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Tag: Securitization

  • Mortgage investor JER files for bankruptcy, is latest property firm to crash

    Mortgage investor JER files for bankruptcy, is latest property firm to crash

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    JER Investors Trust Inc., a mortgage REIT, filed for bankruptcy in the latest sign of distress in commercial real estate.

    The real estate investment trust  — which counts the private equity firm C-III Capital Partners among its top shareholders — owes more than $100 million to creditors but has less than $50 million of assets, according to a Chapter 11 petition filed in Wilmington, Delaware, on Friday. Companies use Chapter 11 of the U.S. Bankruptcy Code to temporarily halt most debt payments while they try to work out a plan to stay in business.

    JER Investors manages a portfolio of mortgage-backed securities and other types of debt tied to the commercial real estate market, according to the company’s website. As interest rates climbed this year, commercial properties came under pressure, especially firms that lost tenants during the pandemic as office-tower workers stayed home.

    Earlier this month, mall owner Pennsylvania Real Estate Investment Trust filed for bankruptcy for the second time in three years. In November, the coworking behemoth WeWork Inc. filed for bankruptcy with plans to cut back a sprawling real estate portfolio that spanned 39 countries.

    C-III Capital owns at least 8.4% of JER Investors, according to court papers. JER also owes C-III nearly $20 million, the bankruptcy filing shows. The Bank of New York Mellon Trust is owed $93.9 million, according to the Chapter 11 petition.

    The case is JER Investors Trust Inc., 23-12109, US Bankruptcy Court, District of Delaware (Wilmington)

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  • Tesla hits ABS market in first sale since blue-chip upgrade

    Tesla hits ABS market in first sale since blue-chip upgrade

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    Tesla is returning to the US asset-backed securities market for the first time in over a year, with a $1 billion prime auto-lease transaction, a sign of how credit markets are starting to recover.

    The electric-vehicle maker is in the premarketing stage for the deal, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. It marks Tesla’s first ABS transaction since securing blue-chip status in March.

    The company hasn’t stepped into the US ABS market since September 2021, except for one sale that was halted in March 2022. The latest marketing comes as the asset-backed securities market, which repackages different types of debt into bonds of varying risk and size, slowly recovers from the volatility that rocked the market toward the end of last year. Spreads on new issue offerings have come in significantly since their October and November wides. And in secondary markets, bonds are being exchanged at a yield of 5.3% compared to the 5.7% highs in November, according to one measure.

    “Liquidity has increased and spreads have tightened through the first half of the year, which has given ABS issuers a better environment to raise money in our market,” said Jordan Chirico, head of Indianapolis-based 352 Capital, a firm backed by money manager Leucadia Asset Management.

    Tesla, which started its ABS program in early 2018, is repackaging a pool of leases on new electric vehicles manufactured by Tesla and originated through Tesla Finance into the securities, according to a presale report from Fitch Ratings. The loans come from borrowers with an average credit score, known as FICO, of 773, which is the lowest for the platform since a deal they did in 2018, Fitch said. Wells Fargo is structuring the sale, the person said.

    “Tesla’s bond sale comes as the ABS market recovers since November along with other risk assets,” said Tracy Chen, portfolio manager at Brandywine Global Investment Management. “However, spreads are still wide compared to before the pandemic. Certain ABS sectors are also cheap relative to corporate bonds of equivalent ratings.”

    The bond sale comes as the carmaker attempts grow its business by 50% annually, according to Bloomberg Intelligence’s Joel Levington. “They’ve been paying down debt as it matures and doing it really consistently,” he said.

    Tesla wasn’t the only borrower that delayed a deal in March of last year, right after Russia’s invasion of Ukraine rattled the bond markets. Both auto-finance company World Omni and “buy now, pay later” lender Affirm also postponed offerings at the time. 

    —With assistance from Charles Williams, Sri Taylor and Scott Carpenter.

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