SCI Start the Week - 19 September

Category: ABS CDO CLOs


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

Pipeline
After the flood of additions in the week before, last week's pipeline activity was calmer. There were three new ABS added, as well as an RMBS, two CMBS and two CLOs.

Bavarian Sky German Auto Loans 5, €726m PSA 2016 and €750m SC Germany Consumer 2016-1 accounted for the ABS. The RMBS was Fastnet Securities 12.

US$1.12bn FREMF 2016-K57 and US$550m MSCBB 2016-MART constituted the CMBS. The two CLOs were US$516m Madison Park Funding XXII and US$557.75m OCP CLO 2016-12.

Pricings
No fewer than 25 ABS prints were recorded for the week. There were also two RMBS, two CMBS and three CLOs.

The ABS were: US$180.7m BCC Funding XIII Series 2016-1; US$751m Capital Auto Receivables Asset Trust 2016-3; US$752m CNH Equipment Trust 2016-C; US$1.2bn Discover Card Execution Note Trust 2016-4; US$230m First Investors Auto Owner Trust 2016-2; €800m Ginkgo 2016-PL1; €653m Globaldrive Auto Receivables 2016-B; US$970.83m GM Financial Automobile Leasing Trust 2016-3; C$700m Golden Credit Card Trust 2016-5; US$320m HERO Funding 2016-3; US$1.2bn Hyundai Auto Receivables Trust 2016-B; US$1.5bn Mercedes-Benz Auto Receivables Trust 2016-1; NZ$200m MTF Torana Trust 2016; US$145m Navitas Equipment Receivables Series 2016-1; US$209.665m New York Counties Tobacco Trust VI; US$1.14bn Nissan Auto Lease Trust 2016-B; US$362.2m OSCAR US 2016-2; US$436.67m SoFi Consumer Loan Program 2016-4; US$1.745bn SpringCastle Funding Asset-Backed Notes 2016-A; US$767m Synchrony Credit Card Master Note Trust Series 2016-3; US$502m TCF Auto Receivables Owner Trust 2016-1; US$150.4m United Auto Credit Securitization Trust 2016-2; US$500m USAA Auto Owner Trust 2016-1; US$375m Vistana 2016-A; and US$350m World Financial Network Credit Card Master Note Trust Series 2016-B.

US$221.3m COLT 2016-2 and A$750m Progress 2016-1 were the RMBS, while US$235m JPMCC 2016-WSP and US$515m STACR 2016-HQA3 were the CMBS. The CLOs were US$707m Ares XL, US$612m Magnetite CLO 2016-7 and US$449m LCM XXII.

Markets
The European secondary markets were unmoved by broader market volatility, as SCI reported on Tuesday (SCI 13 September). A shortage of primary supply continued to drive secondary spreads, with UK non-conforming RMBS and CLOs notably underrepresented in the growing post-August pipeline.

The rally in the US CLO secondary market began to ease up last week (SCI 15 September). "There's been around a 5bp tightening in the last few sessions in the triple-As to single-As, but it's slowed up a little with the Bs," says one trader. "Good names in double-Bs are hitting in and around the low 700s."

Editor's picks
Agency investing
: Combined Fannie Mae and Freddie Mac CMBS issuance is expected to come close to US$100bn for the year, with agency CMBS comfortably outstripping non-agency supply. While the agency CMBS market has historically been small, it is growing rapidly and there are attractive opportunities for investors to take advantage of...
Horizontal interest: An increasing number of US sponsors are expected to retain a horizontal rather than a vertical risk slice in upcoming securitisations, despite complexities around valuation and disclosure of the residual interests. Several recent transactions have successfully employed the horizontal risk retention method and its economic efficiencies may convince other sponsors to follow suit...
Housing boost for Spain: The bottoming-out of house prices in Spain will reduce the expected severity of mortgage defaults, resulting in the improvement of the performance of Spanish RMBS, SME ABS and covered bonds, according to Scope Ratings...

Deal news
• The first weather catastrophe bond for 17 years has hit the market. It is hoped that the deal - Market Re 2016-5 - will kick-start an expansion of weather-linked bonds in the ILS market, but their take-up rests on greater education around the topic.
• Freddie Mac has priced its sixth STACR offering of the year, with the senior M1 notes printing at the tightest level to date at one-month Libor plus 80bp. The US$515m STACR Series 2016-HQA3 also saw its M2 tranche print at plus 135bp, the M3s at 385bp and subordinate Bs at 900bp.
• Moody's has assigned a green bond assessment (GBA) of GB1 to US$320.24m of HERO Funding 2016-3 class A1 and class A2 notes, marking the first time a PACE securitisation has been assigned such a grading. The green bonds will fund energy efficiency, renewable energy and water conservation improvements on residential properties in California.
• American Homes 4 Rent (AH4R) has repaid the US$342.1m loan that backs the American Residential Properties 2014-SFR1 single-family rental securitisation. The move follows the merger of the sponsor American Residential Properties with AH4R earlier this year.
• Cardno has provided technical assistance to the US Agency for International Development in connection with Armenia's first-ever securitised bond. The transaction raised US$5m in new funding for five non-bank credit institutions and introduced a new ABS to the Armenian market using a mixed portfolio of microbusiness and consumer loans.
• Nelnet has extended the final maturity date on nine FFELP student loan ABS deals following investor consent. The firm expects to add five-year maturity extensions over the next week on the following transactions: NSLT 2014-4 A1, 2014-4 A2, 2014-4 B, 2011-1 A, 2010-1 A, 2015-3 A3, 2015-3 A2, 2015-3 B, 2015-1 A, 2015-1 B, 2015-2 A2, 2015-2 B, 2014-6 A, 2014-6 B, 2014-5 A, 2014-5 B and 2010-2 A. It anticipates launching a process to seek investor consent to extend its NSLT 2012-3, 2014-2 and 2014-3 transactions in the near future.
• A third proposed replacement collateral manager has been rejected by Gramercy Real Estate CDO 2007-1 noteholders. Holders of a majority of the CRE CDO's controlling class had previously directed the issuer to appoint Cairn Capital Management North America as successor collateral manager (SCI 10 August).

Regulatory update
• The ECB's ABSPP is entering its third year in November and since inception has been joined by three other asset purchase schemes. While the entire ECB purchase programme is set to expire in May 2017, the effectiveness of the ABSPP in particular continues to be a topic of debate.
• There are many opportunities for greater standardisation and automation of derivatives trade processes in order to achieve improved efficiency, reduced complexity and lower costs for market participants, says ISDA in a new white paper. The association notes that market participants are increasingly looking for market solutions to automate and streamline the reporting, trading, clearing and collateral management requirements required by regulatory changes.
• The London Market Group (LMG) has welcomed a letter from HM Treasury that outlines early 2017 as the target for implementing an ILS framework within the UK. The letter, signed by Economic Secretary to the Treasury Simon Kirby, notes that the next phase involves drafting the regulations for consultation later this Autumn prior to putting legislation before Parliament.
• Deutsche Bank has commenced negotiations with the US Department of Justice (DoJ) to settle civil claims which may be brought as a result of the bank's issuance and underwriting of RMBS and related securitisation activities between 2005 and 2007. The bank confirms that the DoJ's opening position is a US$14bn settlement, with Deutsche Bank invited to submit a counter proposal. The bank says it "has no intent to settle these potential civil claims anywhere near the number cited".

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