Monday 23 May 2016 11:36 London/ 06.36 New York/ 19.36 Tokyo

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

Pipeline
ABS additions to the pipeline carried on last week at a good pace, as 11 such deals joined. There was also a single ILS and five RMBS.

The ABS were: US$513m Ally Auto Receivables Trust 2016-3; US$364m Avis Budget Series 2016-2; €5bn BPCE Consumer Loans FCT 2016-5; US$425m CBC Insurance Revenue Securitization Series 2016-1; US$861.88m CNH Equipment Trust 2016-B; GMF Floorplan Owner Revolving Trust Series 2016-1; US$1.282bn Honda Auto Receivables 2016-2 Owner Trust; US$340m Massachusetts Educational Financing Authority Issue J Series; US$375m Mercedes-Benz Master Owner Trust Series 2016-A; US$375m Mercedes-Benz Master Owner Trust Series 2016-B; and Swiss Credit Card Issuance 2016-1.

US$100m Laetere Re 2016 was the sole ILS. The RMBS were US$536m Colony Starwood Homes 2016-1, €900m HT Abanca RMBS I, US$300m New Residential Mortgage Loan Trust 2016-2, US$627m STACR 2016-HQA2 and Towd Point Mortgage Trust 2016-2.

Pricings
More than a score of deals left the pipeline. As well as eight ABS prints there were also four RMBS, six CMBS and four CLOs.

The ABS were: US$1.2bn Drive Auto Receivables Trust 2016-B; €380m FADE Series 21 Tap 1; £300m Greene King Finance Tap 3; US$751m Hyundai Auto Lease Securitization Trust 2016-B; US$253.5m LEAF Receivables Funding 11; US$1.17bn Nissan Auto Lease Trust 2016-A; US$380m SoFi Professional Loan Program 2016-B; and US$600m Synchrony Credit Card Master Note Trust Series 2016-2.

The RMBS were: £3.2bn Duncan Funding 2016-1; €630m Essence VI; A$500m Firstmac Mortgage Funding Trust No.4 Series 2-2016; and US$375m Holmes Master Issuer Series 2016-1.

The CMBS were: US$222.3m A10 TAF 2016-1; US$876m BACM 2016-UBS10; US$755.7m CGCMT 2016-C1; US$767m CSAIL 2016-C6; US$750.6m GSMS 2016-GS2; and C$400m REAL-T Series 2016-1.

Lastly, the CLOs were: €360m Aurium CLO II; US$356m Newfleet 2016-1; US$608.3m Wind River CLO 2016-1; and US$403.2m York CLO.

Markets
Investor demand for US ABS "remained overwhelming" last week, according to JPMorgan analysts, as primary market oversubscription caused spreads to grind tighter. They add: "Freshly minted bankcard ABS from last week traded 5bp tighter this week. Even in off-the-run sectors, secondary trade prices on Taco Bell's inaugural ABS earlier this month jumped to over US$101 from par at new issue on the first trading day."

Bank of America Merrill Lynch analysts note that there has also been a surge in European ABS and RMBS activity, largely driven by UK issuance. "While UK supply dominates the European markets in volume, the rest of Europe is not totally dormant - a German, a French and a Swiss deals vie for investor attention. Deals structured for retention are out there too." Activity is expected to cool off next month as the industry meets in Barcelona and the UK referendum on EU membership is held.

Editor's picks
Call for clarity: Banks' diminished market-making capacities and shrinking inventories are taking their toll on liquidity, particularly in the ABS and structured credit markets. However, a lack of clarity over valuations may also have a role to play in the liquidity debate...
Upgrades boost Spanish RMBS: The Spanish RMBS sector continues its recovery, with Moody's upgrading 200 classes of Spanish RMBS across 91 deals. JPMorgan European securitisation analysts expect this to provide positive technical support for secondary market pricing, although capital requirement benefits will be mixed...
Risk retention class debuts: Colony Starwood Homes is in the market with its first single-family rental securitisation - the US$535.9m Colony Starwood Homes 2016-1 - following the merger of Colony American Homes and Starwood Waypoint Residential Trust in January. The transaction is also notable for including a risk retention class, representing a subordinate 5% horizontal strip designed to comply with risk retention rules...
US CLOs weaken: The late start to the week for the US CLO secondary market saw signs of weakness yesterday and tone will be tested further today. "There's a little bit of caution coming back into the market as volatility creeps back into broader markets and consequently ours," says one trader. "We've got a large number of lists today, which may well start to shake things out..."

Deal news
• SoFi's second ABS of the year has hit the market, making it the ninth rated term ABS the online lender has completed. Dubbed SoFi Professional Loan Program 2016-B, the US$379.7m marketplace transaction is backed by refinanced student loans and incorporates a number of new features.
• The ratings on the class E notes of Mountain Hawk I CLO and on the class D and E notes of Mountain Hawk II CLO have been downgraded by S&P. Mountain Hawk I has been affected by a decline in supporting collateral and increase in triple-C rated or defaulted assets, while Mountain Hawk II has also suffered significant par loss.
• S&P has affirmed its double-B rating on Everglades Re II Series 2015-1. The probability of attachment and expected loss increased slightly for the risk period beginning 1 June 2016, but remains well within the permitted range.
• Freddie Mac has a new way to transfer multifamily mortgage credit risk. It has now settled its first offering of Freddie Mac Multifamily Structured Credit Risk (SCR) Notes.
• The trustee for Taberna Europe CDO II has served the issuer with a notice of default, stating that it is in breach of clauses 22 of the collateral management agreement and clause 11.13 of the trust deed. These breaches are required to be remedied within 45 days, failing which an EOD will arise.
• The controlling class of Strawinsky I CLO, acting by ordinary resolution, has not disapproved the appointment of Dynamic Credit Partners Europe as successor investment manager. Dynamic will therefore, subject to the other conditions of the master investment manager terms, be appointed as successor investment manager for the transaction.
• The holders of a majority of the outstanding principal amount of the controlling class of Gramercy Real Estate CDO 2007-1 have directed the issuer to appoint Dock Street Capital Management as successor collateral manager, replacing CWCapital Investments. The issuer intends to appoint Dock Street as successor manager, unless a majority by aggregate outstanding amount of each class of notes objects by notice to the trustee within 30 days.
• Dock Street Capital Management has replaced IMC Asset Management as collateral manager for a pair of ABS CDOs - Faxtor ABS 2003-1 and 2004-1. Moody's has determined that the move will not affect its ratings of the notes.

Regulatory update
• Megan Messina, a Bank of America md and co-head of structured credit products, has filed a discrimination lawsuit against the bank that includes allegations surrounding its supposed role in misleading CLO trading partners and clients. In particular, the lawsuit highlights the alleged role that Messina's colleague and co-head of global structured credit products David Trepanier played in the supposed abuse of practices within the bank.
• The Consumer Financial Protection Bureau has released a proposal to end the use of clauses in US financial-product contracts that prevent consumers from taking part in class-action lawsuits. Moody's suggests that the rule would create new risks for financial services companies and US ABS tied to consumer loans.


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