A look at the major activity in structured finance over the past seven days
Pipeline
Four deals remained in the pipeline by the end of last week. They comprised two auto ABS (ZAR2bn Commissioner Street No.5 TopDrive Funding series 2012 and US$527m Porsche Innovative Lease Owner Trust 2012-1), one student loans ABS (US$518.7m Utah Series 2012-1) and one CLO (US$374m Oaktree Enhanced Income Funding Series I).
Pricings
Issuance was strong during the week, with 11 ABS, two RMBS, four CMBS and three CLOs pricing. Auto deals accounted for the bulk of the ABS prints.
Those auto ABS comprised: US$1.1bn Ally Master Owner Trust Series 2012-5; US$813m CarMax Auto Owner Trust 2012-3; US$1bn Huntington Auto Trust 2012-2; US$1.5bn Santander Drive Auto Receivables Trust 2012-6; US$750m SMART ABS Series 2012-4US Trust; and US$1.25bn Volkswagen Auto Loan Enhanced Trust 2012-2.
Three credit card deals (US$850m Chase Issuance Trust 2012-7, US$500m Citibank Credit Card Issuance Trust Citiseries 2012-1 and US$390m World Financial Network Credit Card Master Note Trust Series 2012-D), one student loan deal (US$937.5m Nelnet Student Loan Trust 2012-4) and one lease ABS (€176.8m TDA Lico Leasing III) also printed.
The two RMBS were €2.06bn STORM 2012-V and €747m Credico Finance 11, while the CMBS included US$876m COMM 2012-CCRE 3, US$259m COMM 2012-LTRT, US$1.37bn FREMF 2012-KF01 and US$1.25m MSBAM 2012-C6.
Finally, CLO issuance consisted of US$458.6m Benefit Street Partners CLO I, US$466m ING IM CLO 2012-3 and US$560m OZLM Funding II.
Markets
Last week began with non-agency paper circulating widely in the US RMBS secondary market, as SCI reported on Tuesday. Monday's session saw around US$600m of non-agency paper out for the bid, with offering levels in line with those seen at the end of September. Citi securitised products analysts note that BWIC supply reached around US$4.5bn by Wednesday, with prices flat to higher.
The US CMBS market rallied throughout last week. Thursday saw BWIC volume gather momentum and GG10 Dupers tightening to swaps plus 159bp/155bp (see SCI 5 October). Tranches such as MSC 2007-IQ14 AM were being covered at levels far tighter even than those seen on Wednesday.
US ABS secondary activity benefited from a rush of auto paper, as SCI reported on Thursday (SCI 4 October). SCI's PriceABS BWIC data showed 16 auto tranches for Wednesday's session alone. Spread covers for that session ranged from 1bp over to 15bp over.
Barclays Capital analysts note that the search for yield is leading investors to off-the-run and esoteric ABS. "However, over the past couple of weeks, we have seen a mini-rally of sorts in mezzanine and subordinate retail auto and credit card ABS. Spreads on such paper are about 5bp-10bp tighter."
The US CLO secondary market was exhibiting clear tiering last week. Tuesday's session saw covers for subordinated paper ranging from 176.27 to 33.27 (SCI 3 October).
Finally, the European ABS market was fairly stable last week, according to JPMorgan ABS analysts. They note: "Spreads remained unchanged week-on-week, as the secondary market starts to stabilise after a summer-long rally. BWIC activity remains fairly strong as a number of investors look to take advantage of the tightening in spreads over the last couple of months."
Deal news
• Further details have emerged on Isobel Finance No.1, the £463.22m CMBS that RBS preplaced on 28 September. The transaction represents the first use of CMBS technology in Europe post-financial crisis to partially fund the purchase of legacy commercial real estate loans from a bank balance sheet.
• Ocwen Financial has acquired Homeward Residential for US$750m. With the purchase, Ocwen will assume the servicing on all of Homeward's portfolios - including the Option One, Citi Residential Lending (Ameriquest) and Downey pools - comprising 422,000 mortgage loans, with an aggregate unpaid principal balance of over US$77bn.
• The extraordinary resolution to appoint Deutsche Bank as auction agent has been approved by Eurosail UK 2007-5NP class B1c, C1c and D1c noteholders, having been passed by the class A1a and A1c noteholders on 7 August. However, the trustee is unable to agree to the implementation of the proposal in its current form.
• Morningstar has added the US$232m Galleria Towers loan - securitised in JPMCC 2006-LDP9 - to its watchlist, following a drop in the net cashflow debt service coverage ratio (NCF DSCR) and occupancy, as of 31 March. According to the servicer, the decline in occupancy is due primarily to the departure of Highland Capital, which occupied roughly 8% of the gross leasable area on a lease that expired in December 2011.
• New information published on the London & Regional Debt Securitisation 1 (LORDS 1) CMBS suggests that noteholders are exposed to greater risk than previously identified. The information includes updated collateral valuations and details of a long-dated swap, the presence of which was not previously publicly disclosed.
• Rescap secured bondholders have ended an agreement to support Ally Financial's reorganisation plan. The ad-hoc steering committee - representing US$2.2bn of junior secured Rescap noteholders - has withdrawn its support for the plan, given the protracted nature of the legal proceedings thus far and the chance to improve its negotiating position in future disputes with other creditors.
Regulatory update
• The FHFA has released for public input a white paper on a proposed framework for a common securitisation platform and a model pooling and servicing agreement (PSA). The white paper seeks to identify the core components of mortgage securitisation that will be needed in the housing finance system going forward.
• In a sign that EU regulators' stance on securitisation may potentially be softening (SCI 21 September), the European Commission last week asked the European Insurance and Occupational Pensions Authority (EIOPA) to examine Solvency II calibrations and the design of capital requirements for investments in assets that it describes as "relevant to 'long-term finance'" in the region.
• The European Wholesale Securities Market (EWSM) is expected to start listing debt and structured finance securities imminently. The joint venture between the Irish Stock Exchange (ISE) and Malta Stock Exchange (MSE) is awaiting designation as a recognised exchange by HMRC for withholding tax purposes.
• The Federal Court in Australia has ruled in favour of three councils in a class action brought against Lehman Brothers Australia. The findings could pave the way for the judgment to be extended to other organisations that either sold or distributed CDOs and capital protected notes to councils, or advised councils to buy them.
• New York Attorney General Eric Schneiderman has announced a lawsuit against JPMorgan Securities, JPMorgan Chase Bank and EMC Mortgage. It is the first lawsuit to be brought by the RMBS Working Group, of which Schneiderman is co-chair.
• ISDA has released a comment letter in response to the BCBS-IOSCO Consultative Document 'Margin Requirements For Non-Centrally Cleared Derivatives', endorsing the collection of variation margin (VM) between covered entities as a means to promote systemic resiliency. However, the association believes that current margin proposals raise a number of key issues that effectively undermine the stated objectives of the BCBS-IOSCO study.
• The NCUA has filed suit in Federal District Court in Kansas against Credit Suisse Securities. The suit alleges misrepresentations in connection with the underwriting and sale of RMBS to US Central Federal Credit Union, Western Corporate Federal Credit Union and Southwest Corporate Federal Credit Union.
• A proposed increase in Portuguese income tax would cut household income and could have a knock-on effect on arrears and default levels in the RMBS transactions. The proposal would increase the average rate of income tax to 11.8% from 9.8% and introduce a 4% income tax surcharge for 2013.
Deals added to the SCI database last week:
BAMLL 2012-CLRN; Beacon Container Finance 2012-1; Brass No. 2; Citibank Credit Card Issuance Trust 2012-A1; Dolphin Master Issuer series 2012-II; Dryden Senior Loan Fund XXIV ; Ford Credit Auto Lease Trust 2012-B; Golden Credit Card Trust series 2012-5; Golden Credit Card Trust series 2012-6; Hermes XVIII; Impala Trust No. 1 sub-series 2012-1; Isobel Finance No.1; JPMCC 2012-C8; LEAF Receivables Funding 8 series 2012-1; Liberty series 2012-1 Auto; SMHL Securitisation Fund 2012-2; and Venture XI CLO.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-1; BACM 2006-4; COMM 2005-LP5; CSFB 2000-C1; DECO 2005-C1; DECO 2006-E4; EMC VI; EURO 27; EXCAL 2008-1; GCCFC 2007-GG9; GMACC 1998-C1; GSMS 2007-GG10; JPMCC 2006-LDP7; JPMCC 2007-LD12; MLCFC 2006-1; MLCFC 2007-8; REC 3 Foundation; REC 6; TAURS 2006-2; TITN 2006-CT1; TITN 2007-3; WINDM XII; and WINDM XIV.
Top stories to come in SCI:
Esoteric ABS update
US CMBS market trends
Emergence of European agency CMBS