SCI Start the Week - 11 January

Category: ABS CDO CLOs


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

Pipeline
Pipeline additions picked up last week as market participants returned to their desks for the new year. As well as six new ABS there was also an ILS, three RMBS, a CMBS and a SME CLO announced.

The ABS were: US$1.2bn AmeriCredit Automobile Receivables Trust 2016-1; CNY2.79bn Driver China Three; ¥30bn Driver Japan Five; US$340m DT Auto Owner Trust 2016-1; €610.3m Globaldrive Auto Receivables 2016-A; and US$260m Westlake Automobile Receivables Trust 2016-1.

US$300m Galileo Re 2016-1 was the ILS, while the RMBS were US$302m Agate Bay Mortgage Trust 2016-1, Gosforth Funding 2016-1 and US$996m STACR 2016-DNA1. The CMBS was US$703.6m CFCRE 2016-C3 and the CLO was Project Salisbury.

Markets
As with the start of 2015, 2016 has begun with difficult global markets. US agency RMBS has not been unaffected by this, with Barclays analysts noting that mortgages underperformed Treasury and swap hedges last week. They say: "FN 3s underperformed their Treasury hedges by 3 ticks, while FN 3.5s were down 2 ticks. FN 4s were almost flat, while FN 4.5s outperformed by 0.5 ticks. The underperformance against swaps was much higher, as swap spreads have tightened 2bp (as of Thursday's close) since last Wednesday."

Anxiety levels are rising in US CMBS, say Citi analysts, as triple-A and triple-B minus spreads widened 5bp and 20bp respectively after the Chinese stock market selloff. They say: "The ripple effect of the overseas developments could potentially lead to real risks to CMBS unlike previous macro events that provoked only spread volatility."

The European RMBS market has made a fairly positive - if quiet - start to the year, report Bank of America Merrill Lynch analysts. They say: "Despite some weakness in broader credit markets, spreads are steady across RMBS sectors. Traders report an overall positive bias, as investors seem to be getting ready to add risk. In the periphery, a couple of BWICs traded strongly (Italian seniors, Spanish sub-IG mezz), supply was low."

Editor's picks
RMBS speeds to jump
: Several Alt-A and prime jumbo US RMBS deals could experience significantly higher voluntary prepayment speeds this year as a high number of loans are set to switch from interest-only to amortising. Morgan Stanley analysts identify certain key characteristics to help predict a borrower's repayment fate...
US CLOs lack commitment: The US CLO secondary market is suffering from a lack of investor commitment in all but the most liquid bonds. "It's a new year, but still the same themes," says one trader. "We keep switching back and forth between risk-on and risk-off, primarily taking our cue from high yield spreads..."

Deal news
• Noteholder meetings have been scheduled for 27 January for defunct DSB Bank's Monastery 2004-I and 2006-I, and Chapel 2003-I and 2007-I transactions. The meetings are in connection with offers made by the DSB bankruptcy trustees to the relevant SPVs to settle unpaid duty of care claims in full.
• Based on its monthly review of the CMLT 2008-LS1 CMBS, KBRA notes that four REO assets underlying the transaction were up for bid in online auctions in December, three of which sold and one failed to trade. A total of 28 assets securing the transaction have now been auctioned since September.
• Macy's has announced 36 new store closures as part of a cost-reduction plan. Morgan Stanley CMBS strategists identify 10 loans totalling US$501m across 11 CMBS that have exposure to the closures.The largest loan by allocated balance with exposure is the US$79.3m Valley Mall, securitised in JPMCC 2006-LDP6.
• An auction to settle the credit derivative trades for Abengoa CDS is to be held on 14 January, after a failure to pay credit event was determined in connection with the entity (SCI 14 December 2015). The move follows the company's failure to pay coupons under its €750m Euro CP programme.
• Banca Monte dei Paschi di Siena (BMPS) has sold a non-performing loan portfolio to Epicuro SPV, a securitisation vehicle financed by affiliates of Deutsche Bank. The portfolio is composed of just under 18,000 borrowers, with a total book value of around €1bn.

Regulatory update
• The purchaser of an unrated junior tranche in the CDO transaction STACK 2006-1 adequately pled justifiable reliance by stating that it relied on the credit ratings of the senior tranches, according to a recent New York Supreme Court appellate ruling. Judge David Friedman dismissed an appeal by Morgan Stanley, in a case that has significant implications for the limits on a sophisticated investor's obligation to perform due diligence.
• The US SEC has issued its two annual staff reports on credit rating agencies registered as nationally recognised statistical rating organisations (NRSROs). The reports show the NRSROs have made operational improvements and have enhanced process accountability, controls and governance.

Deals added to the SCI New Issuance database last week:
BBVA Portugal RMBS No. 1; DBL Funding Trust No. 1 series 2015-1PP; Dolphin Master Issuer series 2015-3; Magni Finance; Tombac No. 2; Vela Consumer

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-1; BACM 2006-5; BSCMS 2005-PWR7; BSCMS 2006-PW13; BSCMS 2007-PW15; CD 2006-CD2; CFCRE 2011-C1; CMLT 2008-LS1; COMM 2005-F10; COMM 2012-CR2; COMM 2014-CR14 & COMM 2014-LC15; COMM 2014-UBS5; CSMC 2006-C1; GECMC 2006-C1; GMACC 2004-C2; JPMCC 2004-LN2; JPMCC 2006-CB17 & JPMCC 2006-LDP9; JPMCC 2006-LDP6; JPMCC 2006-LDP7; JPMCC 2006-LDP9; JPMCC 2007-CB19; LBUBS 2006-C6; LBUBS 2007-C1; MLCFC 2007-5; MLCFC 2007-6; SELK 2014-3A; WBCMT 2007-C30 & WBCMT 2007-C31; WFCM 2015-C31; WFRBS 2013-C15

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