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

Pipeline
It was a busy week for the pipeline. There were four CMBS, one RMBS, one CLO, one ILS and four ABS deals.

The CMBS transactions were US$1.2bn FREMF 2012-K710, US$300m JMPCC Mortgage Sec Trust 2012-HSBC Commercial Mortgage Pass-Thru Certificates, C$240m IMSCI Commercial Mortgage Pass-Through Certificates Series 2012-2 and US$1bn MSBAM 2012-C5 CMBS.

The RMBS and CLO were Lanark series 2012-2 and US$300m JFIN CLO 2012, respectively. The ILS was Vita Capital V series 2012-1.

The ABS deals were £454m Bealine, an airport slots deal, and three student loan ABS deals: US$526m Educational Funding of the South Series 2012-1, US$531m Iowa Student Loan Liquidity Corp series 2012-1 and US$463m North Texas Higher Education Authority Inc series 2012-1.

Pricings
There was also a fair share of pricings, with two CLOs and seven ABS. The CLOs were US$514m Gramercy Park CLO and €839.2m SME Grecale.

The ABS prints were C$514.7m CIT Canada Equipment Receivables ULC Series 2012-1 (equipment ABS), US$1.45bn Hyundai Auto Receivables Trust 2012-B (auto prime), US$300m Sierra Timeshare 2012-2 Receivables Funding (timeshare), US$1.215bn SLM Student Loan Trust 2012-5 (student loans), US$416m World Financial Network Credit 2012-B (credit cards), US$266.67m World Financial Network Credit 2012-C (credit cards) and US$713m World Omni Auto Receivables Trust 2012-A (auto prime).

Markets
Activity has picked up in the US CLO market, with increased secondary trading and the New York Fed announcing three rounds of Maiden Lane III sales for later in the month (SCI 13 July). "Secondary spreads tightened this week across the capital structure. Legacy triple-A spreads tightened in by 5bp while double-A, single-A and triple-B spreads tightened by 25bp," note securitised products analysts at Bank of America Merrill Lynch.

There was also increased activity in US CMBS as the market continued to pick up after the previous holiday week. Citi securitised products analysts note that weekly secondary activity "approached near-average levels". Legacy spreads have continued tightening, but there has been widening amongst new issuance, with long senior bonds trading at their widest point this year.

Demand is strong in US RMBS, say Barclays ABS analysts. In the agency space they note that "dollar prices hit new highs this week as most coupons outperformed duration hedges" and that collateral shortage technicals drove FN 3.5 and 4.5 rolls sharply higher. The non-agency market also remained strong, with prices rising higher despite broader concerns.

Demand is also good in European RMBS where it is outstripping supply, as SCI reported on 11 July. Spread movement has been limited as a lack of issuance is starting to take its toll. "The short end is extremely well bid and trading very well, so we find it very hard to obtain paper right now. We put bids on BWICs and we bid dealers, but there is still a lot of supply constraint. It is much less so on the longer end, though," reports one trader.

JPMorgan ABS analysts note that it was a quiet week in primary European ABS, with no new deals placed with investors. A scarcity of paper saw secondary tightening in vanilla asset classes.

Deal news
• GRAND CMBS bonds reacted positively in the secondary market to the proposed restructuring terms (SCI 10 July), with class A spreads moving from the low- to mid-90s to above 97 and junior tranches rallying by more than 20 points. If accepted, the refinancing is expected to lead to a 're-rating' of the transaction, with further significant price appreciation possible.
• The New York Fed has announced a succession of asset sales from Maiden Lane III, with bids due at three points this month. In each case Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Pierce Fenner & Smith, Morgan Stanley and RBS have been invited to bid for the collateral.
• A portfolio of 33,000 apartments being sold by BayernLB subsidiary GBW is expected to generate significant bidding interest, reflecting sustained demand for German multifamily housing (MFH) portfolios, Fitch notes. The agency says this supports its view that the diversified and durable income generated by well-managed MFH is a major strength for the three large German MFH CMBS.
• European DataWarehouse (ED) has successfully completed a private placement with 15 key investors, consisting largely of global banks and institutions. The placement was coordinated by Perella Weinberg Partners.
• Moody's has placed 78 tranches from 15 European CLOs, currently rated Aa1 and below, on review for upgrade and upgraded two further tranches. The actions reflect a correction to the rating model the agency used for these transactions, as well as the generally stable performance of the affected tranches since the last rating action in 2011.

Regulatory update
• SIFMA public policy and advocacy evp Kenneth Bentsen has testified before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit to discuss the Qualified Mortgage (QM) proposed rulemaking and its impact on the cost and availability of mortgage credit.
• OTC derivative market reforms are raising particularly challenging questions for sovereign institutions, according to a new BNY Mellon report. The report explores inherent inconsistencies in the application of key OTC reform provisions and the potential impact on sovereign institutions - a base of increasingly influential global investors that use capital markets and OTC derivatives for implementing their investment strategies and hedging exposure.
• SIFMA public policy and advocacy evp Kenneth Bentsen yesterday (Tuesday) testified before the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises regarding the impact of the Dodd-Frank Act. Specifically, he focused on the implementation of the Volcker Rule, credit risk retention, Title VII and Section 165(e) single counterparty credit limits.
• The US SEC has approved rules and interpretations that further define the terms 'swap' and 'security-based swap', as well as whether a particular instrument is a 'swap' regulated by the CFTC or a 'security-based swap' regulated by the SEC. The action also addresses 'mixed swaps' - which are regulated by both agencies - and 'security-based swap agreements', which are regulated by the CFTC but over which the SEC has antifraud and other authority.
• The Basel Committee and IOSCO have published a consultative paper on margin requirements for non-centrally cleared derivatives. The report lays out a set of high-level principles on margining practices and treatment of collateral.
• The ECB has released a timeframe for the implementation of loan-level data reporting for ABS. Provision of loan-by-loan information for RMBS will be mandatory as of 1 December 2012, with SME ABS and CMBS reporting to be implemented by 1 January 2013 and consumer finance, leasing and auto loan ABS reporting by 1 January 2014.

Deals added to the SCI CMBS Loan Events database last week:
BACM 2004-5; BACM 2006-2; BACM 2007-3; CD 2006-CD2; CSFB 2004-C3; CSMC 07-C5 & 08-C1; DECO 2006-C3; DECO 2007-E5 & WINDM IX; DECO 8-C2; EMC 6; EPICP DRUM; EURO 24; FHSL 2006-1; GECMC 07-C1, BACM 07-1 & JPMCC 07-LDPX; GRAND 1; GRF 2006-1; GSMS 2006-GG8; ING (UK) Listed Real Estate Issuer; JPMCC 2007-LD11; LBUBS 2006-C3; LBUBS 2007-C7; MSC 2006-T23; MSC 2007-IQ15; OPERA UNI; PROMI 2; REC 6; TITN 2007-CT1; WBCMT 2004-C10; WINDM VII; WINDM XI; and WINDM XIV.

Top stories to come in SCI:
Brevan Howard Credit Catalysts profile
REO-to-rent securitisation potential
ILS market update
Structured credit recruitment trends