SCI Start the Week - 4 April

Category: ABS CDO CLOs

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

The week following Easter marked a slow-down in the pace of deals joining the pipeline. At the last count there were six ABS and a single CMBS.

US$1bn AmeriCredit Automobile Receivables Trust 2016-2, US$300m DT Auto Owner Trust 2016-2, €400m FCT Eurotruck Lease III, US$438m Hyundai Floorplan Master Owner Trust Series 2016-1, US$575m Sonic Capital 2016-1 and €742.5m VCL 23 accounted for the ABS. The CMBS was US$550m SBL Commercial Mortgage Trust 2016-KIND.

A large number of deals did leave the pipeline, however. As well as five ABS prints there was also an ILS, four RMBS, two CMBS and four CLOs/CDOs.

The ABS were: US$510m Apollo Aviation Securitization Equity Trust 2016-1; US$450m Avis Budget Rental Car Funding Series 2016-1; US$699m Chesapeake Funding II Series 2016-1; €717.5m FCT Ginkgo 2015-SF1; and US$750m Ford Credit Floorplan Master Owner Trust A Series 2016-2.

US$175m Aozora Re 2016-1 was the ILS. The RMBS were US$326m Agate Bay Mortgage Trust 2016-2, US$1.89bn Chase Mortgage Trust 2016-1, €7.679bn Dolphin Master Issuer 2016-1 and US$772.75m Towd Point Mortgage Trust 2016-1.

US$771m CGCMT 2016-P3 and US$818m DBJPM 2016-C1 were the CMBS. The CLOs/CDOs were €1.171bn Berica PMI 2, US$451m Canyon CLO 2016-1, €412m Harvest CLO XV and US$347.5m Trust Preferred Insurance Note Securitization 2016-1.

US CMBS spreads have rebounded strongly, having widened 33bp during the first part of 1Q16 and then tightened 43bp to finish the quarter at swaps plus 130bp. Citi analysts attribute the rebound to lower supply expectations and the Fed's dovish interest rate stance. The analysts have cut their issuance expectation to US$65bn-US$70bn, and as investors have also readjusted their expectations, demand for recent offerings has increased.

The European ABS and RMBS markets were quiet in the holiday-shortened week. BWIC volumes were muted while JPMorgan analysts note that "sentiment around the product continued to improve as investors were opportunistically looking for yield". Portuguese RMBS spreads tightened around 5bp last week, with Spanish and Italian spreads tightening 1bp.

Editor's picks
Trust issues: The US CMBS market has encountered a rocky start to 2016, with new issue pricing spreads performing unpredictably. A number of other concerns have cast doubt over profitability on the origination side, prompting suggestions that lenders may slowly thin out...
Data firms diversify: Orchard has revealed that it has applied for a broker-dealer license, indicating a change of tack for the data and analytics firm. The company believes it is the next natural step in its role as a neutral facilitator of marketplace lending investment...
US CLOs still strong: The US CLO secondary market looks set for a quieter day today (31 March), but sentiment is still strong. "It's relatively quiet today, thanks to quarter-end, but we saw quite a bit of activity yesterday and spreads are still firm," says one trader. "A high proportion of bonds traded on the bid-lists yesterday and, once the new quarter starts, I expect sellers to continue to test liquidity."

Deal news
• In its latest monthly update, PeerIQ suggests that the recent CHAI 2016-PM1 print illustrates the thawing that has occurred in the US securitisation market over the last month. Spreads across the transaction's capital structure are almost double those of the CHAI 2015-PM3 deal from December (see SCI's new issue database), but this is said to be reflective of increased financing costs across the market.
Banca Popolare di Bari is set to become the first bank to launch a non-performing loan (NPL) securitisation via the Italian government's GACS guarantee scheme. The bank reportedly plans to sell up to €1bn worth of NPLs, with JPMorgan, PWC and Prelios understood to be advising on the deal.
• Six REO CMBS assets with a combined unpaid balance of US$55.4m, accounting for 2% of the CGCMT 2007-C6 pool, were put up for bid in online auctions last week. Kroll Bond Rating Agency research shows that all of the properties were in escrow as of 24 March, indicating that they were sold.

Regulatory update
• The Association of Mortgage Investors (AMI) has sent a letter to the CFPB outlining a number of concerns surrounding the regulator's TILA-RESPA Integrated Disclosure Rules (TRID), which were enacted in the second half of last year. The letter says that the rule has produced a climate of legal uncertainty, which is 'chilling' private investment.
• The Basel Committee has opened up a consultation on new proposals to reduce the variation and complexity involved in calculating credit risk-weighted assets (RWA). The proposals offer a set of changes to the Basel framework's advanced internal ratings-based (IRB) approach for banks computing their RWAs and regulatory capital requirements.
ESMA has fined DTCC Derivatives Repository (DDRL) €64,000 for negligently failing to implement systems capable of providing regulators with direct and immediate access to derivatives trading data. Such access is a key requirement under EMIR.
• The US SEC's proposals to cap the portfolio limits for derivatives by registered funds could harm a large number of funds and shareholders, according to a letter penned by the Investment Company Institute. The association says that the rules will stymie many funds' ability to diversify their portfolio management, forcing some to even liquidate.
• The Barr-Scott bill could pose indirect positive effects on the US CLO and leveraged loan markets by lowering the risk retention burden for managers bringing new deals to the market, Moody's reports. The bill passed the House Financial Services Committee earlier this month and now awaits potential passage in the House and the Senate (SCI 4 March).
• The NCUA has achieved its latest settlement from a series of cases surrounding faulty pre-crisis US RMBS, as Credit Suisse has agreed to a US$29m payout. The federal agency has successfully pursued numerous securities cases against large investment banks (SCI passim), pushing its total in related legal recoveries up to US$2.5bn.

Deals added to the SCI New Issuance database last week:
Akibare Re Series 2016-1; Aozora Re series 2016-1; Atlas IX Series 2016-1; Caelus Re IV series 2016-1; CAS 2016-C02; CGCMT 2016-P3; COMM 2016-787S; Dolphin Master Issuer series 2016-1; E-CARAT 6; Espada Reinsurance Series 2016-I; FCT Ginkgo Compartment Sales Finance 2015-1; Golub Capital Partners CLO 30(M); Manatee Re Series 2016-1; Molineux RMBS 2016-1; Pepper Residential Securities Trust No. 16; WFCM 2016-C33

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-6; CGCMT 2013-GC15; COMM 2012-CR3; COMM 2013-CR9; COMM 2014-CR15; COMM 2014-CR19; COMM 2014-LC17; COMM 2014-UBS6; GSMS 2011-GC5; GSMS 2013-GC10; GSMS 2014-GC20; Logistics 2015 UK; TAURS 2006-1; TITN 2006-2; TMAN 5; UBSBB 2013-C6; WFRBS 2013-C11; WFRBS 2013-C13 & WFRBS 2013-C14; WFRBS 2013-C14; WFRBS 2013-C15; WFRBS 2013-UBS1; WFRBS 2014-C22