SCI Start the Week - 28 November

Category: ABS CDO CLOs


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

Pipeline
With the week dominated by Thanksgiving, there were few pipeline additions. These amounted to three ABS, an ILS, an RMBS, two CMBS and a CLO.

CNY4bn Bavarian Sky China 2016-2 Trust, US$709m Labrador Aviation Finance 2016 and Red & Black Auto Lease Germany 2 accounted for the ABS. The ILS was €180m Horse Capital I and the RMBS was Hypenn RMBS VI.

The CMBS consisted of US$555m Morgan Stanley Capital Citigroup Trust 2016-SNR and US$280.75m SCF RC Funding I and II Series 2016-1. The sole CLO was US$410.4m HPS Loan Management 10-2016.

Pricings
The number of prints was actually fairly consistent, with the exception of CLOs which dropped from 10 in the week before to just two last week. The final count showed six ABS, an ILS, six RMBS, four CMBS and those two CLOs.

The ABS were: €522m Bavarian Sky France Compartment French Auto Leases 2; €2.25bn Caixabank PYMES 8; CNY3.65bn Driver China Five Trust; €725.7m Lusitano SME 3; €1.335bn Sunrise 2016-2; and £405m Turbo Finance 7. The ILS was US$300m Ursa Re 2016-1.

The RMBS were: €1.8bn BBVA RMBS 17; A$2bn Kingfisher Trust 2016-1; US$400m NRZ Advance Receivables Trust 2015-ON1 Series 2016-T4; US$400m NRZ Advance Receivables Trust 2015-ON1 Series 2016-T5; US$623.5m Progress Residential 2016-SFR2; and US$353.68m Shellpoint Co-Originator Trust 2016-1.

The CMBS were: US$750m Hilton USA Trust 2016-HHV; US$725m Hilton USA Trust 2016-SFP; US$824.4m MSC 2016-UBS12; and US$955m Wells Fargo Commercial Mortgage Trust 2016-LC25.

The CLOs were: €266.2m Arbour CLO 2014-1R and US$330m OHA Loan Funding 2012-1R.

Editor's picks
Premium pricing
: Above-par issuance is becoming a staple of the European primary ABS market. Deals backed by auto loans, mortgages and credit cards have recently tested the water with this pricing concept, paving the way for other issuers navigating markets in which negative rates prevail...
Car trouble?: US auto ABS issuance is booming, but collateral continues to deteriorate and delinquencies have climbed by more than 10% year-on-year. With investors required to exercise ever greater vigilance, some compensation by way of spread widening may be necessary...
FX issues: Recent speculation that Deutsche Bank could be selling its Polish unit has highlighted the FX issues associated with shedding non-core mortgage assets in the country. Roughly a third of Deutsche Bank Polska's assets are said to be euro- and Swiss franc-denominated mortgages, the sale of which is likely to be challenged by the Polish regulator in an effort to maintain financial sector stability...
On the agenda: Efforts by European policymakers to tackle the region's non-performing loan burden appear to be gathering pace. Establishing a central clearinghouse for NPLs has been mooted, while the ECB's latest Financial Stability Review calls for the creation of further government-backed bad banks...
Election may yield positive results for SF: The recent election of a Republican government "should be good for economic growth" and securitisation, with credit spreads benefitting from a tightening bias, according to Wells Fargo structured product analysts. They add that reversing already inked regulations might have a mixed result for structured finance in the US, but that a big fiscal stimulus "may push economic expansion past historic norms"...
Draft ILS regulations released: As part of the Chancellor's Autumn Statement, the UK government has launched a consultation setting out its proposed corporate, tax and regulatory framework for ILS. The consultation reiterates the government's aim to create an efficient and streamlined regime for multi-arrangement ISPVs in the UK, setting out the draft regulations it intends to place before Parliament early in 2017...

Deal news
• Continental Finance Company is in the market with a US ABS transaction - Continental Credit Card ABS 2016-1 - securitising below-prime credit card debt. Continental's business model is focused on borrowers with limited credit history or a below-prime credit score.
• Highbridge Capital Management subsidiary HPS Investment Partners is in the market with a new CLO (see SCI pipeline), which will allow up to 80% of the loans in its collateral pool to be covenant-lite. HPS Loan Management 10-2016 has been provisionally rated by S&P and sized at US$410.4m.

Regulatory update
• The European Parliament appears to have reached a consensus on its approach to securitisation. The MEPs responsible for the new securitisation bills are understood to have come to an agreement on risk retention, which had been the main sticking issue.
• The European Commission has presented a package of reforms to strengthen the resilience of EU banks, including measures to facilitate securitisation and derivatives activity. They contribute to the Commission's ongoing work to reduce risk in the banking sector and are in line with the ECOFIN Council in June, where the Commission was invited to put forward relevant proposals no later than end-2016.
Basel Committee discussions next week may expose divisions between national members and lead to further differentiation between the EU and internationally-agreed Basel standards, Fitch suggests. The latest Basel 3 amendments - sometimes referred to as Basel 4 - seek to restrict the use of internal risk models and set overall capital requirements using the revised standardised approaches.
• Fraud claims alleged by Federal Home Loan Bank of Boston (FHLBB) against RBS Securities and other RBS companies relating to the marketing and sale of 10 RMBS certificates are being dropped after the plaintiff and defendants filed a joint stipulation seeking dismissal. However, a further two claims against RBS remain, and FHLBB also retains claims against other defendants.
Ally Financial has agreed to pay US$52m in conjunction with its resolution of all outstanding investigations and potential claims by the US Department of Justice (DOJ) related to RMBS issued by the company's former mortgage subsidiary Residential Capital and its ResCap RMBS subsidiaries. It has also agreed to withdraw the broker-dealer registration of Ally Securities, which it says has not been a major part of the company for some time and will not impact Ally's ongoing operations.

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