SCI Start the Week - 11 July

Category: ABS CDO CLOs


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

Pipeline
Pipeline activity picked up again last week, with ABS leading the charge. There were nine ABS added to the pipeline, as well as an RMBS and a CMBS.

The ABS were: Aurorus 2016; US$755m Capital Auto Receivables Asset Trust 2016-2; US$1bn CarMax Auto Owner Trust 2016-3; US$980m Dell Equipment Finance Trust 2016-1; US$750m Enterprise Fleet Financing Series 2016-2; US$750m Nissan Master Owner Trust Receivables Series 2016-A; US$430m OneMain Direct Auto Receivables Trust 2016-1; US$300m Sierra Timeshare 2016-2 Receivables Funding; and US$750m World Omni Automobile Lease Securitization Trust 2016-A.

SapphireOne Mortgages 2016-1 was the RMBS. The CMBS was US$430m Waldorf Astoria Boca Raton Trust 2016-BOCA.

Pricings
There were fewer prints last week. These consisted of three ABS, an RMBS, a CMBS and two CLOs.

CNY3bn Driver China Four Trust, US$500m Evergreen Credit Card Trust Series 2016-2 and C$1bn Master Credit Card Trust II 2016-3 accounted for the ABS. The RMBS was €1bn Purple Storm 2016.

US$939m JPMCC 2016-JP2 was the sole CMBS. The CLOs consisted of €421m Accunia European CLO I and €454m CVC Cordatus Loan Fund VII.

Editor's picks
Big appetite
: While political developments on the other side of the Atlantic may have increased risk, US ABS still provides ample opportunities to invest. Gross ABS issuance is up to almost US$90bn for the year so far, as investor demand remains high...
Manager options outlined: If Brexit concludes with the UK outside of the EU passporting regime, UK entities may be limited in acting as managers of and risk-retention holders for European CLOs (SCI 30 June). An informal survey of presale documents undertaken by Wells Fargo structured products analysts indicates that of the 84 outstanding 'sponsor retention' European CLOs, 51 have UK-based managers, 24 do not provide enough information and nine appear to have managers based in the EU...
Risk retention expectations surveyed: Just over half (51%) of the respondents polled in Morgan Stanley's latest US CRE survey believe the market will pay up for risk retention-compliant CMBS deals. Opinions varied about anticipated quality differences in transactions retained by banks versus B-piece buyers, but overall more participants (38%) expect banks retaining a horizontal strip to result in a higher quality deal...

Deal news
• Fitch has downgraded the class A notes of Ulysses (European Loan Conduit No. 27) and placed the class A to C notes on rating watch negative. These actions have been taken as a direct result of the UK's vote to leave the EU.
• Fitch has downgraded the class A notes of Juturna (European Loan Conduit No. 16) and Pacific Quay Finance to single-A plus from double-A minus, with a negative outlook. The action follows a change in the agency's view of the credit quality of the BBC, which is the sole tenant of the underlying properties.
• The US$44.95m Chateau on the Lake loan securitised in Wells Fargo Commercial Mortgage Trust 2015-C26 has been transferred to special servicing. The loan is the largest underlying the CMBS.
• Swiss Re Capital Markets has placed a US$100m transaction in the ILS market, the first catastrophe bond sold at a discount pursuant to Rule 144A since 2009. Laetere Re was issued on behalf of United Property & Casualty Insurance Company (UPC), Family Security Insurance and Interboro Insurance, providing reinsurance cover on named storms and earthquakes affecting certain US coastal states.
• ISDA's EMEA Credit Derivatives Determinations Committee has resolved that a bankruptcy credit event occurred in respect of Portugal Telecom International Finance. An auction will be held in due course in respect of outstanding CDS trades referencing the entity.

Regulatory update
• The FHFA has released an update on the implementation of the single security and common securitisation platform. The update includes expected milestones that Fannie Mae, Freddie Mac and Common Securitization Solutions (CSS) expect to meet to achieve the stated goals of the projects.
• Five organisations have issued a joint response to proposed revisions to the Basel 3 leverage ratio framework, urging that the Basel Committee expand the scope of its review. The response includes the recommendation for a well calibrated leverage ratio that will recognise the benefits of securitisation for originating banks.
• The Structured Finance Industry Group (SFIG) has sent a letter to the US Treasury Department outlining its concerns that new income tax regulations could disrupt the securitisation market. The group's Tax Policy Committee describes the regulation as "overly broad" and says it could lead to potentially "adverse, market-chilling effects".

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