A look at the major activity in structured finance over the past seven days
Pipeline
It was another steady week for the pipeline, with seven new deals remaining on Friday. Freddie Mac is in the market with the US$1.213bn FREMF 2012-K708, its seventh K Certificate transaction of the year. It is not the only CMBS circulating, as the US$159.5m S2 Hospitality Series 2012-LV1 is also marketing.
The US$285.5m Garrison Funding 2012-1 was the only CLO to enter the pipeline last week, but it was joined by four ABS - A-BEST 7, Glacier Credit Card Trust series 2012-1, SCARD 2012-1 and MEFA Education Loan Revenue Bonds Issue J Series 2012.
Pricings
The week saw one CMBS, one CLO, five ABS and a single RMBS print. The CMBS transaction was US$270m JPMCC 2012-WLDN, while the CLO was the US$311.46m ECP CLO 2012-4.
Auto deals accounted for the bulk of ABS issued last week, with US$1.224bn Ally Auto Receivables Trust 2012-3, US$419m ARI Fleet Lease Trust 2012-A and A$684.4m-equivalent Series 2012-1E REDS EHP Trust all pricing. These were joined by one equipment deal and one student loan deal - US$632.8m GE Equipment Small Ticket Series 2012-1 and US$1.135bn SLM Private Education Loan Trust 2012-C respectively. The RMBS was the €763.5m STORM 2012-III.
Markets
It was a quiet week in the European markets. European ABS market participants are not sure whether to focus on Greece, JPMorgan's woes or the ECB's upcoming loan-level data initiative, as SCI reported on Thursday.
"It is all pointing to a difficult time. If Greece leaves the euro, then anything could happen, but there will be some selling pressure for sure. Where things then settle down is anyone's guess. If Greece does not leave, then we will continue as we are, with a new headline every day and gradually mark things down without really trading at lower levels," says one trader.
European RMBS saw paper generally trading a couple of points lower on the week. JPMorgan analysts note that for STORM 2012-III - Obvion's third deal of the year - the A1s came at 5bp inside guidance, while the A2s sold at the wide end of guidance. Secondary market activity was limited.
Deutsche Bank analysts note that it was also "a relatively quiet week in the secondary markets" for European CMBS. However, high quality sterling front-pays are still in demand at or around 300 DM.
In US RMBS, meanwhile, agency MBS underperformed, report Barclays Capital analysts. Rate movements calmed down and the 10-year rate ended only "a touch wider" than the week before. Mortgages underperformed and coupons were off five or six ticks against the curve.
"While 15s have given up some ground during the past few weeks, lower coupons staged a moderate comeback relative to 30s. This was especially true for FNCI 2.5s, where the roll heated up. Somewhat surprisingly, though, this demand was driven by REITs and money managers, rather than banks," the analysts note.
The secondary US ABS market was also relatively quiet ahead of the Memorial Day holiday. Several off-the-run student names were offered and met with strong demand. Spreads were 1bp-2bp tighter for auto ABS and generally unchanged elsewhere.
Deal news
• The recent court-approved modification of the Westin Portfolio loan, securitised in JPMCC 2007-C1 and JPMCC 2008-C2, has taken the market by surprise. The modification extends the loan by 15 years and slashes its coupon to zero.
• Freddie Mac has announced US$330m of buyouts from various pools due to the resolution of certain "contractual matters". The move is likely to renew concerns about buyouts driven by policy changes.
• RBC recently filed a registration statement with the US SEC for the first public offer of covered bonds in the US. The filing was made in reliance on a no action letter issued by the SEC staff that addresses the conditions under which the covered bonds could be registered.
• Citi and Credit Suisse emerged as the respective winning bidders for the US$1.67bn Duke High Grade Funding CDO and US$690.5m Putnam Structured Products CDO assets auctioned last week by the New York Fed from its Maiden Lane III portfolio.
• Principal payments for Aire Valley UK RMBS are likely to be disrupted over the next couple of months by a £72.5m reserve drawing to meet the expected maturity date of the last bullet bond in April. European asset-backed analysts at RBS note that the drawing will be recouped from principal receipts (accounting for £30m) and excess spread (£4.6m) until it returns to its £380m target size.
• Restructuring talks for the £429m City Point loan, securitised in Ulysses (ELOC No. 27), have been terminated. The transaction had been subject to restructuring discussions since October 2011 and was granted a number of standstills to remedy the interest payment default (see SCI's CMBS loan events database).
• New York Mortgage Trust (NYMT) has completed a resecuritisation of multifamily CMBS. The REIT received net cash proceeds of approximately US$26.1m after deducting expenses associated with the transaction.
• Morningstar has added the US$53m Ardenwood Corporate Park loan, securitised in CSMC 2007-C3, to its watchlist following a notification from the collateral's largest tenant (Logitech) of an intention to vacate its leased space. The firm accounts for roughly 48% of the gross leasable area (GLA) and 37% of effective gross income (EGI).
Regulatory update
• The FHFA last week released for public comment its strategic plan for 2013-2017. The plan provides more detail on proposals to increase the guarantee fee and create a new securitisation platform.
• The FDIC, as receiver for Citizens National Bank and Strategic Capital Bank, has filed three separate lawsuits against a group of major banks - including JPMorgan, Citi, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank, Ally Financial, RBS, HSBC and UBS. The agency alleges that the banks made numerous misrepresentations and omissions regarding the credit quality of loans underlying RMBS that they underwrote.
• FINRA has fined Citigroup Global Markets US$3.5m. The fine is for providing inaccurate mortgage performance information, supervisory failures and other violations relating to its subprime RMBS.
• IOSCO's Technical Committee has published a consultation report, describing certain internal controls and procedures that credit rating agencies (CRAs) use to promote the integrity of the credit rating process and address conflicts of interest, with a view to promoting a better understanding of these practices. The views of stakeholders and CRAs on these questions will assist IOSCO with further analysis of the internal controls and procedures used by CRAs, it says.
• ISDA has published a paper entitled 'Netting and Offsetting: Reporting Derivatives Under US GAAP and Under IFRS'. The paper examines how and why derivatives are treated differently under IFRS and US GAAP and their impact on the new Basel 3 leverage ratio.
• The RMBS Working Group has launched a new website to report fraud and established a coordination team to facilitate the various investigations underway around the US.
Deals added to the SCI database last week
BlueMountain CLO 2012-1
Chase Issuance Trust 2012-A1
COMM 2012-CCRE1
Fosse Master Issuer series 2012-1
Gracechurch Card Programme Funding series 2012-3
GSMS 2012-GCJ7
Kramer Van Kirk CLO 2012-1
LCM XI
Nissan Master Owner Trust Receivables Series 2012-A
Nissan Master Owner Trust Receivables Series 2012-B
Sugar Creek CLO
Triton Container Finance III series 2012-1
Venture X CLO
Deals added to the SCI CMBS Loan Events database last week:
BACM 2002-PB2; CSMC 2007-C1; DECO 2007-E5; ECLIP 2007-2; EMC VI; EURO 27; GCCFC 05-GG3 & GSMS 04-GG2; GCCFC 2007-GG9; JPMCC 2005-CB13; JPMCC 2006-LDP9; LBUBS 2007-C1; OPERA CMH; REC 4; TAHIT 1; THEAT 07-1 & 07-2; TITN 2007-CT1; WBCMT 2003-C9; and WINDM XI.
Top stories to come in SCI:
ABS risk management
European CDO update
Valad Europe profile
Leadenhall Capital Partners profile
Corporate trust survey