SCI Start the Week - 28 September

Category: ABS CDO CLOs

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

The pace of deals joining the pipeline continued to slow last week. In all, there were three new ABS as well as one RMBS, one CMBS and one CLO.

US$220m American Credit Acceptance Receivables Trust 2015-3, Canadian Credit Card Trust II Series 2015-2 and Hertz Vehicle Financing II Series 2015-3 accounted for the ABS. The RMBS was Hypenn RMBS IV, the CMBS was US$170m MSJP 2015-HAUL and the CLO was US$800m Octagon Investment Partners 25.

Many more deals left the pipeline than joined it. In total there were four ABS, five RMBS, three CMBS and two CLO prints.

The ABS were: US$1bn Drive Auto Receivables Trust 2015-D; €750m Driver Espana Two; C$250m Eagle Credit Card Trust Series 2015-1; and US$290m OneMain Financial Issuance Trust 2015-3.

The RMBS were: US$310.39m Agate Bay Mortgage Trust 2015-6; US$425m California Republic Auto Receivables Trust 2015-3; US$340m DRB Prime Student Loan Trust 2015-B; A$500m Light Trust No.6; and US$1.3bn Towd Point Mortgage Trust 2015-4.

US$1.57bn FREMF 2015-K48, €150m Taurus 2015-3 EU DAC and US$814.5m WFCM 2015-NXS3 made up the CMBS. Meanwhile, the CLOs were US$400m JFIN CLO 2015-II and US$456m THL Credit Wind River 2015-2.

US ABS primary activity was reduced due to the industry conference in Miami, while secondary spreads were mostly stable. Barclays analysts say: "An average of US$1bn in ABS traded each day during the first four days of the week, bringing average daily volumes in September up to US$806m, still well below the US$1.6bn during September 2014."

Over three quarters of the week's US CLO secondary market supply came from 2.0 and 3.0 deals, report Bank of America Merrill Lynch analysts. They add: "Bidding activity was somewhat muted and we saw a repeat of some of the same themes from the last few weeks, where triple-A notes continued to hold up and mezz trading stayed thin. The generic spread levels we track for 2.0/3.0 deals pushed wider by 5bp wider in double-A and single-A, and by 35bp and 25bp wider in double-B and single-B."

The weakness that had been feeding into secondary levels for European ABS and RMBS over the last few weeks finally slowed down, particularly for UK non-conforming and buy-to-let, which only shed 1bp-2bp last week. "The auto ABS sector however reversed, when its broadly stable spreads leaked 2bp-3bp wider during the week on concerns surrounding Volkswagen. Moving south to the periphery, Portuguese senior RMBS paper came under a degree of stress - widening 10bp generically, while its Spanish and Italian peers held ground relatively well, shedding 1bp-2bp only," say JPMorgan analysts.

Editor's picks
New frontiers? Recent US RMBS transactions have increased expectations about the dawn of a 3.0 market. However, while their innovations may open new territory, a true 3.0 environment appears to remain a way off...
VW 'rule breach' impact weighed: The US Environmental Protection Agency's issuance of a notice of violation of the Clean Air Act to Volkswagen has direct implications for securitisations backed by Volkswagen vehicles. Volkswagen's auto loan (VALET), auto lease (VWALT) and dealer floorplan (VWMT) transactions will all be affected...
Euro market looks liquid: European ABS BWIC activity was high over the summer, while the traded percentage also surprised to the upside. From this perspective, at least, European liquidity appears healthy, with UK RMBS proving particularly liquid...

Deal news
• The One & Two Prudential Plaza loan has been refinanced in such a way as to avoid paying proceeds to the modified B-note. Barclays CMBS analysts describe it as "the worst case of hope note strategic refinancing to date". The modified loan was split pari passu between JPMCC 2006-LDP7 and JPMCC 2006-CB16.
• Ford Motor Credit last week priced the first Reg AB 2-compliant ABS - the US$1.05bn Ford Credit Auto Owner Trust 2015-C prime auto loan transaction. New data disclosures under the filing include weighted average LTV, subvented receivables and commercial use percentages, delinquencies, losses and prepayment charts, according to JPMorgan ABS analysts.
• Freddie Mac has priced its first STACR actual loss offering with original LTV ratios ranging from 80% to 95%. The transaction is the GSE's sixth in 2015 and fifteenth since the programme began in 2013.
• Following reports that proceeds from a mortgage loan securitised in Velocity Commercial Capital 2015-1 were misused by the related borrower to purchase a home as a primary residence, Kroll Bond Rating Agency has undertaken a thorough review of Velocity's credit policies, underwriting guideline, sample loan documentation and loan sale representations. As a result of this review, the rating agency is satisfied that Velocity is acting properly and is not making any consumer loans to residential buyers.
• Dock Street Capital Management is set to replace Chotin Group as collateral advisor to Saturn Ventures 2004 - Fund America Investors III. Under the terms of the appointment, Dock Street agrees to assume all the responsibilities, duties and obligations of the collateral advisor under the applicable terms of the indenture.
• ISDA's EMEA Credit Derivatives Determinations Committee has resolved that a potential repudiation/moratorium has occurred in respect of the Republic of Ukraine. The move comes after Ukraine agreed to a restructuring deal with creditors that includes a 20% write-down to the face value of about US$18bn of Eurobonds.

Regulatory update
AFME has published a model clause for contractual recognition of bail-in. It provides model wording designed to assist banks in complying with obligations under the Article 55 of the EU's Bank Recovery and Resolution Directive (BRRD).
ISDA has published an Australian single-sided reporting letter, allowing certain market participants to take advantage of the Australian single-sided reporting regime for Phase Three entities. The letter provides necessary representations to allow Phase Three entities to take advantage of an exemption from reporting.

Deals added to the SCI New Issuance database last week:
American Homes 4 Rent 2015-SFR2; Ares XXXV CLO; BACM 2015-UBS7; Benefit Street Partners CLO I (refinancing); CGCMT 2015-GC33; CPS Auto Receivables Trust 2015-C; Driver Espana Two; Dryden 41 Senior Loan Fund; Ford Credit Auto Owner Trust 2015-C; FREMF 2015-K48; Liberty Series 2015-1 SME; Light Trust No. 6; MAD 2015-11MD; Ocwen Master Advance Receivables Trust series 2015-T1; Series 2015-1 REDS EHP Trust; Taurus 2015-3 EU DAC; Ursa Re series 2015-1; Warwick Finance Residential Mortgages Number Two

Deals added to the SCI CMBS Loan Events database last week:
COMM 2012-LC4; COMM 2013-LC13; COMM 2013-LC6 & COMM 2013-CCRE6; COMM 2014-CR14; CWCI 2007-C2; GCCFC 2007-GG9; JPMCC 2010-C2; LBUBS 2006-C3; MLCFC 2007-5; MSBAM 2012-C5; MSC 2005-HQ5; WBCMT 2004-C12; WBCMT 2005-C22; WBCMT 2007-C32; WFCM 2015-C26; WFRBS 2011-C4; WINDM X