A look at the major activity in structured finance over the past seven days
Pipeline
A further three deals joined the pipeline last week. Two auto ABS deals (€460m FCT TitriSocram Compartment TitriSocram 2012-1 and €561.8m Red & Black Auto Germany 1) and one RMBS - Lloyds' Arkle 2012-1 - began marketing.
Pricings
A number of transactions printed last week. In ABS, two auto (¥25bn Driver Japan One and C$521m Canadian Capital Auto Receivables Asset Trust II 2012-1) and two credit card (C$1.06bn Master Credit Card Trust Series 2012-1 and US$675m GE Capital Credit Card Master Note Trust 2012-2) deals priced.
Additionally, four RMBS (€1.01bn B-Arena 2012-1, €1.44bn FCT BS CDN PPI, US$411.36m Sequoia Mortgage Trust 2012-1 and €1.22bn Storm 2012-I) and three CMBS deals (US$1.13bn FREMF K-705, US$1.15bn GS MST 2012-GC6 and £451m Tesco Property Finance 5) were issued. Finally, a large CLO (€1.403bn FCT BS CDN ENT) and a hurricane ILS transaction (US$40m Successor X 2012-1) printed.
Markets
The positive momentum seen in global structured finance secondary markets so far this year continued last week, despite the ASF conference taking many participants away from their desks.
JPMorgan ABS analysts say that "voracious" investor appetite remained for short benchmark ABS as cash surrogates and bids for the second-tier names and sectors also continued to improve. They add that spread changes on the week reflected this - credit card subordinates tightened by 5bp, three-year triple-B subprime autos tightened by 15bp and double-A FFELP bonds tightened by 5bp to 10bp. In addition, two-year triple-A fixed rate credit cards tightened by 2bp, but other spreads were unchanged.
CLO technicals also continue to be strong, with low supply and robust demand, according to JPMorgan CLO analysts. US super senior triple-As tightened 5bp last week to 180bp and pass-through triple-As moved by the same margin to 210bp, while the single-A to triple-B sector was 25bp tighter across the board.
In European CLOs, the JPM analysts add: "The basis to the US is also narrowing, with buying interest moving beyond the euro double-A and single-A area." Euro triple-A spreads moved 10bp tighter last week to 260bp, with double-As 75bp tighter, while single-As and triple-Bs both 100bp tighter. Euro double-B spreads remained unchanged last week at 2150bp versus 1025bp for US double-Bs.
Meanwhile, Citi securitised products analysts report that the US CMBS market saw another week of robust trading activity in an already very active month. They say: "Total volume for the week reached over US$1.2bn through Thursday, with a projected full-week total of more than US$1.5bn. So far this month, current face of over US$5bn has appeared on BWICs, despite the CREFC winter conference which curtailed trading activity early in the month and a couple of holiday-shortened weeks."
The CMBS credit sectors have been the prime beneficiaries of the recent risk-on sentiment, resulting in an increased flow of capital to the credit classes. Generic 2007 AMs have already tightened in by 150bp since year-end. Generic 2007 dupers are in just 25bp since year-end, 2.0 triple-As are in 15p, Fannie Mae MBS/DUS bonds are in 5bp and 2.0 super-seniors are flat.
Activity in the European CMBS market had a break-through week, according to Deutsche Bank CRE debt analysts. "Trading volume totalled roughly €100m, which is double the recent average. Investors of all types were more active this week than they have been in recent memory," they say.
The DB analysts note the most significant rally so far this month in Europe has occurred in the junior triple-A sector, although prices have not rallied broadly. For example, they say: "The TITN 2007-CT1X A2 is currently trading at around 68 which is largely unchanged since December. By contrast, the TMAN 7 class B was trading in the high-50s in December and is now in the mid-60s. The latter was driven up in part to the price increase in class A."
Continued buoyancy was also seen in the US RMBS secondary market. Residential credit analysts at Barclays Capital say: "Non-agency prices were higher even as most investors were headed to ASF. Jumbo and alt-A prices were up approximately 0.5-1.5 points week-on-week. Meanwhile, the ABX and PrimeX indices were also higher week-on-week, with prices up 1-2 points across most indices."
Deal news
• Assured Guaranty Municipal Corp (AGM) has entered into an agreement to reassume US$12.9bn of par it had previously ceded to Radian Asset Assurance. At the same time, Assured Guaranty Corp (AGC) has agreed to reinsure approximately US$1.8bn of Radian Asset public finance par.
• A meeting has been convened on 17 February for Eurosail Prime-UK 2007-A class A noteholders to consider, and if appropriate, pass an extraordinary resolution to terminate the hedging agreement with Lehman Brothers Holding Inc (LBHI) and agree to a stipulated and 'Agreed Claim Amount' of US$106m.
• Barclays Bank has commenced a tender offer to purchase for cash all outstanding class A2L, A3L, B1L and B2L notes, as well as four million preferred shares of ACA CLO 2005-1. The notes are being offered at between US$900-US$950 for each US$1,000 principal amount tendered or 63 cents (70 cents if tendered early) per preferred share.
• €29.4m Faxtor ABS 2005-1 class A1 notes have been bought back at a discounted purchase price. The repurchased notes were subsequently cancelled, thereby increasing the available credit enhancement to all rated notes.
• S&P has taken various rating actions on all classes of notes in the Granite UK RMBS master trust. The move follows the agency's counterparty analysis, as well as credit and cashflow analysis of the most recent transaction information that it has received.
Regulatory update
• OpenLink Financial has rolled out initiatives focused on accelerating compliance with Dodd-Frank regulatory milestones scheduled for 2012. Among these initiatives are: a Dodd-Frank regulatory compliance reporting package; CFTC position limits monitoring, in aggregate for both OTC and exchange-traded products; swap data repository (SDR) reporting; and OTC trade processing workflows, which have been extended for the lifecycle of cleared derivative products.
• The GFMA has posted a test file of provisional legal entity identifiers (LEIs), created by the DTCC and SWIFT. This information is being made available so that member firms and other financial market participants can begin to evaluate, understand and test the operational implications for their businesses of recently enacted and impending regulatory reporting requirements that include legal entity identification.
Deals added to the SCI database last week:
American Home Mortgage Servicing 2012-1
BAA Funding
CIFC Funding 2011-1
Ford Credit Auto Owner Trust 21012-A
Freddie Mac SPC series K-705
GE Capital Credit Card Master Note Trust series 2012-1
Holmes Master Issuer series 2012-1
Sequoia Mortgage Trust 2012-1
South Texas Higher Education Authority series 2012-1
Symphony CLO VIII
Tesco Property Finance 5
Vitality Re III
Volkswagen Auto Loan Enhanced Trust 2012-1
Top stories to come in SCI:
US CLOs
Special servicer fees
ABS portfolio management trends