Monday 27 March 2017 12:11 London/ 07.11 New York/ 20.11 Tokyo

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

Pipeline
Insurance-linked securities dominated the transactions remaining in the pipeline last week, after a heavy volume of deals priced. A handful of ABS, RMBS and CMBS also continued to market.

The ILS comprise US$178m Integrity Re Series 2017-1, US$300m Kilimanjaro II Re 2017-1, US$300m Kilimanjaro II Re 2017-2 and US$100m Pelican IV Series 2017-1. The ABS consisted of: €1.375bn BBVA Consumo 9, E-CARAT 8 and US$618.81m Golden State Tobacco Securitization Corp series 2017 A-1. The RMBS are Prado 4 and Residential Mortgage Securities 29, while the CMBS is the US$1bn CGCMT 2017-P7.

Pricings
CLOs accounted for the majority of new issuance last week, with ABS coming a close second. A number of CMBS and RMBS also priced.

US$405.5m ACIS CLO 2017-7 and US$406.35m NXT Capital CLO 2017-1 were the only new CLOs to print last week. The remaining CLO issuance was made up of refinancings: US$192m ACIS CLO 2013-2 (refinancing), US$326m Battalion CLO IV (refinancing), US$324.5m, Battalion CLO V (refinancing), US$319m Battalion CLO VII (refinancing), US$428m Carlyle Global Market Strategies 2014-5 (refinancing), US$525m Dryden 31 Senior Loan Fund (refinancing), US$350.85m Flagship CLO VII (refinancing), US$476m Fortress Credit Opportunities III (refinancing), €287.89m Grosvenor Place CLO 2013-1 (refinancing), US$415m KVK CLO 2014-3 (refinancing) and US$437.5m TICP CLO III (refinancing).

The ABS prints were dominated by auto deals: US$717.48m Ally Auto Receivables Trust 2017-2, US$1.1bn Drive Auto Receivables Trust 2017-B, €468m Driver France 3, US$1bn Ford Credit Auto Lease Trust 2017-A, US$1.19bn Honda Auto Receivables 2017-1 Owner Trust, US$1.21bn Hyundai Auto Receivables Trust 2017-A and US$1bn Nissan Auto Receivables Owner Trust 2017-A. On the consumer side, US$2bn BA Credit Card Trust Series 2017-1, US$600m Capital One Multi-asset Execution Trust 2017-2, US$800m Capital One Multi-asset Execution Trust 2017-3 and €783m Sunrise 2017-1 priced. US$461.5m SoFi Professional Loan Program 2017-B and US$600m FOCUS Brands Funding Series 2017-1 rounded out the ABS issuance.

A handful of RMBS also printed: €2.72bn Caixabank RMBS 2, €420m European Residential Loan Securitisation 2017-PL1, A$1.7bn Firstmac Mortgage Funding Trust No.4 Series 1-2017, US$395m Mill City Mortgage Loan Trust 2017-1, US$969m-equivalent Pepper Residential Securities Trust No.18 and US$340m Sequoia Mortgage Trust 2017-3. Meanwhile, US$567.4m PFP 2017-3 and US$637.5m WFCM 2017-RB1 accounted for the CMBS issuance.

Finally, one CDO - the US$331.25m TruPS Financials Note Securitization 2017-1 - and one ILS - the US$375m Sanders Re 2017-1 - priced.

Editor's picks
SFR strategy raises RMBS questions:
American Homes for Rent (AH4R) announced this week an additional public equity offering, expecting to raise over US$250m, in the latest sign that single-family rental (SFR) companies are significantly changing their funding and operations. SFR securitisation performance has been strong, yet the market opportunity may be dwindling just as it proves its value...
Canadian banks eye credit card appetite: Canadian banks are capitalising on strong demand for US dollar-denominated credit card ABS. The sector has seen a resurgence in recent months, with deals being upsized and performance remaining sound...
Lender actions key to managing auto losses: Rising losses across the US auto ABS sector are at odds with strong economic conditions and low unemployment levels, albeit greater losses in the subprime space are being mitigated by lender actions, such as loan extensions. Whether losses increase further may depend on lenders' ability to maintain or further strengthen credit standards that have been weakening until recently...
JCPenney exposure gauged: JCPenney has disclosed the 138 stores that it plans to shutter in an effort to optimise retail operations (SCI 2 March). The impact of the closures on the CMBS market appears to be smaller than anticipated, with 14 liquidated stores encumbered by 17 loans totalling US$1bn, according to Morgan Stanley figures. The IHS Markit CMBX index has exposure to nine properties encumbered by loans totalling US$411m...
Euro CLOs mixed: Tone and spreads remain strong in the European CLO secondary market, but activity levels are still down. "It's a weird market at the moment - it feels quiet, but we are still trading," says one trader. "Clip sizes have gone up, so volumes are growing, but the number of trades has gone down..."

Deal news
• Carlyle recently priced what is believed to be the first post-crisis US CLO to feature a six-year reinvestment period - the US$612m Carlyle US CLO 2017-1. As the new issue CLO term curve evolves, JPMorgan CLO analysts suggest that investor market segmentation provides opportunities to add alpha when the term curve becomes mispriced.
• The Russian SME loan market is anticipated to grow, with further SME ABS issuance following suit. As the Russian SME ABS sector develops, several innovations seen in last year's offering from Promsvyazbank - SPE PSB SME 2015 - are expected to be replicated.
• The recent resurgence in primary issuance is not the only way to tap Irish RMBS value, as further redemptions for a number of Celtic Residential Irish Mortgage Securitisation series transactions could also provide value in the secondary market. JPMorgan analysts believe indicative pricing levels for CRSM 9 A2 and CRSM 11 A3A could yield a sizable spread pickup relative to a no call scenario, should they be called between June this year and December 2018.
• Blackstone affiliate Spain Residential Finance is in the market with its second Spanish re-performing RMBS. Dubbed SRF 2017-1, the €403.1m transaction is backed by 3,307 seasoned residential mortgage loans extended to borrowers in Spain.

Other news
• Although some US retailers continue to underperform, investors should be wary of taking a wholly negative view on the sector, according to Morgan Stanley CLO analysts. They point out that with broadly strong US retail sales and growing personal income, problems lie only in certain subsectors within the segment.
• Moody's is requesting comments on proposals to consolidate and revise its approaches to assessing a number of structured finance-related counterparty risks. If adopted, the changes are expected to have a ratings impact of one to two notches on approximately 210-220 structured finance transactions.


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