Monday 6 June 2016 11:30 London/ 06.30 New York/ 19.30 Tokyo

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

Pipeline
The holiday-shortened week resulted in a slowing of the pace of pipeline additions. As well as eight new ABS there was an ILS, two RMBS and a CLO.

The ABS were: CNY3.68bn Bavarian Sky China 2016-1; US$180m CCG Receivables Trust 2016-1; US$300m Harley-Davidson Motorcycle Trust 2016-A; US$324m Oxford Finance Funding 2016-1; US$230m SCF Equipment Trust 2016-1; €1.242bn Sunrise 2016-1; Sfr366m Swiss Auto Lease 2016-1; and Towers CQ 2016.

US$150m Blue Halo Re Series 2016-1 was the ILS, while the RMBS were A$250m La Trobe Financial Capital Markets Trust 2016-1 and US$345m Sequoia Mortgage Trust 2016-1. The sole CLO was €416.8m Avoca CLO XVI.

Pricings
A similar number of deals departed the pipeline. As well as seven ABS prints there was also an RMBS and two CLOs.

The ABS were: US$500m BA Credit Card Trust 2016-1; US$145m Drug Royalty III LP 1 (Series 2016-1); US$400m Hertz Vehicle Financing II Series 2016-3; US$400m Hertz Vehicle Financing II Series 2016-4; US$190m New Jersey Higher Education Student Assistance Authority Series 2016-1; US$317m OneMain Financial Issuance Trust 2016-3; and €190m VCL Master Netherlands.

£262m Oncilla Mortgage Funding 2016-1 was the RMBS. The CLOs were US$508m KKR CLO 14 and US$409m TCI-Flatiron 2016-1.

Markets
The US ABS market "smoked" corporates last month, say Citi analysts. They add: "The ABS market continues to perform well against the corporate market and May was no exception where ABS returned 0.17% compared to negative returns for triple-A and single-A corporates in the Citi 1-5YR BIG index and 0.026% returns for the equivalent WAL triple-B corporate index. Auto ABS as a whole returned 0.23%, with subprime auto as the standout performer, returning 0.44%."

The tone may have picked up around the periphery in European RMBS, but the bulk of last week's secondary market activity took place in the UK BTL and non-conforming space. Bank of America Merrill Lynch analysts comment: "Mezz notes were traded tighter, especially for the higher quality deals, both pre-and post-crisis vintages. The flattening of the curve in these sectors may suggest investors taking a more positive view on the referendum risk ahead, given that it is the non-prime RMBS that would benefit the most from the 'stay' vote."

European ABS in general has been tightening. JPMorgan analysts say: "Away from the UK, generic auto ABS seniors (overwhelmingly Germanic names) tightened 2bp to close at one-month Euribor plus 34bp, and are now at similar levels to those just before the Volkswagen scandal broke out last September."

Editor's picks
Spring surge
: The rally in the US CLO market is being reflected in new issuance, with investors witnessing some of the tightest spreads so far in 2016. Questions remain over the resilience of the sector, however...
Fair value?: In a sector where there is no standardised pricing methodology or standardised pricing reference data, a wide variety of approaches are currently being used to value marketplace loans and peer-to-peer loans. Not all of these approaches are deemed appropriate for the assets, however, and their continued use could have significant repercussions for the securitised MPL market...
US CMBS secondary demand strong: The slow pace of primary market issuance is driving US non-agency CMBS trends. "We see little bursts of activity and then everything slows back down. Over the last one or two weeks we have really seen the quiet primary market driving the secondary market," says one trader...
CDS liquidity moving to indices: The buy-side's ability to source single-name CDS liquidity and form prices remains centralised around banks' ability to warehouse risk on their balance sheets, but that service is being rapidly diminished by Basel 3 and FRTB proposals, says GreySpark Partners. The limited number of banks maintaining active single-name CDS underwriting businesses is "creating an oligopolistic environment, with built-in fundamental and regulatory barriers to entry for other banks"...

Deal news
• The February modification of the US$94.3m Gateway Salt Lake loan, securitised in JPMCC 2010-C1, has been rescinded. Trepp suggests that while the pulling of the modification may not be a first for the CMBS market, it is certainly the largest.
• S&P has raised its issue credit rating on Everglades Re Series 2014-1 notes to single-B plus from single-B. The rating action follows the agency's review of the reset report for the final risk period that began on 1 June, the probability of attachment and the expiration of the variable reset feature.

Regulatory update
• The amended external ratings based approach (EBRA) for calculating regulatory capital changes in European structured finance (SF) transactions has come under scrutiny in a recent report from Scope Ratings. Entitled 'External Rating Based Approach: One-size-fits-all limits banks' lending capacity', the study analyses the 11 European SF transactions rated by the agency and questions whether the EBRA amendments may result in the overestimation of the expected economic risk in certain tranches.
• The Basel Committee has warned banks against conducting capital relief trades. The regulator says such transactions will draw "careful supervisory scrutiny".
• The FDIC has achieved a US$190m settlement of certain RMBS claims with Barclays Capital, BNP Paribas, Credit Suisse, Deutsche Bank, Edward Jones & Co, Goldman Sachs, RBS and UBS. The settlement resolves federal and state securities law claims based on misrepresentations in the offering documents for 21 Countrywide RMBS purchased by five failed banks.
• California-based First Mortgage Corporation (FMC) and six of its senior executives have agreed to pay the US SEC US$12.7m to settle charges that they orchestrated a scheme to defraud investors in the sale of RMBS guaranteed by Ginnie Mae. The SEC alleges that from March 2011 to March 2015, FMC pulled current performing loans out of Ginnie Mae RMBS by falsely claiming they were delinquent in order to sell them at a profit into newly-issued RMBS.
• The US Court of Appeals for the Second Circuit has affirmed the district court's dismissal of Lynn Tilton and Patriarch Partners' suit against the US SEC for lack of subject matter jurisdiction. The appellants brought suit in the US District Court for the Southern District of New York to enjoin the Commission's proceeding before its completion, on the theory that the administrative law judge's appointment violated the Appointments Clause of Article II of the US Constitution.

Deals added to the SCI New Issuance database last week:
Ally Auto Trust 2016-3; Avis Budget Rental Car Funding Series 2016-2; Carismi Finance 2016; CNH Equipment Trust 2016-B; ConQuest 2016-1 Trust; Driver UK Master Compartment 3; Duncan Funding 2016-1; FCT Laffitte 2016; Firstmac Mortgage Funding Trust No. 4 Series 2-2016; FREMF 2016-KSW1; GMF Floorplan Owner Revolving Trust 2016-1; Greene King Finance (tap 3); HERO Funding Trust 2016-2; Holmes Master Issuer Series 2016-1; Honda Auto Receivables 2016-2 Owner Trust ; Malt Hill No. 1; Octagon Investment Partners 27; Oncilla Mortgage Funding 2016-1; Orange Lion XIII RMBS; Orange Lion XIV RMBS; Orange Lion XV RMBS; Orbita Funding 2016-1; Steele Creek CLO 2016-1; Swiss Credit Card Issuance 2016-1; Synchrony Credit Card Master Note Trust Series 2016-2

Deals added to the SCI CMBS Loan Events database last week:
CSMC 2007-C5; DECO 2007-E2; DECO 8-C2; ECLIP 2006-1 & ECLIP 2006-4; GCCFC 2004-GG1; GCCFC 2006-GG7; GSMS 2006-GG8; GSMS 2014-GC24; JPMCC 2010-C1; LBUBS 2007-C2; UBSBB 2013-C5; WBCMT 2007-C31; WBCMT 2007-C32; WBCMT 2007-C33


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