SCI Start the Week - 31 October

Category: ABS CDO CLOs


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

Pipeline
As with the preceding week, last week's additions to the pipeline were relatively modest. The final count consisted of three ABS, an ILS, two RMBS and two CMBS.

US$800m Blackbird Capital Aircraft Lease Securitization 2016-1, US$115.3m Golden Bear Funding Notes Series 2016-2 and US$184.477m GoodGreen 2016-1 were the ABS, while Residential Reinsurance Series 2016-II was the ILS. The RMBS were €690.5m Dutch Residential Mortgage Portfolio II and Feldspar 2016-1, while the CMBS were US$787.5m CFCRE 2016-C6 and US$1.1bn JPMDB 2016-C4.

Pricings
Completed issuance was fairly varied. There were eight ABS, four RMBS, seven CMBS and 11 CLOs.

The ABS were: US$840.78m Chrysler Capital Auto Receivables Trust 2016-B; US$175m EARN 2016-D; US$162.59m ENGS Commercial Finance Trust 2016-1; US$188.75m Iowa Student Loan Liquidity Corp 2016A; US$250m Lendmark Funding Trust 2016-2A; US$896m Navient Student Loan Trust 2016-7; CNY3bn Toyota Glory 2016-1; and US$371.88m World Financial Network Credit Card Master Note Trust Series 2016-C.

The RMBS were: A$300m AFG Series Trust 2016-1; A$300m Conquest 2016-2 Trust; C$1.5bn Fortified Trust 2016-2; and €745m SapphireOne Mortgages FCT 2016-2.

The CMBS were: US$610m CGBAM 2016-IMC; US$710m COMM 2016-SAVA; US$1.3bn FREMF 2016-K58; US$557m JPMCC 2016-WPT; US$953.2m MSBAM 2016-C31; A$279m Think Tank Series 2016-1 Trust; and US$512m TRU Trust 2016-TOYS.

Lastly, the CLOs were: US$512m Barings 2016-III; US$404m Battalion CLO X; €372m BlackRock European CLO II; US$508.45m Carlyle US CLO 2016-4; US$348.7m Cerberus Loan Funding XVI 2016-2; US$330m LCM CLO 2012-17R; US$412m Neuberger Berman CLO XXIII; US$449m Salem Fields CLO 2016-2; US$290m Shackleton CLO 2012-1R; €1.739bn Siena PMI 2016; and US$411m TICP CLO 2016-6.

Editor's picks
Bail-in priced in?: Mounting concerns over Deutsche Bank's financial health, along with bail-in speculation have coincided with significant widening in the bank's CDS - both at a senior and subordinated level. However, whether financial CDS prices are reflective of bail-in risk is debatable - as is investor confidence that CDS contracts will act 'as hoped', should a bail-in occur at a European bank...
Rights issues: The US tax lien ABS sector has grown steadily since 2014 in terms of both issuance and investor interest. While it provides several opportunities for investors, its growth could be hampered by unique challenges, in particular a lack of third-party servicers with sufficient operational capability...
Safe haven?: A European bond comprised of securitised sovereign bonds from multiple European countries could help bring funding and economic stability to the eurozone. This is according to a group of leading economists, who have drafted a proposal for so-called European Safe Bonds, or ESBies...
Timeshare default repurchases climb: Timeshare ABS default rates are rising and there is a growing trend of default repurchases and substitutions, although Wells Fargo analysts believe investors should be well protected. Borrowers are increasingly being advised not to make payments on their timeshare loans, which chimes with observations of weaker trends in consumer credit performance in other consumer ABS sectors...
US CLOs partly pause: Aside from a busy equity space, the US CLO secondary market is taking something of a pause. "Last week and this, secondary overall has been bit quieter," says one trader. "People are generally happy to take a breather after the previous few weeks being so busy..."

Deal news
• Two container ABS deals - BEACN 2012-1A and GCA 2013-1A - have been called so far this month, removing about US$300m of bonds from the market. Both of the transactions had experienced declines in average utilisation rate and average portfolio lease rate, which likely contributed to the issuers' decision to call them.
• The US$47.5m Herndon Square Office Park loan securitised in CGCMT 2007-C6 appears set for a modification with an A/B split, based on October special servicer comments. An A/B modification has been offered by the borrower and is currently being negotiated.
• Think Tank Group is in the market with a CMBS deal which includes features more typically found in RMBS. Think Tank Series 2016-1 Trust is a securitisation of loans to commercial borrowers secured by mortgages over commercial or residential properties originated by Think Tank Group.
• UKAR has launched the sales process for the Bradford & Bingley assets. Coinciding with the announcement was BAWAG's mandating of its debut UK prime RMBS - Feldspar 2016-1 - backed by Granite mortgages.
• The One HSBC Center property - securitised in GSMS 2005-GC4 - has been sold for US$14.4m, equating to a loss of 109% on the US$73.3m loan balance, including fees, expenses and advances. The loan has been in special servicing since November 2013, after transferring for imminent default (see SCI's CMBS loan events database).
• The EIB has disclosed its recent participation in two European SME securitisations - ROOF Leasing Austria Compartment 2016 and Sinepia (see SCI's new issue database). The former deal is the first public Austrian ABS in which the EIB Group has participated, while the latter benefits from support from the EU budget guarantee under the European Fund for Strategic Investments (EFSI).
• The first securitisation of aircraft managed by Air Lease Corporation (ALC) has been assigned preliminary ratings by Kroll Bond Rating Agency. The US$800m Blackbird Capital Aircraft Lease Securitization 2016-1 deal is Blackbird Capital I's first term securitisation.
• Achmea Bank is in the market with its second swapless RMBS. The €690.5m Dutch Residential Mortgage Portfolio II is also expected to be priced above par.
• Fannie Mae has secured commitments for a new front-end credit insurance risk transfer (CIRT) structure to be executed with affiliates of approved mortgage insurance companies. The FHFA sought feedback on front-end credit risk transfer transactions over the summer (SCI 30 June).
• S&P has upgraded the Calypso Capital II class A and class B notes, following the advent of their final risk period and consequent lack of further resets. The ratings for the class A and B notes have been raised from double-B minus to double-B and from single-B plus to double-B minus respectively.

Regulatory update
• The US Department of Justice (DOJ) is preparing a civil complaint against Moody's in the US District Court for the District of New Jersey, alleging certain violations of the Financial Institutions Reform, Recovery and Enforcement Act in connection with ratings assigned to RMBS and CDOs in the period leading up to the 2008 financial crisis. Moody's disclosed in its Q3 results that the DOJ also stated - in a letter received at end-September - that its investigation remains ongoing and may expand to include additional theories.

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