portfolio diversification trade; however, we see limited near-term outperformance potential in senior SFR tranches”
  • Investors might favor SFR tranches in AAA/AA space given less idiosyncratic risk vs SASB CMBS floaters; in addition, the Moody’s CPPI Index shows major markets have CRE valuations that are 35% above pre-crisis peak levels
  • Some investors question sustainability of SFR market given shrinking supply of discounted homes available for purchase; in addition, the sector has only 2 yrs of history
  • CLOs could also be favored over SFR for investors with multi-asset mandates; AAA/AA SFR bonds have underperformed similarly rated CLOs since June 2015
    • “With the recent widening in SFR spreads, the sector is now trading at a discount versus CLOs. We believe SFR bonds should trade wide to CLOs”
  • “SFR bonds become more interesting in the middle of the capital stack, specifically single-A and BBB+ rated tranches”
    • Generically, single-A rated SFR tranches offer ~230bp, 205bp, 165bp and 125bp over credit card ABS, STACR M1, CAS M1 and generic legacy RMBS
    • Single-A rated SFR bonds are trading inside of similarly rated CMBS large-loan floaters and 3.0 CLOs on a nominal basis
  • Consumer credit availability, homeownership rates, macroeconomic growth are factors that influence performance of non-agency RMBS and SFR
    • “SFR bonds provide diversification because the underlying collateral should react differently than non- agency RMBS to changes in these economic conditions”
  • Currently projecting $5b-$7b in SFR issuance for 2016; “however, given the recent spread widening, we may revise our estimate downward as sponsors choose alternative funding sources”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Gary Zhu (Wells Fargo & Co)
Neil Delap (Wells Fargo & Co)
Marielle De Beur (Wells Fargo Securities LLC)

Topics
Key Comm. Real Estate News

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UUID: 7947283

HALISTER: Marriott, a Value Investor, Seen Losing Starwood to Anbang Group

Marriott, a Value Investor, Seen Losing Starwood to Anbang Group

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
MAR US (Marriott International Inc/MD)
HOT US (Starwood Hotels & Resorts Worldwide Inc)
1083236D CH (Anbang Insurance Group Co Ltd)

People
David Loeb (Robert W Baird & Co Inc)
Lukas Hartwich (Green Street Advisors LLC)

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UUID: 7947283

HALISTER1: Recommend EUR 20Y Step-Up Single Callable Note: Commerzbank

Recommend EUR 20Y Step-Up Single Callable Note: Commerzbank

(Bloomberg) -- Investors are effectively investing in a short-term instrument with a positive interest rate return given a high probability of early redemption of the note, writes Commerzbank strategist Markus Koch, in a client note.
  • Buy step-up callable note with a 20y term coupled with a short-term, non-callable period to benefit both from short long-tail gamma and from a fairly stable rates outlook at the short end (20yNC1)
  • The note pays a fixed coupon of 0.5% p.a. for the interest rate period up to the single call date after 1-yr
    • Thereafter, coupons will be stepped up to 2.3% p.a. if the note is not called
  • Assuming rates were to stay low with a bias to still lower levels for a 1-yr horizon, the implied call probability increases further from currently lofty levels, reaching almost 80%
  • Structure will be redeemed early only if it is to the issuer’s benefit, i.e. when market rates for matched- maturity rates are lower than the coupon
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Markus Koch (Commerzbank AG)

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UUID: 7947283

HALISTER: Steinhoff to Buy Darty as it Backs Away From Home Retail Deal

Steinhoff to Buy Darty as it Backs Away From Home Retail Deal

Alert: HALISTER
Source: BN (Bloomberg News)

Tickers
DRTY LN (Darty Plc)
HOME LN (Home Retail Group PLC)
SBRY LN (J Sainsbury PLC)
SNH GR (Steinhoff International Holdings NV)

People
Markus Jooste (Steinhoff Africa Holdings Pty Ltd)

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UUID: 7947283

HALISTER: Steinhoff Offer for Each Darty Share 125p in Cash

Steinhoff Offer for Each Darty Share 125p in Cash

(Bloomberg) -- Conforama, Darty boards agree on terms of recommended all cash offer to be made by Conforama, with support of parent Steinhoff International Holdings, for Darty.
  • Under terms of the offer, Darty shareholders to get 125p/shr
  • Offer represents premium of ~54.3% vs closing price on Sept. 29
    • Premium of 3.4% to current implied offer price of 120.9p/shr from Groupe Fnac
    • Premium of 7.6% to previosuly recommended implied offer price of 116.2p/shr from Fnac on Nov. 6
  • Premium of 18.6% to previously recommended implied offer price of 105.4p/she from Fnac on Nov. 20
  • Offers values entire capital of Darty at ~GBP673m
Link to Statement:Link
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
DRTY LN (Darty Plc)
FNAC FP (Groupe Fnac SA)

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UUID: 7947283

HALISTER1: *STEINHOFF DOES NOT INTEND TO MAKE OFFER FOR HOME RETAIL

*STEINHOFF DOES NOT INTEND TO MAKE OFFER FOR HOME RETAIL

Alert: HALISTER1
Source: BN (Bloomberg News)

Tickers
HOME LN (Home Retail Group PLC)
SBRY LN (J Sainsbury PLC)
SNH GR (Steinhoff International Holdings NV)

People
Mariza Nel (Steinhoff International Holdings NV)
Philip Noblet (HSBC Holdings PLC)

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UUID: 7947283