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

Pipeline
Two new deals joined the pipeline last week and remained there. The first is FirstMac Mortgage Funding Trust No.3 Series 2-2012 (an A$80m RMBS), while the second is Magnetite VI (a US$415.75m CLO).

Pricings
Fewer transactions went on to price than in recent weeks. There were still eight prints in total, with half of those accounted for by CLOs.

The non-CLO issuance comprised two credit card ABS (US$1.714bn American Express Credit Account Master Trust Series 2012-2 and US$1.072bn American Express Credit Account Master Trust Series 2012-3), one auto ABS (€395m ABS E-Carat Compartment No. 4) and a single CMBS (US$229.5m STORE Master Funding I Series 2012-1). The CLO prints were €1.446bn Claris SME 2012-1, US$313m Highbridge Loan Management 2012-1, US$561m Lafayette CLO 2012-1 and US$160m TICC CLO 2012-1.

Markets
More than US$3.5bn of US CMBS bonds were out for bid last week and Barclays Capital securitised products analysts note that prices weakened in response. "Prices weakened somewhat in response to the step-up in supply, more so on the AM/AJ part of the curve. On one hand, the 30% enhanced 2007 vintage LCF continued to grind tighter, compressing another 5bp to end the week at 170bp over swaps. On the other, generic AMs widened about 15bp, while 2007 vintage AJs gave up about a point on average," they say.

US CLO secondary market activity started to slow last week, report Bank of America Merrill Lynch securitised products strategists. They expect BWIC volumes to continue to decline in the run-up to Labor Day.

They add: "At the top of the capital structure, spreads remained firm and that segment has started to see some compression in tiering between top-tier and second-tier managers and names. Otherwise, the market remained strong, with demand for yield continuing to support positive technicals."

Prices in non-agency US RMBS were flat to higher last week amid robust investor demand, say Citi analysts. There is continued strong demand on the agency side, although credit concerns over Europe remain.

RMBS volumes spiked sharply, as SCI reported on Friday. Countrywide paper accounted for a large chunk of supply in the latter part of the week. Meanwhile, in the European RMBS market, JPMorgan analysts report that UK prime triple-As tightened to 100DM, the tightest level since mid-2008. 

Deal news
• For what is believed to be the first time in conduit CMBS history, a tranche at the top of the cashflow waterfall has suffered an interest shortfall. The X1 interest-only class in JPMCC 2002-CIB4 was impacted after a loss of 120% on the largest loan - the Highland Mall - in the deal wiped out all available cash (see SCI's CMBS loan events database).
• S&P has announced various credit watch actions based on its updated criteria for monitoring the performance of existing US RMBS (SCI 10 August). The actions affect 16,872 ratings from 3,364 transactions with a par amount of US$253.95bn, accounting for approximately 25% of the agency's total rated US RMBS universe by both the number of classes and par amount.
• The investigation by the US Internal Revenue Service of tax-exempt student loan securitisations sponsors and the establishment of a tax amnesty programme are credit negative for tax-exempt student loan ABS, according to Moody's.
• Morningstar has added the US$51.6m Pecanland Mall, securitised in the CGCMT 2004-C1 CMBS, to its watchlist for a decline in occupancy. For the 12-month period ended 31 December 2011, the net cashflow DSCR was 1.90x, with NCF of US$7.3m. Occupancy was reported at 87%.
• Fitch's stress tests of Australian RMBS show the resilience of the ratings, even through a severe sustained recession and house price deterioration. The agency conducted three scenarios stressing interest rates, unemployment and property price declines as the key drivers of defaults and losses.
• Fitch reports that a severe ratings stress test of EMEA CMBS underlines the considerable resilience of triple-A rated tranches in the face of a funding shock. The stress involves sharply higher inter-bank interest rates and property yields, two variables that closely chart funding conditions.
• Berwin Leighton Paisner has disclosed that it advised Hatfield Philips International on the restructuring of the German State Income (GSI) loan securitised in the Windermere XIV CMBS (see SCI's CMBS loan events database). The restructuring involved the sale of the Justizzentrum in Halle (Saale), Germany.

Regulatory update
• In its latest derivatiViews publication, ISDA calls for outstanding questions about liquidity under MiFID 2 to be addressed, ahead of the ECON Committee vote in late September. The association highlights two aspects to this issue: the use of liquidity as a benchmark or trigger for determining whether a rule applies to a particular obligation; and the impact of the rules on the liquidity of traded financial instruments.
• Appointed counsel for the US District Court for the Southern District of New York has filed a brief in support of US District Judge Jed Rakoff's decision to reject a proposed US$285m settlement between the SEC and Citi. The dispute concerns SEC allegations that Citi sold the US$1bn Class V Funding III CDO without disclosing that the bank bet against US$500m of the assets in the deal (SCI 20 October 2011).
• The recent US Second Circuit Court of Appeals decision to reinstate Bayerische Landesbank's claim against Aladdin Capital Management highlights the potential liability of advisers to related investors in securitisations. The case hinges on whether the manager of a synthetic CDO owed any direct obligations or duties under the related portfolio management agreement to the plaintiffs, as investors in the CDO.
• The US SEC and ICP Asset Management have reached a settlement in principle resolving all claims in the SEC's lawsuit against ICP and its founder Thomas Priore. The SEC alleged that, at the direction of Priore, ICP defrauded four Triaxx CDOs by engaging in fraudulent practices and misrepresentations (SCI 23 June 2010).
• The SEC has charged Wells Fargo's brokerage firm and a former vp for selling ABCP structured with high-risk RMBS and CDOs without fully understanding their complexity or disclosing the risks to investors. Wells Fargo has agreed to pay more than US$6.5m to settle the charges.
• The publication of the Irish Personal Insolvency Bill in late June has clarified certain operational elements of the Personal Insolvency Arrangement (PIA) process, which is expected to be implemented towards end-2012 (SCI passim), according to Fitch. The agency says it has gauged views from Irish banks on the impact the legislation would have on their mortgage portfolios and it believes that PIAs would not be an appropriate solution until existing forbearance measures that banks currently employ are exhausted.
• ISDA has launched the August 2012 Dodd-Frank Protocol, which is designed to allow swap market participants to simultaneously amend multiple ISDA master agreements for the purpose of facilitating compliance with Dodd-Frank regulatory requirements. The protocol consists of a series of amendments to existing documentation, as well as standardised questionnaires that must be completed by counterparties to satisfy new regulations.
• Sapient Global Markets has unveiled a new industry standard for cleared OTC derivatives-related activity reporting for asset managers, futures commission merchants (FCMs) and custodians. The Clearing Connectivity Standard (CCS) is a standardised connectivity format that can be used by the FCM community to transmit OTC clearing-related information on behalf of their asset manager clients to custodians.
• ISDA has launched the ISDA 2012 FATCA Protocol. The protocol offers market participants an efficient way to amend the ISDA Master Agreement tax provisions to address the effects of the Foreign Account Tax Compliance Act, which may impose a withholding tax on payments under derivatives transactions.

Deals added to the SCI database last week:
ACAS CLO 2012-1; Albion No. 1; Ally Auto Receivables Trust 2012-4; Battalion CLO II; Brazos Education Loan Authority series 2012-2; COMM 2012-CCRE2; First Investors Auto Owner Trust 2012-2; Halcyon Loan Advisors Funding 2012-1; ING IM CLO 2012-2; Muir Woods CLO; North Carolina State Education Assistance Authority Series 2012-1; Santander Drive Auto Receivables Trust 2012-5; Springleaf Mortgage Loan Trust 2012-2; & Wessex Water Services Finance.

Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-3; BACM 2007-5; BSCMS 2005-PW10; COMM 2006-CN2A; ECLIP 2006-2; ECLIP 2006-3; GCCFC 2005-GG5; GCCFC 2007-GG11; GECMC 2005-C1; GECMC 2007-1; JPM 2003-PM1; JPMCC 2002-CIB4; JPMCC 2006-CB17; JPMCC 2006-LDP7; JPMCC 2006-LDP9; JPMCC 2007-CB20; JPMCC 2007-CIBC18; JPMCC 2007-LDP11; JPMCC 2007-LDPX; MESDG CHAR; MLCFC 2006-4; MSC 2007-HQ13; MSC 2007-IQ14; MSCI 2007-IQ16; PROMI 2; QUOKK 2006-1; TAURS 2006-2; TITN 2007-CT1X; WBCMT 2005-C21; WBCMT 2005-C22; WBCMT 2007-C34; & WINDM VII.

Top stories to come in SCI:
Libor-related litigation developments
July EMEA CMBS maturity outcomes
CLO documentation trends