Monday 16 May 2016 16:36 London/ 11.36 New York/ 00.36 (+ 1 day) Tokyo

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

Pipeline
While ABS additions to the pipeline were steady last week, they were joined by a greater variety of deals than had been the case in the week prior. Additions consisted of eight ABS, two ILS, four RMBS, six CMBS and a CLO.

The ABS were: C$400m BMW Canada Auto Trust 2016-1; US$1bn Drive Auto Receivables Trust 2016-B; £340m Greene King Finance; US$783m Hyundai Auto Lease Securitization Trust 2016-B; US$340m LEAF Receivables Funding 11; Nissan Auto Lease Trust 2016-A; Orbita Funding 2016-1; and US$551m SMB Private Education Loan Trust 2016-A.

US$100m First Coast Re Series 2016-1 and US$190m Queen Street Re XII accounted for the ILS. The RMBS were US$255m Colony American Finance 2016-1, £3.7bn Duncan Funding 2016-1, National RMBS Trust Series 2016-1 and £240.5m Oncilla Mortgage Funding 2016-1.

The CMBS consisted of: US$259.7m ACM 2016-1; US$755.7m CGCMT 2016-C1; CSAIL 2016-C6; US$750.6m GSMS 2016-GS2; US$133m LMRK Issuer Co Series 2016-1; and C$400m REAL-T Series 2016-1. The CLO was €360m Aurium CLO II.

Pricings
A large number of ABS deals priced last week. As well as 12 ABS, there was also an ILS, three RMBS, two CMBS and two CLO prints.

The ABS were: €964m A-BEST 14; US$1.3bn Capital One Multi-asset Execution Trust 2016-1; US$625m Capital One Multi-asset Execution Trust 2016-2; US$1.5bn Chase Issuance Trust 2016-A1; US$176m DRB Prime Student Loan Trust 2016-B; US$1bn Evergreen Credit Card Trust 2016-1; US$300m Exeter Automobile Receivables Trust 2016-2; US$191.8m GLS Auto Receivables Trust 2016-1; US$1.07bn GM Financial Automobile Leasing Trust 2016-2; €153m Master Credit Cards Pass Compartment France Series 2016-1; €600m SC Germany Auto 2016-1; and CNY950m Shenrong 2016-1 Retail Auto Mortgage Loan Assets Backed Securities Trust.

US$150m Residential Reinsurance Series 2016-1 was the ILS while €1.6bn BVA RMBS 16, US$255m Colony American Finance 2016-1 and US$200m Station Place Securitization Trust 2016-3 were the RMBS. The CMBS were €230m Taurus 2016-2 DEU and US$703m WFCMT 2016-C34. The CLOs were US$473m ALM XIX and US$405m Midocean Credit CLO V.

Markets
"The [US] ABS market continued to see very strong demand this week," say JPMorgan analysts. The two Capital One credit card ABS deals were strongly upsized. The analysts add: "The ABS pipeline remains full as more sponsors take advantage of improved pricing and demand. We expect the supply/demand balance will remain favourable in both the primary and secondary markets."

The key risk for US agency RMBS continues to be a selloff in risk assets and a corresponding rally in rates, say Wells Fargo analysts. However, FN 3.5s outperformed Treasuries by a tick in the week to Wednesday. "Up in coupon largely outperformed as well, which points toward minimal concerns around the prepayment risk. The hedge-adjusted carry on FN 3.5s is 1 tick; and while it is nothing to harp about, it is still quite respectable. The curve hedged carry is a healthy 3 ticks," they note.

In Europe, Bank of America Merrill Lynch analysts note that high primary and secondary supply across ABS, RMBS, CMBS and CLOs probably represents "a storm before the calm" as a referendum and election approach. BWICs presented a wide array of bonds and most appear to have traded. "The primary market was also diverse with dominant auto loan ABS supply stream, supplemented with European CMBS and CLOs, rare credit card ABS, etc. Strangely, given the strong demand, deals which could have been placed with investors were fully or partially retained," the analysts note.

Editor's picks
Firm foundations: The £6.2bn Towd Point Mortgage Funding 2016-Granite1 RMBS that priced last month is the largest new issue in its sector since before the financial crisis. However, its effect on the market could be revolutionary for a different reason - the introduction in Europe of a weighted average coupon (WAC) cap (SCI 28 April)...
IFRS 9 calculation warning: A recent study undertaken by Kamakura Corporation underlines the risks of using credit spreads to assess obligor creditworthiness in light of the upcoming IFRS 9 implementation and the FASB's current expected credit loss model. The findings of the study, entitled 'Fair Value and Expected Credit Loss Estimation', highlight that the common usage of credit spreads - which are derived from observable bond prices but contain false assumptions - contributes large errors to valuation and credit assessment in the obligor creditworthiness analytical process...
Value to be had in card ABS: The first euro-denominated credit card ABS of the year priced this week, helping to chip away at the dearth of primary supply. European credit card ABS distributed issuance is just €550m year-to-date, the second-lowest tally since 2011, so investors are increasingly focusing on secondary market opportunities...
US CLOs pause: The US CLO secondary market looks to be taking time to reflect this week. "It seems like the rally has taken a bit of a pause this week," says one trader. "People are looking at where things stand in respect to credit and deciding on what the path forward might be..."

Deal news
• April remittance reports showed muted activity for US CMBS 2.0 loans secured by properties located in oil boom regions compared to prior months, with only three such loans transferring to special servicing, according to Morgan Stanley CMBS strategists. The largest loan with exposure to oil boom regions to transfer to special servicing was the US$11.6m TownePlace Suites Odessa, securitised in COMM 2012-CR4.
• A second judgment in less than a month has gone against CMBS class X noteholders. Last month, a judge ruled against the class X noteholders in Windermere VII, dismissing the plaintiffs' arguments (SCI 11 April), while the latest case concerned four transactions in the Titan series, including Titan Europe 2006-1.
• United Guaranty Corporation (UGC) has obtained US$298.6m in reinsurance coverage for its legacy portfolio book in its latest ILS deal, Bellemeade Re II. The transaction is believed to be the first in the asset class to include a pre-2009 portfolio of mortgage insurance policies.
• The trustee for the Strawinsky I CLO has received notice from a class B noteholder disapproving the appointment of Dynamic Credit Partners Europe as successor investment manager (SCI 22 April). Pursuant to clause 10.5 of the master investment manager terms, the appointment of a replacement manager is subject to a simple majority of the controlling class (currently the class B noteholders) acting by ordinary resolution not disapproving the move within 21 days of notice of such a proposal.

Regulatory update
• The Bank of China (BOC) has announced that it is proactively preparing for the pilot implementation of its NPL securitisation scheme. At the same time, Fitch has commented that NPL transactions in China will provide a challenge to investors due to the unpredictability of their cashflows and an uncertain judicial process.
• The US Treasury has released a white paper on marketplace lending, which continues the work initiated by last year's request for information (RFI). It reviews over 100 responses from a range of key industry figures and makes recommendations for the continued safe growth of the industry.
SFIG's draft proposal to standardise the framework for reviewing and grading loans for TILA-RESPA Integrated Disclosure (TRID) rule compliance is generally adequate to identify compliance risks that are likely to cause RMBS losses, says Moody's. However, the rating agency does disagree with one grading provision.
ESMA has published the results of its first EU-wide stress test exercise regarding central counterparties (CCPs). The exercise aims to assess the resilience and safety of the European CCP sector, as well as to identify possible vulnerabilities. The results show that the system of EU CCPs can overall be assessed as resilient to the stress scenarios used to model extreme but plausible market developments.
• The New York Supreme Court last week received a proposed severance order and partial final judgement from BNY Mellon as trustee for 512 of the 530 RMBS trusts subject to the US$8.5bn Countrywide Settlement. A group of investors, who have been actively involved in the determination of the proper procedures for handling the payout, have filed a motion consenting to BNY Mellon's proposal.

Deals added to the SCI New Issuance database last week:
Ascentium Equipment Receivables 2016-1 Trust; Bavarian Sky Compartment German Auto Loans 4; Black Diamond CLO 2016-1; Carlyle Global Markets Strategies 2016-2; Cars Alliance Auto Loans Germany V 2016-1; CCRESG 2016-HEAT; Cedar Funding V CLO; Compartment Private VCL 2016-1; Credit Acceptance Auto Loan Trust 2016-2; Dryden 44 Euro CLO; Earnest Student Loan Program 2016-B; Elm Park CLO; FDF II ; Flagship Credit Auto Trust 2016-2; FREMF 2016-KF16; FREMF 2016-KIR1; FREMF 2016-KJ04; Golden Credit Card Trust series 2016-3; Golden Credit Card Trust series 2016-4; Highbridge 9-2016; Home Loan Invest 2016; MMAF Equipment Finance 2016-A; NextGear Floorplan Master Owner Trust Series 2016-1; NP SPE II; OnDeck Asset Securitization Trust II Series 2016-1; Palmer Square Loan Funding 2016-2; PCT 2016-PLSD; Race Point X CLO; Santander Drive Auto Receivables Trust 2016-2; Sapphire XIV Series 2016-1 Trust; Small Business Origination Loan Trust 2016-1; Sound Point CLO XI; STACR 2016-DNA2; Swiss Car ABS 2016; Taco Bell Funding series 2016-1; Toyota Auto Receivables 2016-B Owner Trust; Trinitas CLO IV

Deals added to the SCI CMBS Loan Events database last week:
BSCMS 2004-PWR3; BSCMS 2006-PW11; CGCMT 2013-GC15; COMM 2012-CR4; COMM 2012-CR7; COMM 2014-CR18; COMM 2014-LC15; COMM 2014-UBS6; CSAIL 2015-C2; ECLIP 2006-1; ECLIP 2006-2; ECLIP 2006-4; ECLIP 2007-2; EURO 28; GECMC 2005-C4; GSMS 2014-GC18; INFIN SOPR; JPMBB 2014-C21; JPMCC 2006-CB15; JPMCC 2007-LDP12; JPMCC 2012-CBX; MSC 2006-HQ8; NEMUS 2006-2; TITN 2007-2; TMAN 5; TMAN 6; TMAN 7; UBSBB 2013-C5; WFRBS 2014-C19; WINDM VII; WINDM X


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