SCI Start the Week - 16 November

Category: ABS CDO CLOs


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

Pipeline
Last week's pipeline additions were skewed to ABS and CMBS. There were nine of the former and four of the latter, as well as an ILS, an RMBS and a CLO.

The ABS were: CNY3.22bn Bavarian Sky China 2015-2; US$400m NRZ Advance Receivables Trust 2015-ON1 2015-T3; US$400m NRZ Advance Receivables Trust 2015-ON1 2015-T4; US$536.4m SoFi Professional Loan Program 2015-D; US$198.4m South Carolina Student Loan Corp 2015-A; €983.3m Sunrise Series 2015-3; Swiss Car ABS 2015-1; US$250m TCF Auto Receivables Owner Trust 2015-2; and €882.2m VCL Master Residual Value Compartment 2.

US$1.5bn FREMF 2015-K50, US$820.6m GSMS 2015-GS1, US$761.8m JPMBB 2015-C33 and US$774.5m WFCM 2015-NXS4 accounted for the CMBS. The ILS, RMBS and CLO were Residual Reinsurance 2015-II, US$600m FWLS 2015-SC02 and US$400m Ares XXXVIII CLO, respectively.

Pricings
There were eight ABS prints as well as five RMBS. There was only one CMBS and three CLOs.

The ABS were: US$635m Arby's Funding Series 2015-1; US$106.1m BlueVirgo 2015-1 Trust; US$751m Chrysler Capital Auto Receivables Trust 2015-B; US$180m Diamond Resorts Owner Trust 2015-2; US$200m Ocwen Master Advance Receivables Trust 2015-T2; US$400m Ocwen Master Advance Receivables Trust 2015-T3; €270m Sligo Card Finance 2015; and €231m Success 2015.

The RMBS consisted of: US$301m B2R Mortgage Trust 2015-2; A$500m Firstmac Mortgage Funding Trust No.4 Series 2-2015; £267m Gemgarto 2015-2; US$250m Oaks Mortgage Trust Series 2015-2; and £341.5m Paragon Mortgages No.24.

US$960.9m COMM 2015-LC23 was the sole CMBS. The CLOs were US$509m Carlyle Global Market Strategies CLO 2015-4, €406m Cork Street CLO and US$411.2m Galaxy XXI CLO.

Markets
US ABS auto and credit card spreads were unchanged on the week. "In the student loan sector, spreads for 5- and 10-year senior notes for FFELP ABS widened 5bp, as the market remains cautious in front of new ratings criteria. Wider spreads for FFELP ABS have had a knock on effect on private student loan ABS, where spreads for 3- and 5-year senior notes widened 5bp, while spreads for both class B and C notes widened by 20bp," say Bank of America Merrill Lynch analysts.

US CLO secondary market activity was up significantly in October compared to September, with US$6.4bn of investment grade securities. "A main driver of the surge in public BWIC volume was the continued pickup of supply in CLO senior tranches in October, especially in the first half of the month, from strong real money demand in the senior tranches of the capital structure. Accordingly, secondary trading levels widened considerably across the capital structure, with CLO 2.0 triple-As generically trading in the 160bp-plus context," comment Morgan Stanley analysts.

Editor's picks
Divergent HQS approach highlighted
: The Basel Committee has released a consultative document on capital treatment for 'simple, transparent and comparable' (STC) securitisations, which builds on the criteria issued in July (SCI 23 July). However, given the European Commission's recent 'simple, transparent and standardised' (STS) proposals, it seems that regulators continue to pursue different approaches towards high-quality securitisations (SCI 21 August) and therefore exacerbate regulatory uncertainty...
CMBS borrower bunching considered: Blackstone is the ultimate borrower for a full third of floating rate European CMBS issuance from 2014 and 2015. When adding the second-largest borrower - IVG - concentration increases to 50%...
Euro CLOs stymied: New issue activity is pulling focus away from the European CLO secondary market. "There's not much happening in secondary - we've only done a handful of trades this week," says one trader. "It's all about primary at the moment as we're in one of those windows in which new issues can price most easily..."

Deal news
• UKAR will sell £13bn of loans previously held on Northern Rock's legacy book to Cerberus Capital Management, £12bn of which lies in the Granite securitisation vehicle. The sale ends months of speculation regarding the winning bidder and the potential scenarios the portfolio could face (SCI passim).
• The latest US conduit CMBS to print - the US$960.9m COMM 2015-LC23 - has a structural feature not seen since 2012. Rated by Fitch and Kroll, the US$28.83m D tranche was rated BBB/BBB+ (with 10.75% subordination), while the US$24.02m E tranche was rated triple-B minus (8.25%).
• Invitation Homes has decided to exercise its one-year optional term extension on the single loan backing Invitation Homes 2013-1, a move that Moody's has labelled credit neutral. The deal, which was the first-ever single-family rental securitisation, still has a number of technical conditions to be settled before the extension takes effect.
• Fair Oaks Income Fund has entered into binding contracts to acquire, in the primary market, US$25m notional of AIMCO CLO Series 2015-A equity notes. The investment represents 78% of the transaction's total equity.
• The retention undertaking letters for Castle Park CLO, Orwell Park CLO, Dartry Park CLO, Phoenix Park CLO and Sorrento Park CLO have been amended to include two further representations made by their manager GSO/Blackstone, which aim to comply with the 'purpose test', as envisaged under the European Commission's Capital Requirements Regulation proposals (SCI 2 October). The amendments state that the issuers are not entities that have been established for the sole purpose of securitising exposures and that they have the capacity to meet payment obligations from resources unrelated to the exposures they securitise.

Regulatory update
• The EBA, EIOPA and ESMA have jointly published two draft implementing technical standards (ITS) on credit assessments by external credit assessment institutions (ECAIs). The standards are intended to ensure sound credit assessments and thus contribute to financial stability in the EU.
• A joint report has been published by a number of Israeli government organisations which calls for the promotion of securitisation in Israel, albeit in a 'cautious' and 'measured fashion'. It concentrates on obstacles in areas such as taxation, regulation and accounting, and cites various recommendations to remove them.
HM Treasury's announcement that it has begun the legislative process for introducing a UK ILS framework has been welcomed by the London Market Group (LMG). An amendment to the Bank of England and Financial Services Bill has been tabled to the government, which seeks power for the Treasury to make regulations facilitating and regulating ILS business.
• The Government of Gibraltar has announced legislation that provides a new form of protective cell company (PCC), designed specifically for ILS. The new PCC regime will be regulated under Gibraltar's Insurance Companies (SPV) Regulations 2009.

Deals added to the SCI New Issuance database last week:
AmeriCredit Automobile Receivables Trust 2015-4; CIFC Funding 2015-V; Cole Park CLO; COMM 2015-LC23; Firstmac Mortgage Funding Trust No. 4 series 2-2015; FREMF 2015-KVAD; GSMS 2015-590M; Highbridge Loan Management 7-2015; Neuberger Berman CLO XX; NewDay Funding series 2015-2; Nissan Auto Lease Trust 2015-B; Oak Hill European Credit Partners IV; Paragon Mortgages No. 24; Scandinavian Consumer Loans V; Skopos Auto Receivables Trust 2015-2

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-5; CD 2007-CD4; CGCMT 2006-C5; CGCMT 2008-C7; DECO 2007-E6; ECLIP 2006-3; EMC 6; EURO 25; INFIN SOPR; JPMCC 2006-CB17 & JPMCC 2006-LDP9; MLCFC 2007-5; TITN 2006-3; TITN 2006-5; WINDM X; WINPP I

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