Monday 15 February 2016 11:25 London/ 06.25 New York/ 19.25 Tokyo

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

Pipeline
As with the previous week, pipeline additions last week were dominated by ABS. There were seven new ABS deals announced, as well as an ILS, an RMBS and two CMBS.

The ABS were: US$556m ARI Fleet Lease Trust 2016-A; US$300m Avant Loans Funding Trust 2016-A; US$446m Flagship Credit Auto Trust 2016-1; US$1bn GM Financial Automobile Leasing Trust 2016-1; US$1.025bn Honda Auto Receivables 2016-1 Owner Trust; US$125m Oportun Funding II Series 2016-1; and US$156.382m Tidewater Auto Receivables Trust 2016-A.

US$225m Caelus Re IV was the ILS and Silverstone Master Issuer Series 2016-1 was the RMBS. The CMBS were US$765m 225 Liberty Street Trust 2016-225L and US$875m WFCM 2016-NXS5.

Pricings
Unsurprisingly, ABS deals also accounted for most of the week's prints. As well as 11 ABS there were four RMBS and two CLOs.

The ABS were: US$1bn BMW Vehicle Lease Trust 2016-1; US$850m CNH Equipment Trust 2016-A; Y64bn Driver Japan Five; US$112m Earnest Student Loan Program 2016-A; US$799m Enterprise Fleet Financing Series 2016-1; US$198.8m First Investors Auto Owner Trust 2016-1; US$750m Ford Credit Floorplan Master Owner Trust A Series 2016-1; US$455m GreatAmerica Leasing Receivables Funding Series 2016-1; US$400m PFS Premium Finance 2016-A; US$1.6bn Santander Drive Auto Receivables Trust 2016-1; and £395m Turbo Finance 6.

US$950m CAS 2016-C01, £487m Darrowby No.4, £790m Trinity Square 2016-1 and US$400m WinWater Mortgage Loan Trust 2016-1 accounted for the RMBS. The CLOs were €410m BlackRock European CLO I and US$348m NewStar Commercial Loan Funding 2016-1.

Markets
Banks are expected to switch from Treasuries to US agency RMBS, which is a sector that Citi analysts believe is cheap for investors with a horizon of three to six months. They add: "The rally in rates has pushed down yield bogeys and further pushed out the risk to a taper in the reinvestment program. Investment grade spreads are looking attractive but the impending downgrades in the sector will continue to incentivise money managers to own RMBS."

With US CLO spreads widening significantly, JPMorgan analysts advocate short-to-mid duration triple-As. They say: "We believe the name of the game right now is earning carry while preserving capital. The triple-A term curve is flat and levels have blown out as risk re-priced."

Editor's picks
Right to return
: Attempts to reinvigorate the US non-prime RMBS market appear to be gaining traction. However, the sector still needs to overcome being tarnished by the subprime stigma...
Potential PMI boost for RMBS: The recovery of the private mortgage insurance (PMI) industry suggests that there is value to be found in legacy non-agency RMBS. Even insurers in run-off are making payments and bond values are expected to improve significantly for legacy deals backed by loans with PMI underwritten by still-active insurers...
US CLOs challenged: Internal and external factors are making things difficult in the US CLO secondary market. "There's not a whole lot happening - it's a very challenging market at the moment," says one trader. "Secondary isn't helped by primary being hung as well - it's too difficult to get a deal away with secondary spreads 100+ wider than new issue..."

Deal news
• The US$94.2m Gateway Salt Lake loan - securitised in JPMCC 2010-C1 - has been assumed at US$78.5m and modified, following its acquisition by an investor group that reportedly includes Vestar and Oaktree (see SCI's CMBS loan events database). Morgan Stanley CMBS strategists expect the move to result in significant interest shortfalls and a loss to the trust of roughly US$15.7m.
• The first loan default in the US$251.6m Colony American Finance 2015-1 multi-borrower single-family rental (SFR) securitisation is expected to have little impact on the transaction's performance, as the US$1.1m loan accounts for just 0.4% of the collateral pool. The loan transferred to the special servicer - Midland Loan Services - in November 2015, a month after the transaction closed.
• S&P says that its single-D rating on the MultiCat Mexico series 2012-I class C notes is unaffected following a triggering event. The agency received an event report for Hurricane Patricia from the calculation agent AIR Worldwide Corp, which confirms that a triggering event has occurred in relation to the catastrophe bond, resulting in a principal reduction of US$50m for the series 2012-I class C notes.
• Patriarch Partners is stepping down as collateral manager of Zohar CDO 2003-1, Zohar II 2005-1 and Zohar III. The firm says it will work with a new collateral manager - whose appointment has yet to be announced - to ensure a smooth transition.
MSBAM 2016-C28 contains a series of non-investment grade exchangeable classes, which is a nuance not seen before in a CMBS 2.0 transaction. Fitch believes the feature raises the question of sufficient tranche thickness and maintains that insufficient thickness - particularly below 1% - creates accelerated downgrade risk and a higher rate of loss given default.

Regulatory update
• The European Commission has announced a one-year extension for firms to comply with its MiFID 2 standards as it seeks more time to set up the complex technical infrastructure entailed within the package. The new deadline is now 3 January 2018.
• The European Commission and the US CFTC have reached an agreement on a common approach regarding requirements for central counterparties (CCPs). The move means that European CCPs will be able to do business in the US more easily and that US CCPs can continue to provide services to EU companies.
• The US SEC has voted to adopt rules requiring non-US companies that use personnel in the US to arrange, negotiate or execute security-based swap transactions to include such transactions in determining whether those companies should register as security-based swap dealers. These rules aim to ensure that both US and foreign dealers are subject to Title VII of Dodd-Frank.
• The UK Financial Conduct Authority has fined Achilles Macris £792,900 for failing to be open and cooperative with the regulator. He was head of JPMorgan's international chief investment office (CIO) in London, responsible for a number of portfolios - including the synthetic credit portfolio - at the time of the 'London whale' trades (SCI passim).
• Morgan Stanley has agreed to pay out on another settlement involving failed MBS assets that it sold in the lead-up to the financial crisis. According to New York Attorney General Eric Schneiderman, the bank will pay a total of US$3.2bn, US$550m of which will go to helping New York State residents repair mortgage issues.
• The OCC has terminated mortgage servicing-related consent orders against US Bank and Santander, and assessed civil money penalties against the banks for previous violations of the orders. The consent orders were terminated after the OCC determined that the institutions now comply with the orders.
• The US Justice Department, the Department of Housing and Urban Development and the CFPB, along with 49 state attorneys general and the District of Columbia's attorney general, have reached a US$470m agreement with HSBC to address mortgage origination, servicing and foreclosure abuses. The settlement reflects a continuation of enforcement actions to hold financial institutions accountable for abusive mortgage practices, with negotiations beginning after the announcement of the US$25bn National Mortgage Settlement from February 2012 (SCI passim).

Deals added to the SCI New Issuance database last week:
CLI Funding VI series 2016-1; Darrowby No. 4; Exeter Automobile Receivables Trust 2016-1; FREMF 2016-KJ03; FRESB 2016-SB12; HERO Funding Trust 2016-1; Nissan Auto Receivables 2016-A Owner Trust; OneMain Financial Issuance Trust 2016-1; Trinity Square 2016-1; Turbo Finance 6

Deals added to the SCI CMBS Loan Events database last week:
BL Superstores; BSCMS 2007-PW15; BSCMS 2007-PW17; BSCMS 2007-T26; CFCRE 2011-C2; COMM 2006-C7; CSMC 2007-C1; CWCI 2007-C2; ECLIP 2006-2; ECLIP 2007-2; EURO 25; EURO 26; EURO 28; GMACC 2006-C1 & GECMC 2006-C1; INFIN CLAS; JPMCC 2010-C1; LBUBS 2006-C1 & LBUBS 2006-C7; MSBAM 2013-C8; TMAN 7; WBCMT 2006-C25; WBCMT 2006-C28; WBCMT 2006-C29


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