A look at the major activity in structured finance over the past seven days
Pipeline
The pipeline saw limited activity last week, with three new deals announced. These deals were a A$750m Australian RMBS (Apollo Series 2012-1 Trust), a French consumer loan ABS (FCT COPERNIC Compartment COPERNIC 2012-1) and a UK auto loan deal (Motor 2012).
Pricings
A fair mix of new issuances priced during the week, comprising two ABS, one RMBS, two CMBS and three CLOs. The ABS were US$1.03bn John Deere Owner Trust 2012-B and US$111m Rhode Island Student Loan Authority Series 2012-1, while the RMBS was A$800m Progress 2012-2 Trust.
The CMBS prints consisted of US$466.25m JPMCC Trust 2012-FL2 and US$336.25m Wells Fargo Resecuritization Trust 2012-IO, while the CLOs were US$719m Ares XXIV CLO, US$413m CENT CLO 16 and US$404m Shackleton I CLO.
Markets
It was a week of further spread widening for US CMBS, with trading volumes dipping in advance of Labor Day. Barclays Capital CMBS analysts note that generic 2007 LCFs are now 10bp wider over the month, with AJs having dropped three or four points in the same period.
They say: "The steady flow of supply during the past few weeks, along with some emerging signs of deterioration in credit, has put pressure on spreads. Generic LCFs continued to leak wider; we are now 10p off recent tights in the 2007 vintage, while AMs are about 20bp wider."
US RMBS benefited from a CDO liquidation of 2005-2006 vintage mezzanine bonds, with non-agency BWIC volume up from US$387m on Tuesday to US$696m on Wednesday, as SCI reported last week (SCI 30 August). SCI's PriceABS BWIC data shows strong market appetite for subprime paper, with CITM 2007-1's 2A2 tranche covered at 94 handle, up from mid-80s talk at the start of the month.
Spreads continued to tighten in European RMBS. Securitisation analysts at JPMorgan report that UK prime triple-A reached 85bp last week, with Dutch triple-As at 105bp. It is not just core jurisdictions that are tightening, with peripheral spreads such as Italian and Spanish RMBS also tightening on the back of improved sentiment with regards to the sovereign crisis.
Auto paper really caught the European ABS market's attention last week. A flurry of secondary paper was put out for bid on Thursday and attracted strong covers, as SCI reported last week (SCI 31 August). The demand generated by the activity even appeared to spark a similar situation in the US, as traders looked to capitalise on the situation.
Deal news
• A bankruptcy auction of the remaining MSR Resorts properties, currently scheduled for 25 October, is expected to pay off the entire outstanding CMBS debt. Four of the properties back a US$857.6m loan securitised in COMM 2006-CNL2.
• Two European CLOs - Axius European CLO and Neptuno CLO III - have had changes made to their collateral management agreements. 3i Debt Management Investments has replaced Invesco Senior Secured Management as manager on the former deal, while Bankia has resigned as lead investment manager on the latter.
• In a move that has been described as nonsense given the deal's low LTV and material outperformance, Fitch has placed the triple-A ratings of the Annington Finance No. 4 class A notes on rating watch negative.
• Blackrock has been removed as collateral manager of Toro ABS CDO II. Under the transaction's collateral management agreement, the manager may be removed without cause upon 90 days' prior written notice at the direction of holders of a majority-in-interest of preference shareholders.
• Morningstar has added the US$52.8m Sprint Data Center loan, securitised in the MLCFC 2006-1 CMBS, to its watchlist ahead of the 1 October anticipated repayment date (ARD). The loan is collateralised by a 160,000 square-foot class A data centre built in 2001 in Silicon Valley.
• Fitch says that the proposed amendments to the GRAND CMBS (SCI 10 July) are likely to have a neutral to positive impact on the ratings. Following preliminary analysis of the publicly available information, the agency has confirmed that it doesn't view the proposed amendments as constituting a distressed debt exchange.
• Sabal Financial Group has acquired a non-performing CMBS loan portfolio from CWCapital. The underlying real estate assets are located across the US.
Regulatory update
• US District Judge Shira Scheindlin has denied motions for summary judgment that Moody's and S&P filed in a lawsuit related to the failed Cheyne SIV. The decision finds that the ratings constituted actionable misstatements under New York law, meaning that the plaintiffs' claim for common law fraud can proceed.
• ISDA and the Futures Industry Association have published the FIA-ISDA Cleared Derivatives Addendum, a template that can be used by US futures commission merchants (FCMs) and their customers to document their relationship with respect to cleared OTC swaps.
• The Spanish government last week published the new Royal Decree-Law on bank resolution. The law establishes standards for restructuring viable banks and the resolution of non-viable ones.
• The forthcoming US Foreign Account Tax Compliance Act (FATCA) could have wide-ranging implications for global structured finance transactions, Fitch says. In particular, the FATCA status of SPVs and counterparties handling payments will be a key issue.
Deals added to the SCI database last week:
American Express Credit Account Master Trust Series 2012-2 ; American Express Credit Account Master Trust Series 2012-3 ; BCC SME Finance 1; Belgian Lion SME II; Claris SME 2012-1; CoCo Finance II-1; E-Carat Compartment No. 4; FCT GIAC Obligations Long Terme; FirstMac Mortgage Funding Trust series 1-2012; GE Capital Credit Card Master Note Trust series 2012-6; Highbridge Loan Management 2012-1; Holmes Master Issuer series 2012-4; Lafayette CLO 1; Padovana RMBS; Quadrivio SME 2012; Salina Leasing; TICC CLO 2012-1; and Voba N.4.
Deals added to the SCI CMBS Loan Events database last week:
BACM 07-1 & 07-2; BSCMS 07-PWR17 & PWR18 & MLMT 07-C1; BSCMS 2007-PWR18; COMM 2006-CNL2; CSMC 07-C5 & 08-C1; CSMC 2006-C3; CSMC 2007-C5; CSMC 2007-TFLA; CSMC 2008-C1; DECO 2007-C4; ECLIP 2005-1; ECLIP 2006-2; ECLIP 2006-3; ECLIP 2007-1; ECLIP 2007-2; EMC 6; EPC 3; EURO 19; EURO 21; EURO 22; GRF 2006-1; GSMS 07-GG10 & JPMCC 07-LD11; GSMS 2006-GG6; JPMCC 2006-LDP9; MLCFC 2007-5; MLMT 2007-C1; MSC 2006-IQ12; MSC 2007-HQ13; PROMI 2; TITN 2006-CT1; TMAN 3, 5, 6 & 7; TMAN 6; UBSCM 2007-FL1; Various (September auctions); WBCMT 2005-C21; WINDM IX & DECO 2007-E5; and WINDM XI.
Top stories to come in SCI:
Focus on Irish distressed debt
US housing market outlook
Recent iTraxx index trends
GN/FN swaps valuations
Narrow Road Capital profile