SCI Start the Week - 14 November

Category: ABS CDO CLOs

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

Upcoming SCI event
Panellists are being finalised for SCI's latest Capital Relief Trades Seminar, 'Navigating the Cash vs Synthetic Debate, Weighing the Cost of Capital', which is being held on 22 November in London. Please email for a conference registration code or click here and follow the link to register.

The conference programme consists of a series of panel debates, focusing on the structural landscape, the cost of capital and alternatives, and issuing bank strategies among others. So far, speakers include representatives from: Apollo Management; Caplantic; Chorus Capital Management; Christofferson Robb; Clifford Chance; EIF; Lloyds; Magnetar; Mariner Investment Group; Mizuho; Nomura; Nordea; Open Source Investor Services; and Rabobank.

The rate of pipeline additions last week was fairly consistent with the one before, although with less emphasis on CMBS. In all there were seven new ABS, two ILS, five RMBS and two CMBS added.

The ABS were: US$1bn Drive Auto Receivables Trust 2016-C; €725.7m Lusitano SME 3; CNY3bn Shanghe 2016-1 Retail Auto Mortgage Loan Securitization Trust; €1.335bn Sunrise 2016-2; US$814.385m TSASC Series 2017A and 2017B; and US$1.4bn Verizon Owner Trust 2016-2.

US$200m Bonanza Re 2016-1 and US$300m Ursa Re 2016-1 were the ILS, while the RMBS were US$460m Freddie Mac Whole Loan Securities Trust Series 2016-SC02, A$747m Kingfisher Trust 2016-1, US$353.68m Shellpoint Co-Originator Trust 2016-1, US$300m SPS Servicer Advance Receivables Trust Series 2016-T1 and US$300m SPS Servicer Advance Receivables Trust Series 2016-T2. The CMBS were US$1bn GSMS 2016-GS4 and US$750m Hilton USA Trust 2016-HHV.

The week's prints were skewed towards CLOs, bolstered by a number of refis. In total there were three ABS, four RMBS, one CMBS and 14 CLOs.

US$150m Diamond Resorts Owner Trust 2016-1, £475m E-CARAT 7 and C$426m GMF Canada Leasing Trust Series 2016-1 accounted for the ABS, while the RMBS were £2.552bn Brass No.5, US$187.9m Colony American Finance 2016-2, A$200m Sapphire XV Series Trust 2016-2 and £448m Towd Point 2016-Granite 2. The CMBS was US$452.3m CLMT 2016-CLNE.

The CLOs were: US$560.7m Anchorage Capital CLO 9; US$937.35m Dryden Senior Loan Fund 2014-33R; US$462m Galaxy CLO 2012-14R; €364m GLG Euro II; US$425m GoldenTree Loan Opportunities 2015-11R; US$300m LMREC 2016-CRE2; US$402.7m MidOcean Credit CLO 2016-6; US$309m Mountain View 2016-1; US$459.5m Neuberger Berman CLO 2014-18R; NorthStar 2016-1; US$367.2m OCP CLO 2012-2R; US$605.5m Octagon XXI CLO 2014-1R; US$498m Race Point CLO 2012-7R; and US$282.4m Saratoga Investment Corp 2013-1R.

Editor's picks
Transfer pricing: The securitisation of non-performing loans (NPLs) has been deemed a credible solution for Italian banks seeking to offload the assets from their balance sheets. Just one deal has launched to date, however. Getting a plausible valuation for the NPL portfolio being transferred to the SPV may be one of the main obstacles...
KKR targets shipping loans: Pillarstone, the platform set up by KKR to buy non-core and underperforming assets in Europe, seems set to take on underperforming shipping loans following the recruitment of former Frontline Management ceo Jens Martin Jensen. Indeed, the firm recently confirmed its involvement in a shipping-related securitisation...
Uncertain intentions: The US has had its 'Brexit moment', according to a panel of valuations experts at a Duff & Phelps press briefing in London yesterday (9 November). However, while the timing of the Brexit vote gave funds but a matter of days to reflect the impact on asset valuations, the timing of the unexpected US election result should provide valuers more time to assess the implications...
Euro ABS/MBS distracted: Activity in the European ABS/MBS secondary market continues to be light with participants focusing elsewhere. "Secondary is still relatively quiet," says one trader. "The market continues to be distracted by primary, where there are currently a couple of new issues that we're working on, and obviously events in the US are also taking some attention today..."
External mandates: Since AIFMD came into force, institutions have interpreted the requirement for the 'proper and independent' valuations of an alternative investment fund's assets in different ways. The majority carry out the valuation process internally and employ a third-party valuation agent in an advisory capacity. However, there are certain sectors of the market that may be increasingly likely to outsource valuations to an external valuer...

Deal news
• The US$800m Blackbird Capital Aircraft Lease Securitization 2016-1 priced last week, with the senior notes heavily oversubscribed. The deal is noteworthy for featuring a super-senior tranche and a higher percentage of wide-body aircraft than most aircraft ABS.
• Och-Ziff Europe Loan Management has priced its debut European CLO - the €413m OZLME. The senior notes continued the slew of sub-110bp prints seen last month (see SCI's new issue database).
• Banca del Mezzogiorno has issued and retained its inaugural RMBS transaction, dubbed MCC RMBS. The €427.20m deal is backed by Italian residential mortgage loans.
• Fitch has downgraded Honours' class B, C and D notes and maintains a rating watch negative on these and the A notes. The transaction is a refinancing of the previous Honours deal which closed in 1999, securitising student loans originated in the UK by the Student Loans Company.

Regulatory update
ESMA has opened a public consultation on draft regulatory technical standards (RTS) regarding the treatment of package orders under the amended MiFID II/MIFIR. Asset class-specific criteria have been developed for a few classes, including credit derivatives.
• The Australian Prudential Regulation Authority has responded to submissions to its November 2015 discussion paper on revising its prudential framework for securitisation (SCI 26 November 2015). It has also issued a final revised Prudential Standard APS 120 and is consulting on its draft revised Prudential Practice Guide APG 120.
• The UK Prudential Regulation Authority's new lending standards should improve the credit quality of UK buy-to-let mortgages, Moody's suggests. The agency says that the rules are credit positive because they reduce the risk of excessive losses in UK RMBS and covered bonds.