SCI Start the Week - 7 November

Category: ABS CDO CLOs

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

There was another pickup in pipeline additions last week, as four new ABS, three RMBS and six CMBS were announced. The ABS were US$150m Diamond Resorts Owner Trust 2016-1, E-CARAT 7, C$426m GMF Canada Leasing Trust Series 2016-1 and CNY4.2bn Silver Arrow China 2016-2.

Brass No.5, US$187.9m Colony American Finance 2016-2 and £448m Towd Point 2016-Granite 2 accounted for the RMBS. The CMBS consisted of: US$452.3m CLMT 2016-CLNE; US$1.037bn Cosmopolitan Hotel Trust 2016-COSMO; US$767.6m CSAIL 2016-C7; US$280m CSMC Trust 2016-MFF; US$725m Hilton USA Trust 2016-SFP; and US$190.3m Velocity Commercial Capital 2016-2.

There were fewer prints than there had been in the preceding week, although they still made for a respectable total. At the final count there were five ABS, one ILS, five RMBS, six CMBS and eight CLOs.

The ABS were: US$211.25m American Credit Acceptance Receivables Trust 2016-4; US$640m Apollo Aviation Securitization Equity Trust 2016-2; 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 Trust. The sole ILS was US$400m Residential Reinsurance Series 2016-II.

The RMBS were: A$300m AFG Series Trust 2016-1; US$1.024bn CAS Series 2016-C06; €692m Dutch Residential Mortgage Portfolio II; £775m Feldspar 2016-1; and €745m SapphireOne Mortgages FCT 2016-2.

The CMBS were: US$756.5m Citigroup Commercial Mortgage Trust 2016-3; US$1.175m FREMF 2016-K723; C$352.35m IMSCI Series 2016-7; US$301.5m InSite Issuer Series 2016-1; US$1.1bn JPMDB 2016-C4; and US$725.6m MSCI 2016-BNK2.

The CLOs were: US$411m Atlas VII; US$562.18m Bristol Park CLO 2016-1; US$495.9m CENT CLO 2014-22R; US$411m Golub Capital Partners CLO 33; US$609m OHA Loan Funding 2016-1; €413m OZLME CLO 2016-1; US$256m Tralee CLO 2014-3R; and US$328m Voya CLO 2014-1R.

Editor's picks
Deep pockets?
: As a wave of US CMBS loans originated from 2004 to 2008 is set to mature over the next 18 months, there are concerns about the ability of these loans to refinance. However, some believe that the sector will see smaller losses than previously had been expected as alternative investment sources inject the required capital...
Converging approach?: Representatives from Chorus Capital, Citi and Clifford Chance recently discussed the current status of capital relief trades during a live webinar hosted by SCI (view the webinar here). This Q&A article highlights the main talking points from the session, including the impact of regulatory changes, the emergence of new assets and jurisdictions, and investor requirements. For a broader and more in-depth exploration of the RWA management space, attend SCI's Capital Relief Trades Seminar in London on 22 November (click here for details)...
US CLOs strong: Levels and activity are still strong in the US CLO secondary market, particularly lower in the stack. "It's pretty busy in secondary, even though the mad rush to print new issues is continuing," says one trader. "We're seeing a lot of mezz and equity going through at the moment - there are triple-A buyers out there, but not in force..."
GSEs announce validation frameworks: Both Fannie Mae and Freddie Mac have announced new validation tools aimed at making the mortgage origination process smoother for lenders and borrowers, with greatly reduced rep and warranty risk uncertainty. Fannie Mae's programme, which will be fully ready by 10 December, is called Day 1 Certainty...
Combo repacks emerging: Several CLO combo notes on downgrade watch, following Moody's updated methodology for the instrument (SCI 10 October), have been resolved via dual-tranche repacks with the aim of keeping the rating stable. The rating agency is reviewing 38 securities backed by CLO debt and equity tranches after adding a refinancing scenario to its approach...

Deal news
• Morgan Stanley has once again teamed up with Wells Fargo and Bank of America to market a US CMBS structured to satisfy risk retention rules on both sides of the Atlantic. MSCI 2016-BNK2 is sized at a little over US$700m and is understood to be the third private bond designed to meet risk retention requirements as the market continues to prepare for upcoming regulatory changes.
• A Chinese auto loan ABS thought to be the largest to date has joined the pipeline. Silver Arrow China 2016-2 is Mercedes-Benz's second Chinese auto loan ABS of the year and is almost CNY2bn larger than its last offering.
• UK non-conforming RMBS Leek Finance Number 18 is set to be redeemed on 21 December, five years after the original step-up and call date. Currently £617m of bonds remain outstanding from the transaction, which JPMorgan European securitisation analysts estimate equates to nearly 2% of the distributed UK NCF opportunities held by investors.
• Banca Popolare di Vicenza (BPVi) and Banca Nuova (BN) are set to repurchase on 1 November all the loans in Berica 6 Residential MBS that are classified as defaulted, as of 30 September 2016. The issuer will distribute the proceeds of the sale according to the transaction waterfall on the January 2017 IPD.
• Barclays has settled with Taberna European Capital Management, the collateral manager for both Taberna Europe CDO I and Taberna Europe CDO II, agreeing to discontinue legal proceedings and release claims. Following the settlement agreement, the Taberna Europe CDO II event of default that arose on 28 June has been irrevocably waived.
Taurus (Pan-Europe) 2007-1 wishes to cancel its liquidity facility, after costs escalated sharply. The issuer has therefore contacted noteholders to seek permission.
• Moody's has assigned ratings to the previously unrated class E notes of two Ally Financial auto loan ABS. The affected transactions are Capital Auto Receivables Asset Trust 2014-3 (US$28m class E notes assigned an Aa1 rating) and 2015-1 (US$66m class E notes assigned a Baa1 rating).
• S&P has removed its double-A plus ratings cap on American Credit Acceptance (ACA) subprime auto loan ABS. The move means that the lender's latest transaction - the US$211m American Credit Acceptance Receivables Trust 2016-4 - is its first to achieve a triple-A rating on the senior class.
• Fitch has placed the class A notes - currently rated single-A - of Atlantes Mortgages No 2 on rating watch negative. The action follows the discovery of errors in the manual processing of the loan-level data and manual entry of data into the agency's EMEA RMBS surveillance model for Portugal.
• Fitch has placed the Minnesota Office of Higher Education Supplemental Student Loan Program Revenue Bonds 2010 Series on rating watch negative, due to data inconsistencies in the servicer reports. The June 2015 servicer report showed a cumulative gross default value of US$1.96m and net defaults of US$1.37m, while the September 2015 report showed gross defaults of US$1.37m and net defaults of US$709,891.

Regulatory update
Nomura Asset Acceptance Corp and Nomura Home Equity Loan have agreed to pay the NCUA more than US$3m to settle claims related to the sale of RMBS that contributed to the failure of Western Corporate Federal Credit Union and US Central Federal Credit Union. The NCUA filed suit in federal district courts in California and Kansas against the Nomura entities. It will dismiss the suits as a result of the settlement, although neither Nomura entity admitted fault.
Volkswagen has received final approval from a US federal court for a US$14.7bn settlement under which it will offer to buy back, terminate leases on, or repair around 475,000 vehicles affected by its diesel emissions scandal. Moody's believes this settlement is credit positive for the outstanding US auto lease ABS transaction issued by VW Credit as early lease terminations will increase prepayments to the securitisation trust.