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

Pipeline
Six new deals were announced last week that still remain in the pipeline. Half of those were ABS transactions, but there was also an RMBS and two CLOs.

The ABS comprised €578m Cars Alliance Auto Loans France V 2012-1, US$471m Edsouth Indenture No.3 Series 2012-2 and Glacier Credit Card Trust series 2012-2, a Canadian credit card deal. The RMBS was US$1.03bn Springleaf Mortgage Loan Trust series 2012-3, while the CLOs were US$497m Cerberus Offshore Levered I and €721.9m Promise Neo 2012-1.

Pricings
It was a very busy week for issuance, with 21 deals pricing. That figure includes 10 ABS, six of which were auto transactions.

The auto deals were: US$1.26bn Ally Auto Receivables Trust 2012-5; US$594.81m ARI Fleet Lease Trust 2012-B; US$600m Chesapeake Funding 2012-2; US$750m Nissan Auto Lease Trust 2012-B; Skr4.5bn Svensk Autofinans 1; and US$683.86m World Omni Auto Receivables 2012-B Owner Trust.

The rest of the ABS prints comprised two equipment deals (US$714.664m GE Equipment Transportation Series 2012-2 and US$257.67m Macquarie Equipment Funding Trust 2012-A), one student loan deal (US$674.6m NorthStar Student Loan Trust I 2012-1) and a timeshare deal (US$165.7m SVO 2012-A VOI Mortgage).

In addition, two RMBS (£201m Paragon Mortgages 17 and US$320.34m Sequoia Mortgage Trust 2012-5) and four CMBS priced. The CMBS consisted of US$272.8m COMM 2012-FL2, US$257m Fairway Outdoor Funding 2012-1, US$1.268bn FREMF 2012-K021 and US$1.05bn WFRBS 2012-C9.

Finally, four CLOs were issued: US$450m Apidos CLO X, US$720.43m CIFC Funding 2012-II, US$520m Galaxy XIV CLO and US$459.6m West CLO 2012-1.

Markets
CLO secondary supply was particularly strong towards the end of the week and was also particularly well received. Bank of America Merrill Lynch securitised products strategists note that mezzanine spreads tightened over the week as yield-hungry investors were met with insufficient supply. Triple-A spreads, however, remained at 125bp.

They add: "Despite increased concerns arising from disappointing corporate earnings and a sell-off in the equity markets, the CLO market continues to trade well. Of note, last Friday saw a US$63m buy-it-now list that saw a lot of interest. Most of the line items were purchased at the buy-it-now price prior to the BWIC. As a result of search for yield, focus remains in the mezzanine part of the capital structure, which still provides attractive spread pick-ups versus other credit sectors."

US ABS had a fairly active week, report Barclays Capital ABS analysts. The primary market saw almost US$6bn of issuance, but secondary activity was also up.

They note: "The main theme remains the search for yield, with paper that has any hint of spread continuing to be very well bid. In the generic consumer asset classes, the credit curve continues to flatten; spreads on shorter senior classes leaked wider on supply technicals, while mezzanine and subordinates tightened on strong investor demand."

Non-agency paper dominated US RMBS secondary activity, particularly at the start of the week, as SCI reported on Tuesday (SCI 16 October). Monday's session was mainly focused on subprime collateral. Non-agencies continued to trade tight throughout the week, while the Fed has been crowding competition out of the agency space.

After the week before last saw US CMBS spreads move marginally wider, last week saw them rally back with a vengeance. Deutsche Bank CMBS analysts note that LCFs were 10bp tighter on the week, with AMs and AJs moving 35bp and 25bp tighter respectively.

They add: "In our view, the fundamental issue facing investors now, especially with the Presidential election and year-end approaching, is do you monetise gains now or continue to 'ride the wave'? At the top of the capital structure, it is less obvious that meaningful compression lies ahead, but it is more likely there will be some tightening ahead."

It was a similar story for European CMBS. Here prices have edged higher over the month, as SCI reported on Wednesday (SCI 17 October).

SCI's PriceABS BWIC data for Tuesday's session shows that tranches such as PROUD1 A were covered wider than they were in late September. EPICP DRUM B does buck this trend, however.

Deal news
• A trial start date of 14 January 2013 has been set in connection with ResCap's proposed US$8.7bn settlement with 392 RMBS trusts. The trial is expected not to last beyond 17 January.
• Sound Harbor Partners will acquire the management contracts on US$2.2bn of leveraged loans held in Aladdin Capital Holdings' Landmark CLO funds. The funds will continue to be managed by William Lutkins and his team.
• NIBC is convening a noteholder meeting on 7 November to vote on restructuring proposals for Sound 1. An extension of the first optional redemption date by 12 months to November 2013 is being proposed, as well as an increase on the class A margin to 110bp from the original sep-up date and the other notes to increase to the original step-up margins from the November 2012 IPD.
• ING Global Investment Strategies is set to transfer the collateral administrator agreement for the Ajax Two CDO to Dock Street Capital Management. Moody's notes that the transfer won't result in a downgrade or withdrawal of the deal's ratings.
• Moody's notes that it would not have assigned a Aaa rating to Isobel Finance No.1, the first non-performing real estate loan portfolio CMBS transaction to come to market in EMEA (SCI 4 October). The agency says that the deal is not compatible with a Aaa rating because of the quality of the assets, its extra leverage due to swap termination payments, its principal allocation waterfall and the complexity of the underlying loans.
• Alianza Valores has structured the first trade receivables securitisation in the Colombian market. Originated by Coltejer, the COP22bn public placement exceeded the pre-agreed minimum amount of COP20bn for the first tranche of an issue for an aggregate amount of COP35bn.
• Bemo Securitization (BSEC) has arranged an auto ABS for T. Gargour & Fils (TGF), the exclusive distributor for the Levant of Mercedes-Benz passenger and commercial vehicles. Dubbed TGF Star, the main purpose of the transaction is to enable the company to enhance the structure of its clients' portfolio, as well as create an off-balance sheet financing platform to better manage its credit sales.

Regulatory update
• The CFTC Division of Swap Dealer and Intermediary Oversight has issued interpretative guidance letters to equity real estate investment trusts and asset-backed securities funds. The guidance states that such funds that meet certain criteria are not included within the definition of 'commodity pool' and their operators are not 'commodity pool operators' under the Commodity Exchange Act and the CFTC's regulations.
• New EU regulations governing short selling of EU equities, sovereign bonds and sovereign CDS will come into force on 1 November (SCI passim). Recent changes to the application of the rules are expected to negatively impact liquidity across a number of EU financial instruments.
• The Spanish 'bad bank' is to begin operations on 19 November. Dubbed Sareb, the vehicle will absorb up to €90bn in troubled assets.
• The US SEC has voted unanimously to propose capital, margin and segregation requirements for security-based swap dealers and major security-based swap participants. Under the Dodd-Frank Act, the margin rules are required to be appropriate for the risk associated with security-based swaps that are not cleared by a security-based swap clearing agency.

Deals added to the SCI database last week:
ALM VII; CAL Funding II series 2012-1; Etruria Securitisation (retained); GE Capital Credit Card Master Note Trust Series 2012-7; HLSS Servicer Advance Receivable Backed Notes series 2012-T2; Honda Auto Receivables 2012-4 Owner Trust; Hyundai Auto Receivables Trust 2012-C; IDOL Trust series 2012-2; Porsche Innovative Lease Owner Trust 2012-1; SLM Private Education Loan Trust 2012-E; and State Board of Regents of the State of Utah series 2012-1

Deals added to the SCI CMBS Loan Events database last week:
CSFB 2002-CP3; CSMC 2007-C1; CSMC 2007-C3; ECLIP 2006-1; ECLIP 2007-2; EMC 6; EURO 22; EURO 27; EURO 28; GCCFC 2004-FL2A; GCCFC 2006-GG7; GSMS 2007-GG10; JPMCC 2005-CB12; JPMCC 2006-CB15; JPMCC 2006-CB16; LORDS 1; MALLF 1; MLMT 2007-C1; MSC 2004-HQ4; MSC 2005-HQ7; MSDWC 2002-IQ3; PROMI 2; RIVOL 2006-1; TAURS 2006-2; TITN 2006-3; TITN 2007-2; TITN 2007-3; TITN 2007-CT1; TMAN 5; TMAN 6; TMAN 7; WINDM VII; and WINDM VIII.

Top stories to come in SCI:
US CMBS spread trends
CCP margin developments
Opportunities in CLO equity
Cross-sector relative value analysis