SCI Start the Week - 20 June

Category: ABS CDO CLOs

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

The industry conference in Barcelona reduced primary market activity last week. There were four ABS as well as one RMBS and two CMBS added to the pipeline.

US$811m Ford Credit Auto Owner Trust 2016-REV2, US$123m Golden Bear Funding Notes Series 2016-1, US$156.07m Sierra Auto Receivables Securitization Trust 2016-1 and US$379.8m SoFi Consumer Loan Program 2016-1 accounted for the ABS. The RMBS was US$400m NRZ Advance Receivables Trust Series 2016-T1 and the CMBS were US$115m Cherrywood SB Commercial Mortgage Loan Trust 2016-1 and US$700m SBA Tower Trust Series 2016-1C.

A considerable number of deals did leave the pipeline. There were 11 ABS prints as well as two RMBS, four CMBS and five CDO/CLOs.

The ABS were: €1.026bn Alba 8; CNY3.68bn Bavarian Sky China 2016-1; US$980m Chesapeake Funding II Series 2016-2; €5bn BPCE Consumer Loans FCT 2016-5; US$300m Exeter Automobile Receivables Trust 2016-2; €400m FCT Eurotruck Lease III; US$198m Foursight Capital Auto Receivables Trust 2016-1; US$340m Massachusetts Educational Financing Authority Issue J Series 2016; US$111.2m NMEF Funding 2016-A; US$551m SMB Private Education Loan Trust 2016-A; and €1.471bn Towers CQ 2016.

The RMBS were US$400m ASFR 2016-1 and US$161.7m COLT 2016-1. The CMBS were US$1.037bn FREMF 2016-K55, US$500m LSTAR 2016-4, US$550m SBL Commercial Mortgage Trust 2016-KIND and US$240m VB-S1 Issuer Series 2016-1.

The CDOs and CLOs were S$600m-equivalent Astrea III, US$400m Galaxy XXII CLO, €407.4m Laurelin 2016-1, US$401.45m Seven Sticks CLO 2016-1 and US$411.25m Venture XXIII.

US ABS supply year-to-date is roughly US$20bn down on the same period in 2015. Primary spreads are unchanged week-over-week. JPMorgan analysts say: "We continue to see good demand, though off-the-run names/assets are taking a tad longer to digest. The usual slower pace of activity typical in the summer could be a welcomed lure for investors to re-focus."

US CMBS triple-A spreads have been hovering in the swaps plus 120bp area for a while. Citi analysts note that investors still appear cautious on triple-B minus paper "despite its relatively high yield in the mid- to high-600s" area.

Editor's picks
Trigger point: Two controversial credit event determinations earlier this year in connection with the retransfer of Novo Banco bonds left many affected CDS holders aggrieved. Three months on, questions are still being asked about the reliability of such contracts to pay out...
Attack force: The High Court in London decided five cases brought by class X noteholders in 2006 and 2007 vintage European CMBS in April (SCI 13 May). The overall outcome was the same for both judgments - the claimants failed - but the contrasting approaches taken by the judges leave structured finance agreements open to attack using general legal principles, given the continued uncertainty over how to interpret them...
Going green: Representatives from Renovate America, Kramer Levin and T-Rex recently discussed the development of the renewables ABS market during a live webinar hosted by SCI (view the webinar here). Focusing on the PACE and solar sectors, this Q&A article highlights the main talking points from the session, including structuring and performance considerations. For a broader and more in-depth exploration of these themes, download a special SCI/Renovate America research report on green securitisation...

Deal news
• Fannie Mae last month completed three credit insurance risk transfer (CIRT) deals, continuing its efforts to reduce taxpayer risk by increasing the role of private capital in the mortgage market. The three deals - CIRT 2016-4, CIRT 2016-5 and CIRT 2016-6 - represent the largest cumulative CIRT transaction to date, shifting a portion of the credit risk on pools of single-family loans with a combined unpaid principal balance of approximately US$22.5bn to a group of insurers and reinsurers.
• S&P has lowered its financial strength rating on MBIA Insurance Corp to triple-C from single-B, with a negative outlook. The move is due to the insurer's weak liquidity positon and, absent favourable developments, the expectation that it is unlikely to meet all of its insurance policy obligations in the next 12 months. Specifically, the insured notes issued by the Zohar II 2005-1 CDO will mature on 20 January 2017 and likely result in MBIA Corp paying an immediate claim in excess of US$700m.
• Navient has amended the transaction agreement for SLM Trust 2013-2, in order to extend the legal final maturity date of the US$800m senior tranche to 2043. Since December 2015, Navient has extended the legal final maturity dates on US$6.8bn of bonds from its FFELP student loan ABS.
• An auction to settle the CDS trades for Norske Skogindustrier ASA is to be held on 22 June, following the determination of a restructuring credit event in respect of the entity (SCI 25 April). ISDA notes that further to and for the purposes of Section 13 of the 2016 Norske Skogindustrier ASA credit derivatives auction settlement terms, the €150m 11.75% senior unsecured notes due 2016 issued by the firm were repaid in full on 15 June.

Regulatory update
• The US CFTC has approved a final rule that amends existing swaps reporting regulations in order to provide additional clarity regarding reporting obligations for cleared swap transactions. The rule also aims to improve the efficiency of data collection and maintenance associated with the reporting of the swaps involved in a cleared swap transaction.
• CBL & Associates Properties has disclosed that the US SEC is conducting an investigation into four specific non-recourse secured loans that the firm originated in 2011 and 2012. Specifically, the purpose of the review is to ensure that the information provided to lenders regarding lease status reports, revenues and expected revenues did not materially vary from the firm's financial statements.
• A 2016 edition of the Green Bond Principles (GBP) has been released, creating an online resource for voluntary issuer information on green bond alignment and introducing guidance for issuers of social bonds. The latest edition benefits from the input of GBP members and observers, and takes into account recent market developments.

Deals added to the SCI New Issuance database last week:
A10 Term Asset Financing 2016-1; ALM XVIII; Assurant Commercial Mortgage Trust 2016-1; Babson Euro CLO 2016-1; BACM 2016-UBS10; Blue Halo Re series 2016-1; BMW Canada Auto Trust 2016-1; Brightwood Capital Fund 2016-3; Cairn CLO VI; California Republic Auto Receivables 2016-2; CCG Receivables Trust 2016-1; CGCMT 2016-C1; Chase Issuance Trust 2016-2; Colony Starwood Homes 2016-1 Trust ; Driven Brands Funding series 2016-1; DT Auto Owner Trust 2016-3; FADE series 10 tap 1; FADE Series 21 tap 3; First Coast Re series 2016-1; FREMF 2016-K55; FREMF 2016-KF17; Harley-Davidson Motorcycle Trust 2016-A; La Trobe Financial Capital Markets Trust 2016-1; Laetere Re series 2016-1; Landmark Issuer Series 2016-1; Navient Student Loan Trust 2016-3; New Residential Mortgage Loan Trust 2016-2; Ocean Trails CLO VI; Oxford Finance Funding Trust 2016-1; Queen Street XII Re; Sequoia Mortgage Trust 2016-1; STACR 2016-DNA3; Swiss Auto Lease ABS 2016-1; TICP CLO V 2016-1; Towd Point Mortgage Trust 2016-2; Trillium Credit Card Trust II series 2016-1; UNITE (USAF) II; VB-S1 Issuer series 2016-1; VCL Master Netherlands; VINZ 2016-1 Retail Auto Loan Securitization Trust; Voya CLO 2016-2; Westcott Park CLO; Westlake Automobile Receivables Trust 2016-2

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-3; BACM 2006-4; BACM 2007-3; CD 2005-CD1; EPC 3; GCCFC 2004-GG1; GCCFC 2007-GG9; GSMS 2006-GG6; GSMS 2007-GG10; GSMS 2011-GC3; JPMCC 2005-CB12; JPMCC 2006-CB15; JPMCC 2006-LDP7; JPMCC 2006-LDP9; JPMCC 2007-LD11; MSC 2005-IQ9