Monday 1 February 2016 17:00 London/ 12.00 New York/ 01.00 (+ 1 day) Tokyo

A look at the major activity in structured finance over the past seven days

Pipeline
The pipeline was slightly quieter last week as fewer deals joined and fewer deals left. At the last count there were four new ABS, one new RMBS, three CMBS and a single CLO.

The ABS were: US$112m Earnest Student Loan Program 2016-A; US$150m Nations Equipment Finance Funding III 2016-1; US$1bn Nissan Auto Receivables 2016-A Owner Trust; and US$500m OneMain Financial Issuance Trust 2016-1. The RMBS was US$400m WinWater Mortgage Loan Trust 2016-1.

US$166m BAMLL Commercial Mortgage Securities Trust 2016-SS1, US$1.2bn CGCMT 2016-GC36 and US$960m WFCM 2016-C32 accounted for the CMBS. The CLO was €410m BlackRock European CLO I.

Pricings
There were four ABS prints, four RMBS and three CMBS. The ABS were: US$1.14bn CarMax Auto Owner Trust 2016-1; US$340m CPS Auto Receivables Trust 2016-A; US$604.42m Hyundai Auto Lease Securitization Trust 2016-A; and US$488m Navient Private Education Loan Trust 2016-A.

The RMBS were: US$302m Agate Bay Mortgage Trust 2016-1; £518m Friary No.3; US$483m Home Partners of America 2016-1; and €1.8bn STORM 2016-I. The CMBS were US$1.03bn COMM 2016-CCRE28, US$936.4m CSAIL 2016-C5 and US$1.14bn FREMF 2016-K52.

Markets
In the US agency RMBS market, Citi analysts continue to believe FN 3s and 3.5s appear rich in comparison to FN 4s, trading around 3bp tighter. "Over the past week, outperformance in FN 3s-4s against Treasury curve hedges was quite comparable at 6-7 ticks as it was led by a decline in global asset volatility. We continue to see significant downside risk to relative performance in 3.5s if rates rally given the coupon's high negative convexity and tight valuations."

The re-opening of the US CMBS new issue market provided investors with context for new issue spreads last week, say Deutsche Bank analysts. They add: "Spread tiering remains pronounced, with triple-As in the 155bp-162bp context."

No new US CLOs priced last week. JPMorgan analysts comment: "January US CLO volume is the lightest since 2012, though other sectors are also slow."

While European supply was particularly high in January, Bank of America Merrill Lynch analysts believe that serves more as a reflection of deep distress in other markets than as a signal of a recovery for European structured finance. They say: "We expect the strong supply in SF bonds to continue, judging by the visible pipeline, and we expect some slow down in covered bond supply in the run up to the ECB meeting in mid-March. In both cases, the markets will keep reading behind the pronouncements of ECB board members and behind the ECB actions on its purchase programmes to divine the most likely path of action the bank is likely to take in March."

Editor's picks
Retention return?: Retained issuance volume in Europe was 63% lower in 2015 than it had been in 2014, but this decline was turned on its head in the final months of last year. Such a reversal came as something of a surprise and could signal a long-term change of direction for the market, or be forgotten by February...
Synthetic disorder: Panellists at SCI's inaugural capital relief trades conference in December discussed regulatory developments in the sector and the push towards accommodating synthetic securitisations under the new umbrella of standardisation. However, doubts persist over the viability of harmonisation in such a diverse market...
Energy stress surging: The beginning of 2016 has seen a number of stressed loan issuers - particularly in the oil and gas sector - moving closer to potential default. Wells Fargo CLO strategists highlight five recently troubled names, which account for US$1.4bn in US CLO collateral, or 0.33% of the outstanding US CLO universe...
Court rules against Canary Wharf: Canary Wharf Group sold 10 Upper Bank Street for £790m in June 2014 and used the proceeds to prepay £578m of the class A1 fixed-rate notes of its CMBS at par (SCI 2 July 2014). The spens amount of £169m was placed in an escrow account to be paid to either the class A1 bondholders or Canary Wharf Group, depending on a court decision (see SCI's CMBS loan events database), which was eventually reached this week...
Euro secondary keeps positive: The European securitisation secondary market is holding onto the positive tone of the past few sessions. "Sentiment was a bit better again [on Wednesday], flows in general are improving and prices are going higher on- and off-BWIC," says one trader. "With little primary activity, technicals are supportive of secondary, so while global credit remains relatively stable that positive trend could continue."

Deal news
• Four ABS sponsors - Ally, AmeriCredit, Discover and Ford - have completed Reg AB 2-compliant transactions so far this year. The new regulation went into effect in November and Ford was the first to issue a compliant deal, FORDO 2015-C (SCI 21 September 2015).
• Eurotunnel has reported strong revenue growth, increasing the likelihood that it will refinance its Channel Link Enterprises Finance (CLEF) A3 and A4 bonds before year-end. The deal's euro liquidity notes appear particularly attractive.
• Online lender Earnest Operations is in the market with its inaugural rated term securitisation. The US$212m transaction, dubbed Earnest Student Loan Program 2016-A, is backed by refinanced student loans.
• Armenia has seen the launch of its first securitisation, listed on the country's stock exchange NASDAQ OMX Armenia. The deal was issued through the SPV, Loan Portfolio Securitisation Fund I, which was established in August 2015 to securitise US$2m worth of microfinance loans originated by five universal credit organisations (UCOs).
• S&P has lowered its ratings on the class A and B notes issued by Vitality Re V Series 2014 and Vitality Re VI Series 2015 by two notches to triple-B minus and double-B minus respectively. The action reflects updated information received from Milliman and Aetna Life Insurance Co related to the recently-priced Vitality Re VII catastrophe bond.
• Moody's has affirmed its ratings of all Pepper Residential Securities Trust No. 15 notes, following a review triggered by a re-classification of some underlying loans. The re-classification involved 6.49% of the total pool balance having either one or two adverse credit events prior to origination, instead of having no adverse credit events.
• ISDA's EMEA Determinations Committee has extended the external review schedule in connection with the governmental intervention credit event question on Novo Banco, such that the oral argument will be held on 12 February and the decision deadline will be 16 February. The association says that the amendment is due to the availability of the external review panel. The submission deadline for ISDA members to submit written materials in connection with the external review process remains unchanged (5 February).

Regulatory update
• The Italian government is set to introduce rules establishing a guarantee mechanism, dubbed Garanzia Cartolarizzazione Sofferenze (GACS), to facilitate the transfer of non-performing loans from the books of commercial banks to securitisation vehicles. The move has been welcomed as a positive step towards clearing the country's overhang of NPLs, but uncertainty remains over the transfer prices to be used.
Canadian securities regulators across the country's various provinces have agreed to implement rules on derivatives product determination and reporting on trade depositories and derivatives data. This follows a consultation on the proposals of the rules last year (SCI 27 January 2015) and paves way for the harmonisation of a derivatives reporting regime in line with Manitoba, Ontario, Quebec and internationally.
• Eleven banks have agreed on a US$63m settlement with the Commonwealth of Virginia and the Virginia Retirement System (VRS) over allegations surrounding the sale of allegedly misrepresented RMBS. The agreement has been hailed as the largest non-healthcare-related recovery ever obtained in a suit alleging violations of the Virginia Fraud Against Taxpayers Act.
• The US CFTC has granted registration to 18 SEFs, which had previously operated under temporary registration status. A further five SEFs currently remain temporarily registered.

Deals added to the SCI New Issuance database last week:
Ally Auto Receivables Trust 2016-1; American Credit Acceptance Receivables Trust 2016-1; AmeriCredit Automobile Receivables Trust 2016-1; Arbour CLO III; Discover Card Execution Note Trust 2016-1; Drive Auto Receivables Trust 2016-A; DT Auto Owner Trust 2016-1; Ford Credit Auto Owner Trust 2016-A; Friary No. 3; Golden Credit Card Trust Series 2016-1; Gosforth Funding 2016-1; IM BCC Cajamar 1; Siena Lease 2016-2; SolarCity FTE Series I series 2015-A; United Auto Credit Securitization Trust 2016-1; Volvo Financial Equipment Series 2016-1; Westlake Automobile Receivables Trust 2016-1

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-5; CANWA II; CD 2006-CD3; CFCRE 2016-C3; CMLT 2008-LS1; CSMC 2006-C5; DECO 2006-E4; DECO 2007-E5; DECO 2007-E6; DECO 8-C2; ECLIP 2006-1; ECLIP 2006-1 & ECLIP 2006-4; ECLIP 2006-3; ECLIP 2007-2; EPIC DRUM; EURO 28; INFIN SOPR; JPMCC 2001-CIB2; JPMCC 2005-LDP5; JPMCC 2006-LDP9; JPMCC 2007-C1; JPMCC 2007-LDPX; LBCMT 2007-C3; MLCFC 2007-9; MSC 2006-IQ11; MSC 2011-C2; TITN 2006-1 & TITN 2006-2; TITN 2006-3; TMAN 5; WBCMT 2005-C20 & WBCMT 2005-C21; WBCMT 2007-C30; WFRBS 2011-C5; WFRBS 2014-C22; WINDM VII


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