SCI Start the Week - 6 November

Category: ABS CDO CLOs

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

It was full steam ahead once more for the pipeline. There were 13 ABS, an ILS, three RMBS, two CMBS and a CLO added.

The ABS were: US$1.3bn AmeriCredit Automobile Receivables Trust 2017-4; Auto ABS UK Loans 2017; A$329.3m Eclipx Turbo Series 2017-1; US$502m DLL Securitization Trust 2017-A; US$456.23m DriveTime Auto Owner Trust 2017-4; US$890m Hyundai Auto Lease Securitization Trust 2017-C; A$542.5m Latitude Australia Personal Loans Series 2017-1; US$750.9m Navient Student Loan Trust 2017-6; PCL Funding III; US$591m SoFi Consumer Loan Program 2017-6; Toyota Auto Receivables 2017-D; US$373.8m Volvo Financial Equipment Master Owner Trust Series 2017-A; and US$578.4m WAVE 2017-1.

US$400m Ursa Re Series 2017-2 was the ILS, while the RMBS were US$865m Invitation Homes 2017-SFR2, US$255m RCO 2017-INV1 and US$320.3m Sequoia Mortgage Trust 2017-CH2. The CMBS were US$250m CSMC Trust 2017-CALI and US$1.2bn FREMF 2017-K728, while the CLO was €371m Aqueduct European CLO 2-2017.

A large number of deals also departed the pipeline, with a fairly even distribution by asset class. There were seven ABS prints, as well as nine RMBS, seven CMBS and 11 CLOs.

The ABS were: US$207.25m CFG Investments 2017-1; £1.45bn Delamare 2017-1; US$585m METAL 2017-1; US$1.25bn Nissan Master Owner Trust Receivables Series 2017-C; €770m SME Grecale 2017; US$676m SMB Private Education Loan Trust 2017-B; and US$265m Tesla 2017-1.

The RMBS were: US$170.2m Bayview Opportunity Master Fund IVb Trust 2017-RT6; US$207.2m CoreVest American Finance 2017-1; US$638.1m CSMC 2017-HL2; US$305m Deephaven Residential Mortgage Trust 2017-3; US$486m Flagstar Mortgage Trust 2017-2; C$520m Fortified Trust Series 2017-1; US$911m JPMMT 2017-4; A$300m Sapphire 2017-2; and US$743m Towd Point Mortgage Trust 2017-5.

The CMBS were: US$977.1m CGCMT 2017-C4; US$1.3bn FREMF 2017-K68; US$1.2bn FREMF 2017-K728; US$519m JPMCC 2017-FL11; C$407m REAL-T 2017; US$743m UBS 2017-C5; and US$705m Worldwide Plaza Trust 2017-WWP.

The CLOs were: US$378m AMMC 2013-12R; US$658m Ares CLO 2015-4R; US$1.008bn CBAM CLO 2017-4; US$484m CFIP CLO 2017-1; €617m Dryden 56 Euro 2017; US$1.5bn Fortress Credit Opportunities CLO 2017-9; US$507.4m KKR Financial CLO 11 2015-11R; US$530m KKR CLO 19; US$611.6m THL Credit Wind River 2017-4; US$715m Venture XXX CLO; and US$609m Voya CLO 2017-4.

Editor's picks
Pre-emptive lawsuits envisaged: The threat of significant losses has sparked concern that the US subprime auto ABS sector could see pre-emptive legal actions emerging. With spreads continuing to tighten in the face of increasing delinquencies, investors may start to question whether they are being adequately compensated for the risks involved...
STS rules welcomed: The European Parliament last week approved new common rules for securitisation in the EU, while also finalising the simple, transparent and standardised (STS) framework. The long-awaited legislation has been welcomed by the market, although it features numerous legal uncertainties, which are expected to be resolved at the regulatory technical standards level...
Secured warehouse use broadens: Be-Spoke Loan Funding (SCI 3 October), a direct lending warehouse facility set up as a cashflow securitisation, exemplifies one of the ways in which secured warehouse financing continues to evolve. While the sector has already demonstrated adaptability, rising interest rates could pose a significant challenge...
Legal issues weigh on Earnest acquisition: Navient's recent acquisition of Earnest is seen as a bold move, given its ongoing legal challenges (SCI 13 October). While the takeover could lead to a surge in refi student loan ABS from the firm, investors in future transactions may need to consider whether they are buying into additional risks...
Secured exposures eyed: The ECB's recent proposal regarding higher non-performing loan provisioning is expected to have a modest impact, in particular for unsecured loans. However, the provisioning backstop for secured exposures poses a challenge...
Balance sheet optimisation continues: Rabobank has transferred part of the risk on a €3bn commercial credit portfolio to pension fund Pensioenfonds Zorg en Welzijn (PFZW). The synthetic securitisation forms part of the lender's efforts to optimise its balance sheet and follows the disposal of a €600m mortgage portfolio to La Banque Postale (SCI 27 October)...
US CLO stand-off: The US CLO secondary market is caught in a supply-demand stand-off. "The secondary market has effectively reached stalemate," says one trader. "Levels are such that for many buyers prices are too high, but holders aren't seeing enough value or alternatives to warrant selling, so it has been very quiet over the past few weeks..."
Using insurance to lay off risk: Alan Ball and Fiona Walden, senior underwriters leading the structured risk solutions team at Liberty Specialty Markets, answer SCI's questions...

Deal news
• The first securitisation of income-contingent repayment (ICR) student loans originated by the UK government (SCI 29 March) has been re-jigged after being postponed due to the UK general election in June. Dubbed Income Contingent Student Loans 1 (2002-2006), the £3.94bn ABS is the first of its type globally and has been relaunched with structural changes and revised provisional ratings.
• The first Australian personal loan ABS is marketing. The A$542.5m Latitude Australia Personal Loans Series 2017-1 transaction (see SCI's deal pipeline) securitises a portfolio of Australian unsecured and partially secured personal loans originated by Latitude Personal Finance.
• Loss coverage ratios on a number of World Omni Auto Trust class A ABS bonds should have been adequate before the recent introduction of a cash-trapping mechanism, according to a new Wells Fargo study. However, the analysis suggests that loss coverage ratios on class B bonds have been lagging, particularly for 2016 vintage deals.

Regulatory update
• Plans to establish Singapore as an Asian insurance-linked securities hub were unveiled today at the Singapore International Reinsurance Conference. Lim Hng Kiang, minister for trade and industry and deputy chairman of the Monetary Authority of Singapore (MAS), outlined a three-pronged strategy aimed at closing what he described as a "protection gap" in the region.
• The UK PRA has published its final approach and expectations in relation to the authorisation and supervision of insurance SPVs (SCI passim). In light of public consultation, a new safeguard has been introduced that removes the need for multi-arrangement insurance SPVs (MISPVs) to notify supervisors of proposals to assume new risks before they take effect. The authority has also issued additional guidance on the fully funded requirement and the senior insurance managers regime (SIMR).