Monday 15 June 2015 11:01 London/ 06.01 New York/ 19.01 Tokyo

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

Pipeline
It was another busy week for the pipeline. There were nine new ABS added - including yet another Chinese deal - as well as three RMBS, three CMBS and a CLO.

The ABS were: US$214m American Credit Acceptance Receivables Trust 2015-2; US$96.4m CommonBond Student Loans Trust 2015-A; CNY1.9bn Driver China Two Trust; A$285m Flexi ABS Trust 2015-2; US$114.83m ReadyCap Lending Small Business Loan Trust 2015-1; US$750m Santander Drive Auto Receivables Trust 2015-3; €1.1bn Sunrise Series 2015-2; US$1bn SunTrust Auto Receivables Trust 2015-1; and US$450m Westlake Automobile Receivables Trust 2015-2.

US$1.2bn Invitation Homes 2015-SFR3, US$343m Sequoia Mortgage Trust 2015-3 and US$405m WinWater Mortgage Loan Trust 2015-4 accounted for the RMBS, while the CMBS were US$380m BXHTL 2015-JWRZ, US$206m RIAL Series 2015-LT7 and US$1.2bn WFCM 2015-C29. The sole CLO was US$450m Marathon CLO VIII.

Pricings
A significant number of deals also printed. The week's issuance included ten ABS, two RMBS, a CMBS and six CLOs.

The ABS were: US$250m CPS Auto Receivables Trust 2015-B; US$344m DT Auto Owner Trust 2015-2; US$970m GM Financial Automobile Leasing Trust 2015-2; US$290m Hertz Fleet Lease Funding Series 2015-1; €700m Highway 2015-I; US$758.2m Navient Student Loan Trust 2015-3; US$180m New Jersey Student Loan Revenue Bonds 2015-1; CNY3.58bn Rongteng Individual Auto Mortgage-Backed Securitization 2015-1; US$443.4m Santander Drive Auto Receivables Trust 2015-S1-S7; and US$864m Toyota Auto Receivables 2015-B Owner Trust.

A$500m Pepper Residential Securities Trust No.14 and A$500m TORRENS 2015-1 were the two RMBS. The CMBS was €480m-equivalent Mint 2015.

Lastly, the CLOs were: US$475m ALM VI (reissue); US$411m Cathedral Lake 2015-2; US$408m Fortress Credit Investments CLO 2015-4; US$411m ICG US CLO 2015-1; US$616m THL Credit Wind River 2015-1; and €354.7m Tikehau CLO 2015-1.

Markets
Front-end US ABS spreads widened 5bp last week and 2bp-5bp the week before. Citi analysts attribute the widening to a robust new issue market, heavy BWIC activity and rate volatility. They add: "We believe that the technicals are driving the market and wider spreads represent a buying opportunity. The pace of rate lift-off should be measured, justifying market weighting ABS. The sector's short WAL is inherently defensive."

There was significant widening in US non-agency RMBS for CAS and STACR. "In the CRT space, the M1 and M2 tranches widened about 5bp-15bp and the M3 tranches widened about 20bp-30bp," note Bank of America Merrill Lynch analysts.

The US CMBS market sold off for the third straight week. "In secondary trading of recent issues, LCF triple-A bonds were flat, at swaps plus 89bp. Further down the capital stack, more credit-exposed single A-rated mezzanine tranches were 4bp wider, at swaps plus 219bp, and triple-B rated mezzanine tranches were 5bp wider, at swaps plus 354bp," report Barclays Capital analysts.

US CLO secondary spreads have been moving wider over the last two weeks. "Triple-B spreads are approximately 10bp-15bp wider, and double-B spreads have widened approximately 15bp-25bp," say Wells Fargo analysts. "We believe that the widening is due to the continued large amount of secondary supply, combined with the fact that triple-B and double-B spreads were at or close to post-crisis tights."

European RMBS weakness continued as spreads once again leaked wider. "End-clients became more skittish as the week wore on, unsettled by wider offers and weaker bids. In particular, Spanish and Portuguese RMBS senior bonds were generically 10bp and 20bp wider respectively over the week, reaching levels last seen in August 2014," note JPMorgan analysts.

Editor's picks
Trigger effect
: Improving performance in UK non-conforming RMBS is strengthening mezzanine bondholder positions as an increasing number of deals switch to paying pro rata. However, anticipating when switches will occur is being complicated by ambiguous trigger terminology...
Post-auction headache: The US Department of Housing and Urban Development (HUD) has been an increasingly significant source of NPL supply, but recent changes to its loan auction post-sale requirements make purchasing and securitising loans more challenging and expensive. Although the HUD is far from the only source of NPL supply, these changes are likely to have significant implications for the NPL securitisation market...
Special offer: The first of the Australian Office of Financial Management's (AOFM) planned series of RMBS auctions is expected this month. The sales present investors with an attractive opportunity...
Lift off?: The marketplace lending securitisation sector appears set for take-off, fuelled by the proliferation of online lending platforms and an influx of institutional investor capital. However, increased visibility around credit criteria and better representations and warranties are necessary for the asset class to become mainstream...

Deal news
• The latest Auction.com listings indicate that a further 44 properties with US$622m in allocated balance across 30 CMBS loans are up for bid in late June and July (SCI 19 May). The US$75m Manhattan Towers, securitised in CD 2007-CD4, is the largest loan out for bid.
• Redwood Trust's RMBS offering from April, Sequoia Mortgage Trust 2015-2, includes several new structural enhancements for the asset class (SCI 5 May). Fitch says that the features are intended to mitigate potential conflicts of interest, many of which are a plus, but could also introduce a new risk.
• Freddie Mac's newest risk-sharing RMBS transaction is the first to share a reference pool of loans with a previous transaction, says Moody's. However, the agency believes this feature will not increase credit risk for investors. Principal payments for STACR Debt Notes Series 2015-HQ2 will not come out of payments from STACR 2014-HQ2's portion of the shared reference pool, but rather from a portion that Freddie Mac retained in a 2014 transaction.
• Fitch suggests that the exposure of hotel profitability to changes in supply and demand for rooms would have led to lower ratings on some tranches of the recent multi-jurisdictional Mint 2015 CMBS transaction, if rated by the agency. The difference is more pronounced for senior classes denominated in euros, where Fitch would not have assigned a triple-A rating.
• Vertical Capital has resigned as collateral manager of Kleros Preferred Funding. Pursuant to Section 12 of the management agreement, the issuer will appoint a successor collateral manager at the direction of a majority-in-interest of preference shareholders.
• An auction to settle the credit derivative trades for Sabine Oil & Gas Corporation CDS will be held on 23 June. The firm last month filed a Form 8-K in respect of its entry into a forbearance agreement, which triggered a credit event (SCI 2 June).
• Moody's has upgraded the global and national scale ratings of five tranches from a pair of Tunisian RMBS - FCC BIAT-CREDIMMO 1 and FCC BIAT-CREDIMMO 2. The move follows the upgrade of the Tunisian local-currency bond and deposit ceilings to Baa2 from Baa3 and further deleveraging of the two transactions.

Regulatory update
• The European Supervisory Authorities (ESAs) have launched a second consultation on draft regulatory technical standards (RTS) margin requirements for non-centrally cleared derivatives under EMIR. For OTC derivative transactions that will not be subject to central clearing, the draft RTS prescribe the regulatory amount of initial and variation margin that counterparties should exchange, as well as the methodologies for their calculations.
• The European Commission has adopted an implementing act that will extend the transitional period for capital requirements for EU banking groups' exposures to central counterparties (CCPs) under the Capital Requirements Regulation for six months to 15 December. The Commission says the move aims to give the market the legal certainty it needs while "continuing to work hard on solving the underlying issues".
IOSCO has published its final report on good practices for reducing reliance on credit rating agencies (CRAs) in asset management. The report stresses the importance of asset managers having the appropriate expertise and processes in place to assess and manage the credit risk associated with their investment decisions in addition to the influence of CRA ratings.
• Scope believes that the new Spanish corporate finance promotion law (Ley 5/2015 de fomento de financiación empresarial) governing changes to corporate financing allows for more flexible financing of Spanish SMEs and, in certain cases, may positively affect their creditworthiness. The main purpose of the new law is to promote financing of Spanish SMEs by making it both more accessible and flexible, and by developing alternative means of funding (SCI passim).
• The New York Court of Appeals has upheld a ruling dismissing a lawsuit - which alleged that Deutsche Bank Structured Products (DBSP) had breached reps and warranties with respect to US$330m in MBS mortgage loans - as time-barred. A ruling in favour of the appellant's arguments in Ace Securities Corp, Home Loan Equity Loan Trust, Series 2006-SL2 v. DBSP would have had the effect of extending the limitations period for claims alleging breaches of contractual reps and warranties indefinitely.
• Nomura has filed an appeal to the US Second Circuit Court of Appeals with regard to a recent US district court ruling that required the firm to pay US$806m in damages to the US FHFA (SCI 18 May). The figure was based on the court finding that Nomura had made false statements in selling MBS to Freddie Mac and Fannie Mae prior to the 2008 financial crisis.

Deals added to the SCI New Issuance database last week:
Access Point Funding I 2015-A; Ally Master Owner Trust Series 2015-3; Babson CLO 2012-II (refinancing); Barclays Dryrock Issuance Trust Series 2015-2; BBCMS 2015-RRI; Cadogan Square CLO VI; California Republic Auto Receivables Trust 2015-2; Canadian Credit Card Trust II series 2015-1; Carlyle GMS Finance MM CLO 2015-1; Carlyle GMS Finance MM CLO 2015-1; CIFC Funding 2012-II (refinancing); Compass Re II series 2015-1; CPUK Finance; Crown Castle Towers series 2015-1; Crown Castle Towers series 2015-2; Cutwater 2015-I; Driver France FCT Compartment Driver France Two; FTA RMBS Prado I; Gemgarto 2015-1; GoldenTree Loan Opportunities X; GTP Acquisition Partners I series 2015-1; GTP Acquisition Partners I series 2015-2; Halcyon Loan Advisors Funding 2015-2; Hollis Receivables Term Trust II series 2015-2; Huntington Auto Trust 2015-1; Hyundai Auto Lease Securitization Trust 2015-B; IBL Finance (retained); Long Point Re III series 2015-1; Magnetite CLO VI (refinancing); Master Credit Card Trust II series 2015-1; OCP CLO 2015-9; Orange Lion 2015-11 RMBS; Penarth Master Issuer 2015-2; Progress Residential 2015-SFR2 Trust; REAL-T series 2015-1; Residential Reinsurance series 2015-1; Series 2015-1 WST Trust; STACR 2015-HQ2; State Board of Regents of the State of Utah Series 2015-1; Sunrise 2015-1 (private placement); TCF Auto Receivables Owner Trust 2015-1; Towd Point Mortgage Trust 2015-2; Venture XXI CLO; Welk Resorts 2015-A; Wheels SPV 2 Series 2015-1; Z Capital Credit Partners CLO 2015-1

Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-6; BACM 2006-2; BACM 2006-3; BACM 2007-2; BACM 2008-1; CD 2006-CD2; CD 2007-CD4; CFCRE 2011-C1; CGCMT 2006-C5; CGCMT 2014-GC21; COBALT 2006-C1; COMM 2007-C9; COMM 2012-CCRE2 & COMM 2012-CCRE3; COMM 2014-CR15; COMM 2015-3BP; DECO 2006-E4; DECO 2007-E5; DECO 2007-E6; DECO 8-C2; ECLIP 2006-2; ECLIP 2007-2; EPC 3; EURO 23; EURO 28; GSMS 2010-C2; GSMS 2011-GC3; GSMS 2014-GC20; JPMBB 2013-C17; JPMCC 2003-C1; JPMCC 2006-LDP7; JPMCC 2006-LDP9; JPMCC 2007-LD12; JPMCC 2007-LDP12; JPMCC 2011-C4; JPMCC 2013-C16; JPMCC 2013-LC11; LBUBS 2003-C5; LBUBS 2006-C6; LBUBS 2008-C1; MESDG CHAR; MLMT 2007-C1; MSBAM 2013-C7 & MSBAM 2013-C8; MSC 2007-HQ12; MSC 2008-T29; RIVOL 2006-1; TAURS 2006-3; THEAT 2007-1 & THEAT 2007-2; TITN 2006-3; TITN 2007-2; TMAN 4; TMAN 5; TMAN 7; WBCMT 2006-C23; WBCMT 2006-C26; WBCMT 2006-C29; WBCMT 2007-C32; WFRBS 2012-C7; WFRBS 2013-C14; WINDM VIII; WINDM XI


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