A look at the major activity in structured finance over the past seven days
Pipeline
The pipeline was joined last week by two auto ABS, two RMBS and one CLO. The ABS were Bumper 6 France and €560m FCT Autonoria Compartment 2012-2, the RMBS were Gosforth Funding 2012-2 and A$400m Light Trust No.4 and the CLO was US$624.5m Race Point VII.
Pricings
ABS was once more accounting for the bulk of the week's prints. There were seven ABS issued, two RMBS, one CMBS and five CLOs.
The ABS were US$1.122.73bn American Express Credit Account Master Trust Series 2012-4 and US$685.72m American Express Credit Account Master Trust Series 2012-5, US$183m California Republic Auto Receivables Trust 2012-1, US$612.63m GE Dealer Floorplan Master Note Trust 2012-4, €1.03bn Golden Bar 2012-2, €1bn FCT Ginkgo Private Compartment 2012-1 and US$1.25bn SLM Student Loan Trust 2012-7.
The RMBS were €320m Adriatico Finance RMBS 2012-1 and A$300m RESIMAC Trust 2012-1 NC, while the CMBS was US$835m BB-UBS Trust 2012-SHOW. The CLOs were US$315m Gallatin CLO IV 2012-1, US$407m Shackleton II, €889m UBI SPV BBS 2012, €1.017bn UBI SPV BPA 2012 and €852.7m UBI SPV BPCI 2012.
Markets
Even Hurricane Sandy could not derail the US ABS market, say Barclays Capital ABS analysts. Secondary volume was subdued, but the primary market was active. "Despite the first part of the week being effectively washed out by the storm, volume in non-mortgage ABS primary and secondary markets picked up after the winds subsided. Primary issuance, though low relative to this year's average weekly volume, registered US$3.7bn from four transactions."
US CMBS was first to recover in the aftermath of Superstorm Sandy, as SCI reported on Thursday (SCI 1 November). SCI's PriceABS BWIC data shows spreads on legacy CMBS super-seniors edging wider during Wednesday's session and shows a number of AM and A4 bonds circulating, spreads for which were wider by 10bp-15bp.
The US CLO market stayed quiet last week. Bank of America Merrill Lynch securitised products strategists report that BWIC volume was US$221m for the week, with equity pieces accounting for around three quarters of that. Spreads remained flat on light volume.
The quiet week in the US translated into a quiet week for European ABS, according to Deutsche Bank ABS analysts. They add: "Indeed, with sector returns year to date looking robust, the investor community could well look to effectively shut their books early this year to protect gains." They note that both the new issue market and secondary market were quiet.
The European CMBS market was fairly active over the week, as SCI reported on Wednesday (SCI 31 October). The GRAND restructuring proposal and rash of loan maturities were both viewed positively. "Client activity is good. It still feels like there could be more trading going on if there was more paper available for sale, but buyers are being very selective and they know what they will buy and what they will not buy," notes one trader.
Finally, the European CLO market also stalled, with several BWICs planned for last week now expected this week, as SCI reported on Friday (SCI 2 November). "It has been a strange week. The beginning of the week was the slowest we have seen because of the US and then yesterday it was a religious holiday for most of Europe, so a lot of BWICs have been delayed and not that much has happened," reports one trader. He adds: "Yesterday the focus was more on mezz stuff. There were a few covers, but it was mainly all talk. Appetite is still strong and there is a decent bid from the US as well, so I think the market will be coming back to life next week."
Deal news
• The early termination of two German SME CLOs has been announced. 2012S-Fix 1 was called last month by LBBW due to a change in transaction economics, following the bank's recent downgrade. Meanwhile, KfW is set to exercise a clean-up call for Promise XXS-2006-1.
• Swiss Re is in the market with what is being hailed as a catastrophe bond first. The senior tranche of the reinsurer's second Mythen Re transaction is exposed to both a catastrophe peril and mortality risk.
• Moody's has determined that the proposed restructuring of the German Residential Asset Note Distributor (GRAND) CMBS would constitute a distressed exchange for the class D, E and F notes. The move follows the release last week of final heads of terms for the refinancing and the launch of a lock-up solicitation.
• An estimated US$500m of CMBS loans will be up for bid on Auction.com in November, spread across four auctions, according to MBS analysts at Barclays Capital. The note sales include five properties from the US$340m Schron Industrial Portfolio, securitised in GCCFC 2005-GG5, which carry an allocated loan balance of about US$45m.
• Fitch has released an unsolicited comment on NorthStar 2012-1 Mortgage Trust, the first US CMBS backed by transitional collateral. The agency says that the US$351m transaction, which priced last week at a weighted average coupon of 163 over Libor, lacks sufficient credit enhancement to achieve triple-A ratings.
• Morningstar has added the US$53.8m Moorestown Mall loan - securitised in LBUBS 2003-C7 - to its watchlist, due to a decline in the net cashflow debt service coverage ratio (NCF DSCR). The NCF DSCR fell below breakeven through 2Q12.
Regulatory update
• The European Insurance and Occupational Pensions Authority (EIOPA) has published its proposed capital rules for Solvency II, albeit it is labelled as a working document to allow insurance companies to carry out quantitative impact studies. European asset-backed analysts at RBS note that in the aggregate the requirements are now fairly well-specified, with a few issues remaining open.
• The New York state supreme court has allowed Basis Yield Alpha Fund, an Australian-based hedge fund, to proceed with fraud claims against Goldman Sachs in connection with Timberwolf 2007-1 and Point Pleasant 2007-1. In its complaint, Basis had alleged that Goldman sold it US$80m of notes issued by the two CDOs that lost all their value almost immediately after closing, according to a recent Lowenstein Sandler client memo.
• The Korean Financial Services Commission (FSC) last week published a draft Covered Bonds Act. The bill is expected to provide strong legal protections for the sector, as well as cover pool registration and an independent party to monitor the management of cover pools.
• ISDA has welcomed last Friday's European Parliament vote on proposed amendments to MiFID and its accompanying regulation MiFIR. The vote paves the way for negotiations between the Parliament, Council and Commission, which will ultimately lead to the adoption of final MiFID/MiFIR rules.
Deals added to the SCI database last week:
Arbor Realty Collateralized Loan Obligation 2012-1; BlueMountain CLO 2012-2; Cars Alliance Auto Loans France V 2012-1 ; Fairway Outdoor Funding series 2012-1; FCT Auto ABS Compartiment 2012-1; Golub Capital Partners CLO 14; Jamestown CLO I; Master Credit Card Trust II Series 2012-2; NorthStar 2012-1 Mortgage Trust; OCP CLO 2012-2; OHA Credit Partners VII; Promise Neo 2012-1; Sandown Gold 2012-2; Sequoia Mortgage Trust 2012-5; Sierra Timeshare 2012-3 Receivables Funding; Springleaf Mortgage Loan Trust 2012-3.
Deals added to the SCI CMBS Loan Events database last week:
DECO 11-C3; DECO 2005-E1X; DECO 2006-E4; DECO 8-C2; DECO 9-E3X; ECLIP 2006-1; ECLIP 2006-2; ECLIP 2006-3; EMC VI; EPICP CASP; EPICP DRUM; EURO 19; EURO 21; EURO 22; EURO 24; JPMCC 2006-LDP9; LBCMT 2007-C3; MSC 03-IQ4, GMACC 03-C3 & MSC 04-HQ4; MSC 2007-HQ13; MSC 2007-IQ14; OPERA FR-01; RIVOL 2006-1; TITN 2006-1; TITN 2006-5; TITN 2007-CT1; TMAN 3, 4, 5, 6 & 7; WBCMT 2007-C32; WINDM XI.
Top stories to come in SCI:
Focus on Australian RMBS
CDS short selling regulatory impact
US CMBS note auctions
October EMEA CMBS maturity outcomes