A look at the major activity in structured finance over the past seven days
Pipeline
Many of the deals that joined the pipeline last week went on to price soon after, but a couple remained come the end of the week. These consisted of a UK auto ABS (£301m Turbo Finance 3) and one CMBS (US$568m BBUBS Trust 2012-TFT).
Pricings
Issuance last week was heavily skewed towards ABS. Eight ABS deals, three CLOs, two RMBS and a single ILS priced.
The ABS prints comprised three credit card deals (US$250m Discover Card Master Trust 2012-B3, US$700m Dryrock Issuance Trust 2012-1 and US$300m Dryrock Issuance Trust 2012-2), three student loan deals (US$1.174bn Nelnet Student Loan Trust 2012-5, US$536.4m PHEAA Student Loan Trust 2012-1 and US$260m Rhode Island Student Loan Authority Series 2012-2), a structured settlements deal (US$200.28m JGWPT XXVII) and a timeshare deal (US$191.26m Silverleaf Finance XV series 2012-D).
The CLOs were €3.18bn FTA PYMES Santander 4, US$414m ING IM CLO 2012-4 and US$624.5m Race Point VII CLO. The RMBS comprised £1bn Gosforth Funding 2012-2 and US$500m-equivalent Pepper Prime 2012-1 Trust, while the ILS was €176m Atlas Reinsurance VII.
Markets
A positive tone prevailed in the secondary US RMBS market last week, as SCI reported on 6 November. Non-agency supply began the week at an elevated level, with prices continuing their trend of recent weeks to inch higher.
It was a similar story for US CMBS, although prices did widen on Wednesday. SCI's PriceABS data shows that spreads were still comfortably inside where they had been a few weeks earlier, with tranches such as BSCMS 2007-PW16 AM covered at 212bp, in from 220bp a week before and 275bp a fortnight before that.
Citi US ABS analysts note that consumer ABS remained attractive last week. "Among triple-A sectors, the longer WAL credit card classes offer the most pick-up to our price target. The 7- and 10-year cards earn swaps plus 35bp and 55bp, picking up 10bp and 21bp to the price targets respectively." ABS sectors with any pick-up to Citi's price targets tightened over the last month, with subordinate credit cards and autos looking cheap.
Activity in the secondary CLO market was also strong, as SCI reported last week (SCI 7 November). PriceABS showed over 100 line items for the sector, with liquidity particularly strong at the bottom of the capital structure.
However, European RMBS activity was fairly quiet last week, with little change in the secondary market. "Spreads for most asset classes have closed the week unchanged, with only peripheral jurisdictions - Italian, Spanish and Irish RMBS in particular - moving tighter," note JPMorgan RMBS analysts.
Deal news
• S&P has updated its European CMBS rating criteria. The criteria will apply to all new and existing ratings on European CMBS and come into force on 6 December.
• Details are beginning to emerge on the extent of Superstorm Sandy's impact on catastrophe bonds. Moody's believes the estimated insured property losses of US$7bn-US$20bn are credit negative for Combine Re Series 2012.
• Chenavari Investment Managers is set to replace Alpstar Management as collateral manager on the Alpstar CLO 1 and 2 transactions. Consent of controlling noteholders via a written resolution is required by 12 November for this to occur.
• The auction to settle the credit derivative trades for Hibu (formerly known as Yell) LCDS is to be held on 15 November. The firm missed interest and principal payments which were due at the end of last month.
• An auction will be conducted on 23 November for Collybus CDO I.
• Moody's has placed the Euro and US MTN programmes of Links Finance on review for possible downgrade. The move follows the placement of Bank of Montreal's Aa2 rating under review for possible downgrade on 26 October.
Regulatory update
• The US Department of Education issued final regulations last week to help more financially distressed federal student loan borrowers lower their monthly payments. Moody's believes these changes are positive for private student loan securitisations but mixed for FFELP.
• The US SEC has charged Walter Morales and his firm Commonwealth Advisors with defrauding investors over millions of dollars in losses from RMBS investments. The investigation is on-going.
• The Federal Court of Australia has ruled that S&P misled investors by giving ABN Amro's Rembrandt 2006-3 CPDO a triple-A rating. The rating agency and the bank are both judged to have misled those Australian councils which purchased the Rembrandt notes.
• Quantifi has released a whitepaper comparing alternate methods for calculating CVA capital charges under Basel 3. It is published jointly with consultant Jon Gregory and covers the difference in capital charges between the simple and more advanced approaches and the capital relief which can be achieved.
• Celent has released a report on the implications of the Dodd-Frank Act for non-US firms. The report notes that the impact on foreign banks will be "widespread and long-lasting", altering trading strategies and operations for most of the large swap trading firms globally.
Top stories to come in SCI:
Focus on Australian RMBS
CDS short selling regulatory impact
US CMBS note auctions
October EMEA CMBS maturity outcomes