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

Pipeline
A handful of transactions remained in the pipeline by the end of last week. Three of the deals were CMBS: US$448.2m FREMF 2012-KP01, US$1.14bn JPMCC 2012-C8 and US$406m MSBAM 2012-CKSV. The remainder comprised of auto-related ABS (C$398.6m NCAR LP Promissory Note 2012-1 and A$150m Liberty Series 2012-1) and a student loan issuance (US$375m Minnesota Office of Higher Education 2012).

Pricings
A swathe of transactions went on to price during the week, including five CLOs and four auto-related ABS. The CLOs comprised: US$596.04m Carlyle Global Market Strategies CLO 2012-3, US$400m Sound Point CLO I, US$450m AMMC CLO XI, US$516.3m Atrium VIII and US$409.3m Flatiron CLO 2012-1. The auto ABS consisted of: US$184m United Auto Credit Securitization 2012-1, US$300m Westlake Automobile Receivables Trust 2012-1, US$600.8m Enterprise Fleet Financing Series 2012-2 and US$715m Toyota Auto Receivables 2012-B Owner Trust.

In addition, four RMBS printed last week: £1.1bn Brass 2, €526m Dutch MBS XVII, £200m RMS 26 and US$310m Sequoia Mortgage Trust 2012-4. Two student loan ABS (US$235.4m Scholar Funding Trust 2012-B and US$235m Education Loan Asset-Backed Trust I series 2012-1) and two equipment ABS (US$752.05m CNH Equipment Trust 2012-C and US$541.59m GE Equipment Midticket Series 2012-1) also priced. The €754m Florentia CMBS and US$300m Cronos Containers Program I series 2012-2 rounded out the issuance.

Markets
After the reach for spread products and yield last week following the Fed announcement, markets are settling into the new reality of an extended low yield environment, according to Bank of America Merrill Lynch CLO analysts. "During this period, there has been an increase in investor participation in the secondary market. The depth of the CLO market is growing further as more investors look for spread and we believe this interest will continue to expand," they say.

Following a series of slower sessions, the US CMBS market saw BWIC volume increase dramatically last Thursday, as SCI reported on 21 September. PriceABS BWIC data showed over 150 line items for the session, with some interesting price movement evident.

US RMBS BWICs also saw an increase in volume, when on Wednesday activity surpassed the prior session, led by the increase in the supply of subprime bonds out for the bid (SCI 20 September). The sector has a stable tone, with trading levels falling within the bounds of dealer guidance. Some of those subprime names appeared in SCI's PriceABS BWIC archive, with tranches such as FMIC 2007-1 2A2 talked at the mid/high-40s last Wednesday, having been talked at mid-40s on 10 August.

Meanwhile, the US ABS secondary market showed a little weakness in short benchmark spreads under the deluge of newly printed auto ABS. However, JPMorgan ABS analysts report: "Investors have quickly pounced on even the slimmest concessions, leaving the overall positive tone unchanged. Beyond benchmark auto ABS, sectors and names offering more spread continue to trade extremely well and garner strong interest in secondary." 

Deal news
• Structured products strategists at Wells Fargo predict that total US consumer ABS issuance will reach US$170bn for full-year 2012 - an approximately 60% increase over 2011. They expect about US$20bn of new consumer ABS in September alone, assuming the usual seasonal patterns hold and there are no macroeconomic or political disruptions, with the issuance pace remaining brisk in October and November.
• The Markit iTraxx CEEMEA and Markit CDX LatAm Corporate indices - the first CDS indices referencing the regions' corporate debt (SCI passim) - launched on 20 September. The indices will enable investors to gain or hedge exposure to corporate credit risk in CEEMEA and Latin America at a time when there is growing demand for corporate debt from emerging markets, Markit says.
• Two Titan CMBS - Titan Europe 2006-3 and Titan Europe 2006-5 - are expected to see major losses, based on recent regulatory filings. The regulatory notice regarding Titan Europe 2006-5 advises that a discrepancy in regulating the priority of payments for the €239.58m DIVA Multifamily Portfolio loan has been resolved. The other notice is in connection with the €23.64m AS Watson loan, the underlying property of which has been sold for total sale proceeds of €14.3m.
• Deutsche Bank has sold its European CMBS servicing operations to Situs. The bank already transferred its primary servicing role for four transactions to Situs Asset Management, effective from 14 September, and has sub-delegated to the firm its duties under the servicing agreement in respect of nine others.
• Morningstar has added the US$69.2m Oxford Valley Mall loan - securitised in the GSMS 2011-GC3 CMBS - to its watchlist, following a drop in reported occupancy, as of 31 March. An office building on the site (One Oxford Valley) has 69% of its space available for lease and one mall anchor (Boscov's) is vacant.
• Investors would likely change their mandates to purchase F2 rated paper in the absence of alternative short-term investments, if European ABCP conduits lost their F1 rating, Fitch suggests. The agency says that this would limit the impact of downgrades on the US$1trn global ABCP market and reduce concerns that an important source of funding for the real economy would be removed.
• High levels of negative equity will drive losses in Irish RMBS to 9.5% based on defaults peaking at around 20% in early 2013, according to Moody's. However, uncertainty over the full extent of losses remains, as a result of the growing effect of moral hazard.
• Declaration Management & Research has replaced key management personnel in respect of five structured finance CDOs - Independence I, II, IV and V CDOs, and Straits Global ABS CDO I. Three managers specified in the transactions' documents as key management personnel of the collateral manager are no longer employed by Declaration.
• The holders of significant voting rights in more than US$28bn of Morgan Stanley-issued RMBS and US$45bn of Wells Fargo-issued RMBS have sent a notice of non-performance to Morgan Stanley and Wells Fargo. The notice identifies covenants in pooling and servicing agreements which the holders allege have not been carried out, materially affecting the rights of the noteholders and constituting an ongoing event of default.
• Finacity Corporation and ING Belgium have facilitated the successful closing of a pan-European trade receivables securitisation for Sonae Indústria SGPS. The securitisation programme will provide Sonae Indústria with cash proceeds of up to €100m through the on-going purchase of receivables from its European operations.
• Wells Fargo, as trustee for the transaction, will conduct an auction for RFC CDO I on 1 October. The collateral will only be sold if the liquidation results in sale proceeds, together with the balance of all eligible investments and cash in the accounts, greater than or equal to the redemption amount.

Regulatory update
• A new Dutch Securitisation Association (DSA) is expected to launch imminently. The project was initiated by Holland Financial Centre (HFC) in October 2010, with the aim of representing parties involved in Dutch RMBS and improving capital market access for issuers.
• The CFTC has provisionally approved an application by DTCC Data Repository (DDR) to create and operate a multi-asset class swap data repository in the US. The service will be fully ready to operate on 12 October, the first day of required reporting of trades in credit and interest rate derivatives under the CFTC rules.
• The Basel Committee has published the latest results of its Basel 3 monitoring exercise. A total of 209 banks participated in the study, including 102 Group 1 banks and 107 Group 2 banks.
• The IASB has issued a draft of its long-planned update of general hedge accounting rules. Moody's suggests that the new rules are a positive development for investors because the revised reporting guidelines provide a better description and linkage between a company's risks and its corresponding risk-mitigations.

Deals added to the SCI database last week:
Ally Auto Receivables Trust series 2012-SN1; BMW Floorplan Master Owner Trust series 2012-1; CARDS II Trust series 2012-4; CGCMT 2012-GC8; CPS Auto Receivables Trust 2012-C; Credit Acceptance Auto Loan Trust 2012-2; Exeter Automobile Receivables Trust 2012-2; FCT Copernic 2012-1 ; Ford Credit Master Owner Trust A Series 2012-4; Ford Credit Master Owner Trust A Series 2012-5; HLSS Servicer Advance Receivables Trust series 2012-MM1; HLSS Servicer Advance Receivables Trust series 2012-T1; HLSS Servicer Advance Receivables Trust series 2012-VF1; Marea CLO; Marine Park CLO; Mercedes-Benz Auto Receivables Trust 2012-1; Motor 2012-1; PFS Premium Finance Series 2012-B; SLM Student Loan Trust 2012-6; UBS-Barclays 2012-C3; USAA Auto Owner Trust 2012-1; and VCL 16.

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