A look at the major activity in structured finance over the past seven days
Pipeline
FirstRand Bank's £239m Turbo Finance 2 auto ABS entered the pipeline last week. Two ILS deals (Blue Danube 2012-1 and US$150m Combine Re) and three CMBS (US$324.8m BAMLL-DB 2012-OSI, US$452.79m Liberty Revenue Refunding Bonds series 2012 and US$925m WFRBS 2012-C6) are also being marketed.
Pricings
Last week was the busiest of the year so far for pricings. Sixteen deals, including the €3.52bn FTA Santander Empresas 11 CLO, printed. The week saw one other CLO print (US$360.78m Babson CLO 2012-1), as well as six auto ABS deals, four RMBS transactions, two equipment ABS deals, one structured settlements ABS and a timeshare ABS.
The largest auto deals were US$1.43bn Mercedes-Benz Auto Lease Trust 2012-A and US$1.11bn Nissan Auto Lease Trust 2012-A. They were joined by US$425m AESOP Funding II 2012-2, US$155m CPS Auto Receivables Trust 2012-A, US$1.25bn Santander Drive Auto Receivables Trust 2012-2 and Sfr308m Swiss Auto Lease ABS 2012.
The largest RMBS to print was a US$2.36bn-equivalent UK RMBS - Silverstone Master Issuer series 2012-1. That deal was joined by £239m ALBA 2012-1, €398m Civitas 2012 and €406m Mars 2600 2012.
The two equipment ABS deals to price were US$800m CNH Equipment Trust 2012-A and US$685.4m GE Equipment Transportation Series 2012-1. Finally, the structured settlement ABS issued was the US$232.44m JGWPT XXV, with the US$450m Sierra Timeshare 2012-1 Receivables Funding rounding out the issuance.
Markets
Despite the heavy supply in new issue US ABS, the secondary market remained very active last week, according to ABS analysts at JPMorgan. "Two large short card and auto lists traded at spreads that were either firm or tighter," they report.
Overall on the week, two- and three-year triple-A credit card floaters tightened by 1bp and 2bp respectively. Two-year triple-A subprime auto spreads narrowed by 5bp.
Equipment spreads also tightened across the curve. Triple-A FFELP spreads narrowed by 5bp across the curve.
The apparent stabilisation in the global macro backdrop that has emerged this year continued to lead US CMBS spreads tighter, say securitised products analysts at Citi. Generic 2007-vintage dupers are now at 175bp over swaps, 95bp tight to their year-end level, while GG10 dupers are at 220bp - 55bp tight to year-end. 2007 AMs and 2.0 triple-Bs are at 400bp and 525bp respectively - 300bp and 150bp tight to their year-end levels.
In US RMBS, residential credit analysts at Barclays Capital say: "Non-agencies remained relatively flat, despite the upward pressure in credit sectors. The one exception was in negam, where prices rose a half point. Synthetic indices preformed similarly, with little change in the PrimeX indices, while deeper-credit ABX 07 AAA prices rose 0.5-2.0 points."
There was also little movement in US CLOs. According to Bank of America Merrill Lynch CLO analysts, triple-As came in 5bp on the week, double-As were unmoved and the other major points down the capital stack all edged in by 25bp.
Deal news
• The Fed is to continue reinvesting principal payments from its holdings of agency debt in agency MBS. A new study illustrates that the Fed's actions have been a major technical factor in the agency MBS market.
• The launch of ISDA's 2012 US Municipal Reference Entity CDS Protocol is expected to boost liquidity in the market, especially for single name muni CDS. But, despite efforts to increase standardisation, MCDS contracts will continue to feature a number of unique quirks.
• Dock Street Capital Management has been retained to act as liquidation agent for Ipswich Street CDO. The collateral will be sold to the best qualified bidders in two public sales on 27 March.
• A number of changes have been made to the management structure of the €560m Quokka Finance, a German multifamily CMBS. These include a change of property manager and borrower general partner.
• Cengage, the seventeenth largest corporate exposure and represented in about half of the CLO universe, is targeting a three-year extension on its 2014 loan. Participants in the amendment would benefit from a 30% loan pay-down, increased spread and a consent fee, according to LCD.
• The operating advisor on Deco 17 - Pan Europe 7 has replaced Hatfield Philips with Deutsche Bank as special servicer for the Mayne loan. Moody's notes that, based on its assessment of the capability of Deutsche Bank to perform the role, the replacement will not result in a reduction or withdrawal of the current ratings of the notes.
Regulatory update
• A recent Michigan Court of Appeals decision over the Cherryland Center loan securitised in GMACC 2002-C3 has the potential to challenge the main tenets of the CMBS market - the non-recourse nature of the loans. The ultimate outcome of the litigation is likely to be positive for CMBS investors, according to CRE debt analysts at Deutsche Bank.
• Ireland and Spain are set to introduce new debt forgiveness legislation in the coming months that will not only impact their domestic mortgage markets, but may also have ramifications for the associated RMBS. Investors are keeping a close eye on developments, particularly with regards to whether the forbearance measures become compulsory.
• Further details have emerged on the US$25bn servicer settlements that the US federal government and attorneys general agreed with Ally, Bank of America, Citibank, JPMorgan and Wells Fargo. The largest impact is expected to be on deals serviced by Bank of America.
• The US SEC has approved the DTCC's application to operate a new central counterparty designed to reduce risk and costs in the US agency MBS market. Starting on 2 April, the MBS division of DTCC's Fixed Income Clearing Corporation (FICC) subsidiary will begin guaranteeing settlement of all of its members' matched MBS trades and introduce pool netting that will further streamline settlement on the related delivery obligations.
• Fitch has identified one implementation of the Volcker Rule that could have unintended consequences for corporate issuers that access capital through the leveraged loan market and CLOs. This risk has been also been noted by several industry associations, notably the Loan Syndications and Trading Association (LSTA).
• The availability of new products and domestic financial institutions' entry into overseas markets is driving rapid change in the Chinese derivatives market, according to a new report from Celent. The report finds that while Chinese regulation is strict, it is evolving towards a more open, orderly derivatives market.
• The NCUA and HSBC have reached a settlement regarding potential claims relating to the sale of RMBS to five failed wholesale credit unions. HSBC has agreed to pay NCUA US$5.25m.
• ESMA has confirmed that it considers the regulatory frameworks for credit rating agencies of the US, Canada, Hong Kong and Singapore to be in line with European rules. EU regulations require the authority to assess whether the requirements of third-country CRA regimes are "as stringent as" the European ones.
• The ability of Singaporean banks to issue covered bonds is one step closer, following the release of a Monetary Authority of Singapore (MAS) consultation paper on the asset class. MAS is proposing that banks incorporated in Singapore may issue covered bonds subject to the aggregate value of assets in the cover pool being capped at 2% of the value of the total assets of the bank.
• The US SEC has published an analysis of market data related to credit default swap transactions. The analysis is available for review as part of the comment file for rules proposed jointly with the CFTC to further define the terms 'swap dealer', 'security-based swap dealer', 'major swap participant', 'major security-based swap participant' and 'eligible contract participant' under Title VII of the Dodd-Frank Act.
Deals added to the SCI database last week:
AEP Texas Central Transition Funding III
Ally Auto Receivables Trust 2012-2
Domino's Pizza Master Issuer series 2012-1
East Lane Re V
Morgan Stanley Capital I Trust 2012-C4
Pelican Mortgages No. 6
Principal Residential Investment Mortgages 1
SLM Student Loan Trust 2012-2
SMART series 2012-1US Trust
Spoleto Mortgages 2011
Volvo Financial Equipment series 2012-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 07-1 & GECMC 07-C1; BACM 2006-6; BACM 2007-3; BACM 2007-5; BSCMS 2007-PW18; CD 07-CD4, WBCMT 05-C17 & CGCMT 06-C4; DECO 17; DECO 2006-C3X; ECLIP 2007-1; ECLIP 2007-1A; EMC 3; EMC 6; EURO 22; GCCFC 2004-GG1; GECMC 2006-C1; GMACC 2002-C3; GSMS 2005-GG4; IMMEO 2; JPMCC 2005-LDP1; JPMCC 2005-LDP5; JPMCC 2006-CB17 & JPMCC 2006-LDP9; JPMCC 2006-LDP9; JPMCC 2007-CB18; JPMCC 2008-C2; MLMT 2005-MCP1; MSC 2006-IQ12; QUOKK 2006-1; TAURS 2006-1; TITN 2007-CT1; TMAN 6; TMAN 7; UBSCM 2007-FL1; Various (CRE auctions); WBCMT 2003-C9; WBCMT 2007-WHALE 8; and WINDM XIV.
Top stories to come in SCI:
US CLO issuance trends
Growth of liability-driven investment
Impact of RMBS litigation on valuations