SCI Start the Week - 8 February

Category: ABS CDO CLOs

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

Pipeline additions were heavily skewed to ABS last week. A total of 11 ABS deals were added, while there was also a single ILS, an RMBS, a CMBS and a CLO.

The ABS were: US$1bn BMW Vehicle Lease Trust 2016-1; US$850m CNH Equipment Trust 2016-A; US$141m EDvestinU Private Education Loan Issue No.1; US$649m Enterprise Fleet Financing Series 2016-1; US$198.8m First Investors Auto Owner Trust 2016-1; US$980m Ford Credit Floorplan Master Owner Trust A Series 2016-1; US$454m GreatAmerica Leasing Receivables Funding Series 2016-1; US$282m PFS Premium Finance; CNY2.71bn Rongteng 2016-1 Retail Auto Mortgage Loan Securitization; US$1.06bn Santander Drive Auto Receivables Trust 2016-1; and Turbo Finance 6.

Espada Re 2016-1 was the ILS, while Darrowby No.4 was the RMBS and US$955m MSBAM 2016-C28 was the CMBS. The CLO was US$300m Mill Creek CLO II.

The majority of the week's prints were also from the ABS sector. As well as nine ABS there was one RMBS and three CMBS.

The ABS were: CNY1.31bn Autopia China 2016-1 Retail Auto Mortgage Loan Securitization Trust; US$140.4m CLI Funding VI Series 2016-1; €888m Driver Espana Three; US$350m Exeter Automobile Receivables Trust 2016-1; US$217.5m HERO Funding Trust 2016-1; US$439m Hertz Vehicle Financing II Series 2016-1; US$561m Hertz Vehicle Financing II Series 2016-2; US$1bn Nissan Auto Receivables 2016-A Owner Trust; and US$414m OneMain Financial Issuance Trust 2016-1.

US$225m Station Place Securitization Trust 2016-1 was the RMBS. The CMBS were US$991m CGCMT 2016-GC36, US$585m JPMCC 2016-ATRM and US$887m WFCM 2016-C32.

"The [US] ABS market remains bifurcated with strong demand for top tier, plain vanilla versus continued softness in off-the-run names/sectors," note JPMorgan analysts. They add: "Broad macro and financial technical dynamics also continue to be the primary driver of ABS spread performance." Triple-A credit card and private student loan ABS floating rate indicative spreads are Libor plus 45bp and plus 130bp, respectively.

Secondary activity was elevated for the European CMBS market last week, as both CMBS 1.0 and 2.0 names circulated on bid-lists. Bank of America Merrill Lynch analysts note that Italian names were particularly well bid. They say: "Broadly speaking, discount margins on pre-crisis European CMBS transactions are now around 140bp for original triple-A rated notes (up from 135bp last week), 200bp for original double-A rated notes (from 190bp last week), 250bp for original single-A tranches (from 240bp last week) and 290bp for original triple-B tranches (from 275bp last week)."

Editor's picks
Dispute resolution framework inked:
Fannie Mae and Freddie Mac have implemented a new independent dispute resolution (IDR) process for handling alleged loan-level breaches of selling representations or warranties that are unresolved after completing the GSE appeals process. The aim is to provide lenders with a simpler and more certain representations and warranties framework for originations...
CMBS 2.0 delinquencies spike: January saw the largest one-month rise in US CMBS 2.0 loan delinquencies ever, but the corresponding servicer commentary appears to be relatively benign, according to Morgan Stanley CMBS strategists. Among the new delinquencies, they highlight a 2014-vintage loan requesting a modification and a number of new watchlisted loans that could potentially become credit concerns...
US CLOs down but not out: Despite the current downward trend in prices, there are signs that the US CLO secondary market is attempting to pick itself up. "It's not a pleasant picture for sellers right now," says one trader. "There were a couple of lists from people that had to sell [on Wednesday] and they found some really weak bids..."

Deal news
• Jefferies Funding is in the market with an RMBS backed by a one-year revolving warehouse facility guaranteed by Jefferies Group. The US$225m Station Place Securitization Trust 2016-1 transaction is structured with two legs of back-to-back repurchase agreements.
• Creval Group has agreed to sell a €314m securitisation of secured and unsecured NPLs to Credito Dondiario. The sale of the Cerere portfolio is the first significant shifting of NPLs off Creval's books as part of its medium-term NPL management plan.
• From the start of this month, Barclays is linking the interest rates it charges UK credit card customers to the Bank of England's base rate. The current low interest rate environment means such a move will support excess spread levels in the Gracechurch credit card ABS trust and reduce potential asset-liability interest rate mismatches between the receivables and note liabilities.

Regulatory update
• A decree formalising the Italian treasury's €200bn NPL plan (SCI 28 January) is expected shortly. Moody's suggests in its latest Credit Outlook publication that the proposed state guarantee will improve the rating and liquidity of the senior tranches, facilitating both the placement of the senior tranches with investors and the deconsolidation of bad loans from the books of Italian banks.
• Recent changes by Brazil's securities market regulator Comissao de Valores Mobiliarios to ABS performance reporting standards still lack a number of important features, Fitch warns. The breakdown of payment data could result in users continuing to underestimating delinquencies and losses.
• A recent US District Court for the Eastern District of Pennsylvania decision has highlighted once again the regulatory risks that the 'true lender' doctrine can create for internet-based lenders that partner with banks to establish exemptions from state consumer protection laws (SCI passim).
Fannie Mae and Freddie Mac have implemented a new independent dispute resolution (IDR) process for handling alleged loan-level breaches of selling representations or warranties that are unresolved after completing the GSE appeals process. The aim is to provide lenders with a simpler and more certain representations and warranties framework for originations.
• Morgan Stanley has agreed to pay the FDIC nearly US$63m regarding claims over the sale of RMBS to three banks that later failed. The settlement, which resolves lawsuits brought forward by the regulator as receiver for the banks, will be distributed among their respective receiverships.
• A new Catalonian law on housing emergencies could deter potential purchases of Spanish mortgage NPLs, suggests Moody's. As a result, the adverse effects of Catalonian law 24/2015 may see fewer NPLs included within RMBS pools.

Deals added to the SCI New Issuance database last week:
Babson CLO 2016-I; CarMax Auto Owner Trust 2016-1; CFCRE 2016-C3; COMM 2016-CR28; CSAIL 2016-C5; FREMF 2016-K504; FREMF 2016-K52; FREMF 2016-KBAM; FREMF 2016-KF13; FRESB 2016-SB11; Galileo Re series 2016-1; Hertz Vehicle Financing II series 2016-1; Hertz Vehicle Financing II series 2016-2; Home Partners of America 2016-1 Trust; Hyundai Auto Lease Securitization Trust 2016-A; Navient Private Education Loan Trust 2016-A; Storm 2016-I; Vitality Re VII series 2016; Voya CLO 2016-1

Deals added to the SCI CMBS Loan Events database last week:
CGCMT 2004-C2; CGCMT 2014-GC23; COMM 2013-LC13; COMM 2014-CR15; COMM 2014-UBS3; COMM 2014-UBS4; COMM 2014-UBS5; CWCI 2007-C3; DECO 7-E2; DECO 8-C2; ECLIP 2006-1; EMC VI; EURO 28; GSMS 2011-GC5; JPMBB 2014-C21; JPMBB 2014-C24; JPMCC 2010-C1; JPMCC 2012-C8; JPMCC 2014-C20; MLCFC 2006-1; TITN 2006-1 & TITN 2006-2; WFCM 2015-NXS2; WFRBS 2012-C9