SCI Start the Week - 21 August

Category: ABS Capital Relief Trades CDO


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

Pipeline
Only a handful of transactions remained in the pipeline at the end of last week. The majority of the deals were from the Asia-Pacific market.

Accounting for the newly-announced APAC deals were the A$500m Latitude Australia Credit Card Loan Note Trust Series 2017-2 and RMB3bn Rongfa 2017-1 ABS, as well as the A$350m AFG 2017-1 Trust RMBS. The sole remaining pipeline entrant from the US was the US$482.2m BBCMS 2017-DELC CMBS.

Pricings
ABS and CLO transactions made up the bulk of last week's prints. A number of CMBS and RMBS were also priced.

The ABS new issues comprised: €366m abc SME Lease Germany Compartment 4, US$1.1bn Ally Auto Receivables Trust 2017-4, A$350m CNH Industrial Capital Australia Receivables Trust Series 2017-1, US$223m Flagship Credit Auto Trust 2017-3, US$1.38bn GMF Floorplan Owner Revolving Trust Series 2017-2, US$1.382bn Nissan Auto Receivables 2017-B Owner Trust, US$335m Prestige Auto Receivables Trust 2017-1, US$991.7m S-JETS 2017-1 and US$350m Triton Container Finance Series 2017-2. The CMBS consisted of US$350m BXP Trust 2017-CC, US$240m CGCMT 2017-1500, US$1.1bn GSMS 2017-GS7 and US$1.1bn WFCM 2017-C39, while the RMBS were US$1.07bn CAS Series 2017-C06, €250.5m EDML 2017-1, US$1bn JPMMT 2017-3 and A$750m Torrens Series 2017-3 Trust.

CLO issuance included a CRE CLO (US$315m A10 TAF 2017-1) and a couple of newly originated transactions - US$814.41m CIFC Funding 2017-IV and US$557m Wellfleet CLO 2017-2. Refinancings accounted for the remainder: €359.1m Carlyle Global Market Strategies Euro CLO 2015-2, US$369.3m KKR CLO 10, US$345m Monroe Capital BSL CLO 2015-1, US$356m Ocean Trails CLO IV, US$527.25m Venture XIV CLO and US$322m Flatiron CLO 2015-1.

Editor's picks
RMBS reaping RPL benefits: Freddie Mac has settled its largest SCRT deal to date. The RPL RMBS market is growing and investors are enthusiastic about its prospects...
Risk transfer framework outlined: Outlines of the main elements of the EBA's risk transfer discussion paper - due to be released next month - have been revealed. The recommendations will focus on the main structural features of risk transfer transactions and may at a later stage result in regulatory changes...
Bespoke boost opportunity: The search for yield is driving activity in bespoke CDS tranches, referred to as bespoke tranche opportunities (BTOs) post-financial crisis. The sector is expected to receive a further boost if single-name CDS liquidity continues to improve...
Hedging changes a boon for MBS: FASB recently announced plans to finalise new accounting rules for financial instruments used for hedging (SCI 24 July). Within the securitisation industry, MBS are likely to be most affected by the move, with the changes largely acting as a supportive measure by potentially boosting liquidity in the sector...

Deal news
• Three CLOs are being repackaged to issue the senior notes in Japanese yen, rather than US dollars, as the market prepares for the first repacks of resets. Repackaged CLO Series KK-2 will issue ¥25.172bn, Repackaged CLO Series KK-3 will issue ¥29.37bn and Repackaged CLO Series KK-4 will issue ¥27.72bn.
• The trustee for the MLCFC 2007-8 CMBS has withheld US$143.7m in principal, according to August remittance data, as the transaction parties seek to determine the payment order. The dispute is believed to pertain to how principal payments in 'cross-over periods' should be handled.
Air Berlin has filed for insolvency. While intervention from the German state should keep the airline operational for at least the next three months, there are a dozen aircraft ABS deals exposed to Air Berlin and temporary cashflow disruptions are anticipated.
EART 2015-2 senior bondholders received no principal payment this month, after the auto ABS deal's cumulative net loss trigger was cured. Although this appears to be an atypical event, it nevertheless highlights the importance of understanding structural characteristics in order to price risks more efficiently.

Other news
• The self-certified mortgage loan ban included in a recent amendment to European legislation (SCI 27 July) could lead to extension risk for securitisation investors. The sale and price of distressed or reperforming mortgage portfolios could also be negatively affected, which would in turn be detrimental to issuance volumes.
• The US FHFA has extended HARP through to the end of 2018 and announced that the new GSE streamlined refinance programme for high LTV borrowers will be effective from 1 October. Given that the eligibility criteria limit the population that can take advantage of the new programme, it appears to be geared towards having an efficient refinancing construct in place, should there be another housing downturn.
• Collections for most Chinese non-performing loan securitisations have outpaced originators' initial projections, as of June 2017, according to a recent analysis of trustee report data. The study suggests that while originators of unsecured consumer NPL deals are the most optimistic about collections, the expense ratio for these transactions is the highest.

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