SCI Start the Week - 7 March

Category: ABS CDO CLOs

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

With many market participants decamped to Las Vegas for the industry conference, pipeline activity last week was muted. There were four ABS and four RMBS added.

US$440m California Republic Auto Receivables Trust 2016-1, US$991.28m Capital Auto Receivables Asset Trust 2016-1, US$664m Conn's Receivables Funding 2016-A and US$122.33m OSCAR US 2016-1 accounted for the ABS. The RMBS were Agate Bay Mortgage Trust 2016-1, €421m FT RMBS Prado 2, A$300m Liberty Series 2016-1 and US$475m STACR 2016-HQA1.

The number of deals leaving the pipeline stayed fairly steady with the preceding week. The week's prints consisted of two ABS, four ILS, two RMBS, three CMBS and two CLOs.

A$531m Driver Australia Three and US$551m SoFi Professional Loan Program 2016-A were the ABS. The ILS were US$175m Akibare Re 2016, US$250m Citrus Re 2016-1, US$300m Galileo Re 2016-1 and US$100m Manatee Re 2016-1.

A$1.7bn Medallion Trust Series 2016-1 and US$280m Nationstar HECM Loan Trust 2016-1 were the RMBS, while the CMBS were US$194.8m BAMLL 2016-ASHF, US$470m CARS MTI-1-MTI-7 Series 2016-1 and US$806.2m COMM 2016-DC2. The CLOs were US$358.28m Denali Capital CLO XII and US$407m Highbridge Loan Management 8-2016.

US CMBS spreads are expected to continue to lag until 'risk-on' sentiment becomes stronger across credit. "As often occurs in securitised products, once CMBS begins to participate in any rally, spreads will likely gap tighter and it will be difficult to source bonds," say Deutsche Bank analysts. Indicative triple-A spreads were at swaps plus 163bp last week, with triple-B minus spreads at 780bp.

The pricing of Highbridge Loan Management 8-2016 brings US CLO issuance to US$3.8bn for the year so far, and JPMorgan analysts see the potential for pricing lower down the capital structure to bounce. The trend of high yield swinging from a loss to a gain and the fact the S&P500 is up 10% since mid-February "will help open up the new issue CLO market," they say.

Editor's picks
Risky business?
Capital relief trade opportunities are increasing as more jurisdictions open up. However, with this expansion comes increasing calls for market standardisation...
P2P cut-back: As marketplace lending continues to rapidly evolve in Europe, the fate of small lenders is an emerging theme. SCI's inaugural Marketplace, Direct Lending & Securitisation Seminar in London last month featured a diverse set of views on how consolidation will foster securitisation through a concentration of more sophisticated platforms...
Interest diversion cushions assessed: Jamestown CLO IV is thought to have become the first post-crisis US CLO to fail its interest diversion (ID) test - by 32bp. Wells Fargo figures show that 12 post-crisis US CLOs now have less than 100bp of ID cushion, seven of which are from the 2014 vintage and four are 2013 vintage...

Deal news
• February US CMBS 2.0 remittances show that 15 loans totalling US$103m became newly delinquent during the month, while eight loans totalling US$104m transferred to special servicing and 189 totalling US$3bn were watchlisted. A 2011-vintage loan - the US$12.4m Campus Habitat 15 loan (securitised in WFRBS 2011-C3) - became the first CMBS 2.0 asset to liquidate at a significant loss.
• An early redemption notice has been posted for the Kizuna Re II series 2015-1 catastrophe bond, indicating that the notes will be redeemed on 1 April. S&P expects the issuer to pay the unpaid principal and all interest due on this date, with no prepayment penalty.
SC Lowy and UOB Asset Management are together launching the first fully Asia Pacific-backed, actively managed cashflow CLO. The CLO will be comprised predominantly by senior secured bank loans from Asia Pacific issuers.
• ISDA's EMEA Determinations Committee has determined that, for the purposes of the 2003 Credit Derivatives Definitions, no succession event occurred with respect to Novo Banco on or about 29 December 2015. It also ruled that, for the purposes of the 2014 Credit Derivatives Definitions, there is no successor to the relevant obligations of Novo Banco.
• Fitch has upgraded five tranches of the Eurohome UK series 2007-1 and 2007-2 transactions, following the discovery of an inconsistent calculation in its UK RMBS surveillance model. The inconsistency had resulted in weighted average foreclosure frequencies that were too high.

Regulatory update
HM Treasury has opened a consultation on its proposal for a new regulatory and tax framework for ILS in the UK. The proposal covers a range of issues, including the necessity for a Solvency 2-equivalent framework and the authorisation of insurance SPVs.
• The Barr-Scott bill - which seeks risk-retention relief for qualified CLOs (QCLOs) - has passed the House Financial Services Committee by a vote of 42-15, with 10 democrats joining the bill, according to S&P. The bill now passes to the full House of Representatives for a vote. Assuming passage by the House, it would then have to be introduced and passed by the Senate and signed by the president before becoming law.
• A recent ruling by the California Supreme Court affirming the right of mortgage borrowers to continue challenging foreclosures years after a securitisation has closed will be credit negative for pre-crisis RMBS, says Moody's in its latest Credit Outlook. The rating agency warns that the ruling leaves an open door for other borrowers to press similar claims of void mortgage assignments and wrongful disclosures.
• Brian Korn of Manatt Phelps & Phillips has suggested that the marketplace lending industry has "nothing to fear but fear itself" in relation to the Madden vs Midland case. In a recent industry comment, he says that while there is concern that the outcome of the case will have a significant and negative impact on marketplace lending platforms and therefore those invested in the sector, there is no need for panic.
ISDA has published a classification letter enabling counterparties to notify each other of their status for clearing requirements under Australia's mandatory central clearing regime for OTC derivatives. Counterparties can bilaterally communicate their status by answering a series of questions.
AFME, the European Fund and Asset Management Association (EFAMA), the International Capital Market Association (ICMA) and Insurance Europe have issued a joint paper backing EU efforts to develop a robust and successful STS framework. The associations believe that STS and the associated CMU could play a pivotal role in enabling non-bank funding alternatives across the region.
• The European Commission has adopted a set of rules which require certain OTC credit derivative contracts to be cleared through central counterparties (CCPs). This implements the clearing obligation under EMIR.

Deals added to the SCI New Issuance database last week:
Ally Auto Receivables Trust 2016-2; Autopia China 2016-1 Retail Auto Mortgage Loan Securitization Trust; Avant Loans Funding Trust 2016-A; BAMLL 2016-SS1; CNH Industrial Capital Australia Receivables Trust series 2016-1; DRB Prime Student Loan Trust 2016-A; Driver Espana Three; Earnest Student Loan Program 2016-A; Flagship Credit Auto Trust 2016-1; Ford Credit Auto Owner Trust 2016-REV1; FRESB 2016-SB13; John Deere Owner Trust 2016; JPMBB 2016-C1; LBTY 2016-225L; Madison Park Funding XX; Magnetite XVII; Nations Equipment Finance Funding III series 2016-1; Neuberger Berman CLO XXI; Quarzo 2016; Rochester Financing No. 2; Rongteng 2016-1 Retail Auto Mortgage Loan Securitization; Station Place Securitization Trust 2016-1; Tidewater Auto Receivables Trust 2016-A; Toyota Auto Receivables 2016-A Owner Trust; WinWater Mortgage Loan Trust 2016-1

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-3; BACM 2008-1; BSCMS 2006-PW12; BSCMS 2006-PW13; COMM 2013-CR12; COMM 2013-CR9; COMM 2014-LC15; DECO 9-E3; ECLIP 2006-1; ECLIP 2006-2; INFIN SOPR; JPMBB 2013-C14; JPMBB 2015-C28; MLCFC 2007-5; MLMT 2006-C1; MSC 2007-IQ13; TMAN 5; UBSCM 2012-C1; WFCM 2015-NSX2; WFRBS 2012-C7