A look at the major activity in structured finance over the past seven days
Pipeline
In what ended up being a busier week than the previous one, three ABS, one ILS, two RMBS, three CMBS and two CLOs entered the pipeline. The ABS comprised: €266.5m Auto ABS French Loans Master, US$600m Chase Issuance Trust 2012-8 Reopen and A$726.5m Crusade Series 2012-1 Trust. The ILS was US$225m Lakeside Re III, while the RMBS were A$300m FirstMac Series 3-2012 and A$272m PUMA Masterfund S-12.
The newly-announced CMBS consisted of: US$1.37bn FREMF 2012-K23, US$300m GSMS 2012-BWTR and JPMCC 2012-LC9. As for the CLOs, they were US$515.4m Finn Square CLO and US$600m Neuberger Berman CLO XIII.
Pricings
Many deals printed last week ahead of the holiday slow-down. Eight ABS, one ILS, two RMBS, five CMBS and six CLOs were issued in the flurry of activity.
Among the ABS were: four auto securitisations (US$160m CPS Auto Receivables Trust 2012-D, US$700m Mercedes-Benz Master Owner Trust 2012-A, US$700m Mercedes-Benz Master Owner Trust 2012-B and US$700m Santander Drive Auto Receivables Trust 2012-A); two student loan deals (US$420m CIT Education Loan Trust 2012-1 and US$239.5m New Hampshire Higher Education Loan Corporation Series 2012-1); a railcar lease deal (US$216m ARL First Series 2012-1); and a factoring receivables ABS (€1.15bn FCT F.A.S.T. 1).
The ILS print was US$250m Residential Reinsurance Series 2012-II, while the RMBS pricings were €711m Arena 2012-1 and A$500m National RMBS Trust 2012-2. CMBS new issues comprised US$1.134bn COMM 2012-CCRE5, US$294.7m COMM 2012-MVP, US$208m GSMS 2012-TMSQ, US$175m JPMCC 2012-PHH and US$1.5bn UBSBB 2012-C4.
Finally, the CLO prints consisted of: US$568m Ares XXV CLO, US$412.4m Battalion CLO III, US$516m CIFC Funding 2012-3, US$311m Doral CLO 2012-3, US$360.1m Great Lakes CLO and US$626m Octagon Investment Partners XIV.
Markets
The US CMBS market remained busy ahead of year-end, as SCI reported on Thursday (SCI 6 December). AM tranches proved particularly popular, with almost US$500m of US CMBS paper available on Wednesday alone. Among the AM bonds was a US$100m piece of the JPMCC 2007-LD11 AM tranche, which SCI's PriceABS data shows was covered at 525bp.
The US RMBS secondary market was also fairly active, as SCI reported on Tuesday (SCI 4 December). Non-agency supply continues to be dominated by subprime paper, which was boosted by a CDO liquidation at the start of the week. CWL, FFML and JPMAC bonds were among those out for the bid.
US ABS saw private student loan spreads tighten by about 10bp over the week, with long-dated FFELP ABS and prime autos also tightening by a few basis points, report Bank of America Merrill Lynch ABS analysts. "The current low-yield environment and favourable supply-demand technicals should benefit higher yielding ABS sectors. Stabilising fundamentals also should benefit the private student loan market. Spreads for auto, card, equipment and short-dated FFELP should be range bound for the balance of the year and into next year," they add.
European CMBS led the way on the other side of the Atlantic, although JPMorgan analysts note that ABS and RMBS were both fairly active. They say: "Flows continue to be relatively healthy, despite the time of the year; spreads tightened in the yieldier asset classes and jurisdictions, with CMBS and Spanish paper once again leading the charge. More plain vanilla asset classes, on the other hand, have seen lighter flows and spreads closed the week unchanged after widening marginally the previous week."
The CDO market was also active, as SCI reported on Wednesday (SCI 5 December). CRE and Trups transactions attracted a lot of attention in Tuesday's session, with a large slice of GKKRE 2006-1A A1 covered at 90 and I-PRETSL 4 A1 covered in the low-90s - slightly higher than it had been talked in the prior session.
Deal news
• S&P has placed on credit watch negative its credit ratings on 240 tranches in 77 European CMBS, following an update to its criteria for the sector that is now in effect (SCI 8 November). The move affects tranches where the agency believes there is at least a one-in-two chance that ratings will be lowered, following the application of the updated criteria.
• Moody's has taken rating actions on eight South African RMBS, following its reassessment of the sector. The review takes into consideration the risks to RMBS ratings following the deterioration of the credit quality of the South African sovereign.
• Fitch has resolved the rating watch status of various classes in the US prime, Alt-A, subprime and re-REMIC RMBS sectors. The classes previously on rating watch negative generally reflected increasing tail risk, as well as rating sensitivity to the agency's updated loan loss model and surveillance criteria (SCI 13 August).
• Recent investor notices for the Duane Street CLO I to IV transactions provide an insight into how the Volcker Rule is impacting bank investment management arms. The notices state that certain Citigroup Alternative Investments (CAI) businesses - including the Duane Street CLOs - are being transitioned to a newly formed employee-owned asset management company (dubbed Newco) controlled by the current Citi Capital Advisors senior management team.
• Alpstar Capital has notified Alpstar CLO 1 and 2 investors that it intends to resign as collateral manager on the transactions without cause. Further, it has proposed Chenavari Investment Managers as successor collateral adviser.
• Halcyon Neptuno II Management has assumed from Bankia investment management responsibilities for Neptuno CLO II. Separately, Dock Street Capital Management has added another ABS CDO to its roster. The firm has been named successor collateral manager for Mercury CDO III, which was initially managed by Chotin Fund Management Corp.
• Receivers of the properties securing the Gemini (Eclipse 2006-3) CMBS have made a number of appointments in relation to the asset management of the portfolio.
• Fitch says that potential disincentives on behalf of the borrowers in the Preps 2005-2, 2006-1 and 2007-1 mezz SME CLOs are mitigated, following noteholder consent to the issuers' proposal to revise the payment waterfall and pay expense reserves senior in the priority of payments. The expenses reserves will be capped at €2m each.
• Fitch has published an unsolicited comment on CSMC Trust Mortgage Corp 2012-CIM3 (see also SCI 3 December), suggesting that the RMBS has insufficient credit enhancement to achieve a triple-A rating. Although asked to provide feedback, the agency was ultimately not selected to rate the transaction.
Regulatory update
• The Roberts vs. Tishman Speyer Properties court case has been settled. The settlement removes the last significant obstacle to a sale of the Stuyvesant Town-Peter Cooper Village apartment complex and reduces the likelihood of CMBS losses.
• A recent Reed Smith memo highlights three areas of concern for the securitisation industry with CRA 3 - rating agency rotation, public disclosure and civil liability (see also SCI 16 August). The European Council has published what may be the final form of the second amendment to the rating agency regulation, confirming that it will assent to it becoming effective if the European Parliament passes it at its first reading.
• The FHFA is to proceed with most of its fraud claims against Societe Generale in connection with losses suffered by Fannie Mae and Freddie Mac related to the purchase of US$1.3bn of RMBS. A trial is scheduled for January 2015.
• Basis Pac-Rim Opportunity Fund and Basis Yield Alpha Fund have filed a lawsuit against TCW Asset Management in New York state court in connection with a transaction that TCW issued in May 2007. According to the complaint, the plaintiffs acquired a total of US$28.1m securities issued by Dutch Hill Funding II, a mezz ABS CDO.
Top stories to come in SCI:
Year-end outlooks