EJF announced investment of c. £11.9m in the preferred shares issued by TruPS Financials Note Securitization 2019-1 Ltd (“TFINS 2019-1”) on 7 March 2019. TFINS 2019-1, sponsored by EJF Capital LLC, consists mainly of trust preferred securities and surplus notes issued by 32 US community banks and 18 US insurance companies with an aggregate par value of c. $314m. This is the company’s sixth such investment in an EJF sponsored securitisation since admission.
The fund focuses on US securitisations, partly due to regulatory easing on smaller banks, partly because of the opportunity driven by the 2010 Dodd-Frank act. EJFI’s preferred shares tend to be CDO shares backed by US communities, regional banks and insurance companies.
The securitisations, including five risk-retention investments, some legacy CDOs, a US bank sub-debt investment together with EJFI’s investment in the CDO Manager, accounted for 71% of EJFI’s portfolio value as of end-December 2018.
Around 89% of the portfolio is indexed to three-month LIBOR, while the balance is fixed rate. The current weighted average spread of the floating assets is c. 3.2% p.a. The fixed-rate assets have a weighted average coupon of c. 7.0% p.a. The weighted average maturity of the underlying securities is about 15 years from the closing date, and TFINS 2019-1 has a final maturity date in 2039.