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

Pipeline
A variety of deals entered the pipeline last week, including the first NPL CMBS in over 10 years - the US$132m Rialto Capital Series 2012-LT1. The transaction was joined by the A$465m IDOL Trust Series 2012-1 RMBS and the US$367.5m Doral CLO II. Silvermine Capital Management is also marketing a US$400m CLO.

Pricings
The largest transaction to price last week was a US$2.347bn SME CLO (Sandown Gold 2012-1), which was joined by a second US$413m CLO (Galaxy XII CLO). A US$1.2bn CMBS (FREMF 2012-K501), a US$365.4m RMBS (Sequoia Mortgage Trust 2012-2), Investec's postponed RMBS Gemgarto 2012-1, a €422m stranded asset ABS (Rayo Finance Ireland Series 5) and a US$150m ILS (Combine Re) also printed.

Markets
Secondary trading in US ABS was active last week, although ABS analysts at JPMorgan note that the market appears to be trading sideways. The high level of supply for short-dated card and auto deals seen earlier in the year has lessened interest for those assets, but demand for FFELP student loan ABS is increasing.
The volatility in US RMBS has eased off, as SCI reported on Tuesday. Strong agency supply has driven spreads wider, while prices have moved up in non-agency despite similarly heavy supply. With a relatively benign macro outlook, spreads are expected to continue to grind tighter.
US CMBS flows were light, with spreads unchanged, according to CMBS strategists at Bank of America Merrill Lynch. "Legacy conduit spreads were essentially flat for the third week in a row," they say.
BWIC volume has decreased since the start of the year. Large BWICs on Monday and Tuesday contained a number of CRE CDOs that the strategists understand did not trade.
European CMBS flows also slowed down considerably last week for the first time all month, according to CRE debt analysts at Deutsche Bank. "In total, there was only €20m of lists. Mezzanine prices in particular began to drift lower but there is still strong demand for IG rated bonds from 'simple' structures," they say.
The European CLO market continues to be inundated with BWICs, but market participants seem to be beginning to lose interest, as SCI reported on Wednesday. Single-A paper remains the most sought after but there are also signs of a little more interest further down the capital structure.
"Triple-Bs and double-Bs are starting to see a bit more interest. That is encouraging. However, the majority of enquiries are still right up the top of the capital structure," says one trader.
Meanwhile, in the US CLO market JP Morgan analysts report: "March 2012 witnessed the most CDO BWIC activity since January 2009, but the US$9.7bn tally comprises very large liquidations of ABS CDOs."
 

Deal news
• Further details have emerged on the plan put forward by Eurohypo and Uni-Invest Holdings - the special servicer and sponsor respectively - for Opera Finance (Uni-Invest), which defaulted last month (SCI passim). The pair is offering either a consensual restructuring or a bid option to investors.
• The latest investor report for Aire Valley, Bradford & Bingley's UK RMBS master trust, indicates that it is close to breaching its non-asset trigger.
• A unit of Prudential Financial has issued an unconventional bond that is backed by a pool of legacy RMBS, but where the firm guarantees principal and interest payments. Fitting into neither RMBS nor covered bond categories, Prudential Covered Trust 2012-1 has been rated single-A by S&P.
• Songbird's latest results provide updated valuations and LTV ratios for the Canary Wharf CMBS. The LTV ratio in the securitisation improved to 72.5% from 73.7% and, after adjusting for amortisation over the year, this implies a valuation decline of -0.7%.
• The downgrade of Hawker Beechcraft to double-C by S&P will cause some CLO overcollateralisation ratios to decline, securitisation analysts at the agency note. The credit is held by about 75 CLOs, with aggregate exposure of US$200m.
• Dock Street Capital Management has been retained to act as liquidation agent for Trinity CDO. Collateral will be auctioned off in three public sales on 3 and 4 April.
• A noteholder meeting was held on 23 March for the TITN 2007-1 (NHP) CMBS. The presentation included information on the recent actions taken by HC-One in connection with the 241 Southern Cross care homes transferred under the restructuring, as well as an overview of future plans for the homes.
• The €6m subordinated bond issued by Gruezi, which forms part of the collateral backing PULS CDO 2007-1, has been classified as defaulted. An investor in residential real estate, the company is facing an increasing number of lawsuits from customers intending to reverse their transactions, claiming formal mistakes during the purchasing process.
• A majority of the controlling class of Gramercy Real Estate CDO 2007-1 has waived the EOD that occurred under the indenture and its consequences, as well as any EODs that may occur until the earlier of 27 August 2012 and the date written instructions to the contrary are provided to the trustee.
• The investment management agreement for Clydesdale Strategic CLO I has been amended to allow under certain circumstances, following a resignation of the investment manager, the appointment of a successor investment manager designated by the resigning manager. The appointment is conditional upon neither a majority of the subordinated notes nor a majority of the rated notes objecting within 30 days of such an appointment.

Regulatory update
• The final European Council ban on naked shorting of sovereign CDS may be stricter than first anticipated, according to structured credit strategists at Citi. They note that regulators appear to be trying to capture trades in the US and Asia under the legislation, even though those regions would seem to be outside their jurisdiction.
• The European Parliament has approved the European Market Infrastructure Regulation (EMIR), which will regulate trade in OTC derivatives. The rules require OTC derivatives to be cleared through CCPs, with all derivative contracts to be reported to trade repositories.
• The Bank of England has published a report clarifying which criteria it believes are important when determining the eligibility for central clearing of OTC derivatives products. Suitability for mandatory central clearing is likely to depend on product and process standardisation, but also on market liquidity, it suggests.
• The recent Royal Decree will result in a higher incidence of payment in kind arrangements in the Spanish mortgage market, whereby banks take ownership of the property and borrowers' mortgage loan obligations are terminated. However, the impact on securitisation transactions remains unclear, Fitch says.
• The US Fed, the FDIC and the OCC are seeking comment on proposed revisions to the interagency leveraged finance guidance issued in 2001. The move could be a modest positive for future CLO loan quality, according to securitisation analysts at S&P.

Deals added to the SCI database last week:
7 WTC Depositor Trust 2012-WTC
BAMLL-DB 2012-OSI
Combine Re series 2012
Credit Acceptance Auto Loan Trust 2012-1
Drug Royalty LP1 series 2012-1
Prestige Auto Receivables Trust 2012-1
Turbo Finance 2
WFRBS 2012-C6

Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-3; CD 06-CD3 & 07-CD4, CGCMT 06-C5 & 07-C6, CWCI 06-C1 & 07-C2; COMM 2007-C9; CSFB 2003-CPN1; CSMC 06-C3 & CSMC 06-C5; CSMC 2007-C4; CSMC 2007-TF2A; EMC VI; EPRE 1-A; EURO 27; JPM 2007-LDP10; JPMCC 2005-LDP1; JPMCC 2006-CB16; LBFRC 2007-LLF; LBUBS 2004-C1; MALLF 1; MLCFC 2006-4; OPERA UNI; TITN 2007-1; TITN 2007-2X; TITN 2007-CT1X; WBCMT 2005-C20; WBCMT 2007-C30; WINDM XI-A; & WTOW 2007-1.

Top stories to come in SCI:
US CMBS underwriting trends
Credit hedge fund activity
Impact of RMBS litigation on valuations
Structured credit recruitment trends