A look at the major activity in structured finance over the past seven days
Pipeline
Three new deals remained in the pipeline at the end of last week, all of them from Europe. They comprise an RMBS (€90m AyT Celeris Hipotecario I) and two SME CLOs (€1.2bn BBVA Empresas 6 and Geldilux TS 2011).
Pricings
A variety of deals printed during the week. The US$100m Atlas VI Capital 2011-1 and €75m Atlas VI Capital 2011-2 catastrophe bonds both priced, as well as a US$811m equipment securitisation (CNH Equipment Trust 2011-C) and two auto deals - an Australian A$90m transaction (Liberty Series 2011-1 Auto) and a €427m German one (E-CARAT 2011-1).
Additionally, the US$191.3m COMM 2011-STRT CMBS and two RMBS - €960m FTA Santander Hipotecario 8 and €399.4m Giovecca Mortgages 2011-2 - were issued.
Markets
The overriding trend in the structured finance secondary markets over the past week was drop in volumes and a stagnation in spreads as participants completed the last full trading week of the year.
ABS secondary activity picked up significantly last week, while the primary market has unofficially closed for the winter holidays, according to ABS analysts at JPMorgan. "Trading remained focused in high quality and liquid sectors that serve as cash surrogates. While the flows were strong, spreads were unchanged for the most part," they add.
The JPM analysts continue: "Outside the benchmark triple-A bonds, subordinate auto ABS paper saw better bids, driving spreads tighter in that segment. For example, triple-B non-prime auto ABS spreads have tightened roughly 50bp in secondary from this year's wides observed in new issue pricing in October."
In the US CMBS market trading volume started to subside last week as many accounts prepared for the year-end holiday season, according to US CMBS research analysts from Barclays Capital. TRACE data showed that overall trading volume was down US$2.4bn for the week, from US$6.9bn to US$4.5bn.
"Overall, spreads were relatively stable week over week, with 2007 LCFs remaining at last week's level of 285bp over swaps. AM tranches compressed marginally and were 10bp tighter over the week for the 2006 and 2007 vintages. Lower in the capital structure, prices were broadly unchanged," the Barcap analysts add.
Similarly the non-agency RMBS sector is settling into year-end mode, with relatively low engagement levels before the holidays begin, according to MBS analysts at Bank of America Merrill Lynch. "Many investors appear to be taking a conservative view toward aggressive capital allocations at this time of year," they note.
The market continues to see lighter liquidity off BWIC lists, with a greater portion of trades getting done away from lists via offering sheets, for instance. Pricing remains broadly unchanged across both non-agency and subprime markets on lower volumes, the BAML analysts say.
Secondary CLO activity was also fairly subdued this week. BAML CLO analysts comment: "Conviction either way remains feeble, as the standard expectations of spreads tightening into the January effect are offset by the lack of confidence in the macro outlook. Indeed, while US data continues to surprise to the upside, the sovereign story is not going away and weighs on overall sentiment and risk appetite."
Deal news
• Apollo Global Management will merge Stone Tower Capital and its related management companies into Apollo's capital markets business.
• The trustee on Cedarwoods CRE CDO II intends to file an interpleader complaint against the issuer, the collateral manager, the class A-1 noteholder and the class A-2 noteholder regarding the declaration of an EOD and related issues.
• C-III Asset Management is proposing to assign the collateral management agreements for Centerline 2007-SRR5, Centerline 2007-1 Resecuritization Trust and Arcap 2005-1 Resecuritization Trust to C-III Investment Management. This follows the internal transfer of five other CRE CDOs last month (SCI 30 November).
• Final prices for the AMR Corporation, PMI Group and Seat Pagine Gialle CDS auctions - held last week - were determined to be 23.5, 16.5 and 10 respectively. This follows 13 dealers submitting inside markets, physical settlement requests and limit orders to settle trades across the market referencing the names.
Regulatory update
• The DTCC's Fixed Income Clearing Corporation (FICC) mortgage-backed securities division has filed an application with the SEC to provide central counterparty (CCP) and pool netting services for trades in US agency MBS.
• The US SEC has filed papers seeking review of the US Court of Appeals for the Second Circuit's rejection last month of the agency's US$285m settlement with Citigroup (SCI 20 October). The court declined to approve the consent judgment.
• The FDIC has agreed a settlement with the former directors and officers of Washington Mutual Bank. Under the agreement, US$64.7m will be handed over to the FDIC.
• Morrison & Foerster has been appointed as legal counsel for the European DataWarehouse (ED). Elana Hahn, capital markets group partner, will lead the counsel to ED.
Deals added to the SCI database last week:
CFCRE 2011-C2
CNH Equipment Trust 2011-C
CPS Auto Receivables Trust 2011-C
Dolomiti Mortgage
Dryden XXII Senior Loan Fund
E-CARAT 2011
Fanes series 2011-1
Flatiron CLO 2011-1
FTA Santander Consumer Spain Auto 2011-1
JPMCC 2011-PLSD
Royal Street - Compartment 3
Scandinavian Consumer Loan 2011-2
Start CLO VII
Top stories to come in SCI:
2012 outlooks: Asian ABS and structured credit; European ABS; US ABS; CLOs; CMBS; and credit derivatives.