A look at the major activity in structured finance over the past seven days
Pipeline
Last week ABS was in the minority for once in terms of new additions to the pipeline. A single ABS - an auto deal - was joined by two RMBS, two CMBS and a CLO.
The ABS was Volkswagen's €952.5m Driver Ten auto loans securitisation. The RMBS comprised €526.5m Dutch MBS XVIII and €752.2m STORM 2013-1.
The CMBS were US$1.49bn COMM 2013-LC6 and US$860m GSMS 2013-GC10. Finally, the US$519m LCM XIII CLO rounded out the deals being marketed.
Pricings
More auto ABS printed last week than the total number of deals joining the pipeline. In addition, a further four non-auto ABS, two RMBS, five CLOs and an ILS priced.
The auto ABS new issue comprised: US$1.566bn AmeriCredit Automobile Receivables Trust 2013-1; US$1bn BMW Vehicle Lease Trust 2013-1; US$940m Capital Auto Receivables Asset Trust 2013-1; US$187m First Investors Auto Owner Trust 2013-1; US1.725bn Ford Credit Floorplan Master Owner Trust Series 2013-1; US$950m Hertz Vehicle Financing Series 2013-1; US$1.25bn Honda Auto Receivables 2013-1 Owner Trust; and US$500m SMART ABS series 2013-1US Trust.
The non-auto ABS prints were: CARDS II Trust Series 2013-2 (credit cards); US$93.56m Diamond Resorts Owner Trust 2013-1 (timeshare); US$1.15m HLSS Servicer Advance Receivables Trust series 2013-T1 (servicing advances); and US$540m State of North Carolina State Education Assistance Authority Series 2013-1 (FFELP student loans).
The RMBS consisted of €3.288bn Orange Lion 2013-8 and US$398m Sequoia Mortgage Trust 2013-1. The CLOs were: US$515m Longfellow Place CLO 2013-1; US$614.25m Marathon CLO 2013-5; US$394m OFSI Fund V; €588m PYMES Banesto 3; and US$827.5m Symphony CLO 2013-11. Finally, the US$150m Vitality Re IV medical benefits transaction printed last week.
Markets
A spike in subprime bid-lists boosted US RMBS supply early last week, as SCI reported on Wednesday (SCI 16 January). Non-agency BWIC supply for Tuesday's session was almost US$900m. SCI's PriceABS data shows subprime names such as HASC 2007-HE1 2A3 were being talked higher than previous levels, while levels for prime names such as JPMMT 2006-S4 A5 were holding steady.
US CMBS analysts at Citi note that optimism in the CRE sector is continuing to rise. That rising optimism has helped 2007-vintage dupers reach 85bp, which is 155bp tighter since mid-year. However, they say there is still not enough B-piece demand, with only a handful of B-piece buyers active in the sector.
The European CMBS market is continuing to trend upwards, meanwhile. Deutsche Bank analysts report that high quality single loan/single asset front-pays are trading in the mid-100s DM. Money-good second-pays from European conduits are trading in a total return range of 4%-5%, they add.
There were signs at the start of the week of the European CLO market levelling off, as SCI reported on Tuesday (SCI 15 January). One trader describes it as "a buyer's market", with spreads for triple-A paper below 150 DM and below 400 DM in the single-A space. Even JUBIL VIII-X C paper traded at 380 DM, so paper is now reaching levels that the trader notes are surprising.
Deal news
• Deutsche Annington has agreed partial refinancing transactions of €785m for the GRAND CMBS. Net of costs and other cash usage, this represents 71.5% of the principal amount needed to comply with the restructuring conditions for 2013.
• Absent a payout from Bank of America on alleged rep and warranty breaches or an increase in intercompany support facilities, it is unclear how MBIA will continue to pay claims on its structured finance exposures. Indeed, the insurer's recent consent solicitation (SCI 28 November 2012) indicates that it might be preparing for a restructuring in the event that a settlement to its claims cannot be reached.
• The US$742m DRA/Colonial Office Portfolio loan - split pari passu between the BSCMS 2007-PW17, BSCMS 2007-PW18 and MLMT 2007-C1 CMBS - has received an extension modification. The move is being hailed as a positive, given that sales from better-performing properties will be used to fund reserves.
• AIG and some of its affiliates last week filed a complaint in New York State Supreme Court seeking a declaration from the court as to the proper interpretation of a contract it entered into with Maiden Lane II. AIG sold in December 2008 approximately US$20bn in RMBS tranches that it had purchased between 2005 and 2007 to Maiden Lane II, as part of the Federal Reserve's bailout of AIG.
• Windermere X prices received a boost last week, following positive developments in connection with the Thunderbird and Tour Esplanade loans securitised in the deal. Senior European CMBS prices were also generally higher, according to SCI's PriceABS data.
• PIMCO is set to transfer its collateral management responsibilities for Crystal Cove CDO to Vertical Capital. The most senior class in the transaction is currently rated single-C, indicating that default appears inevitable for the notes.
• S&P believes that, in specific circumstances, the remarketing of reset-rate notes (RRNs) issued in connection with certain US student loan ABS might result in an upgrade of the notes' ratings. If RRNs are remarketed into US dollars, it would terminate the existing swap agreement and thereby eliminate the class' direct exposure to counterparty-related risk.
• Fitch has affirmed 32 tranches, upgraded four tranches, revised the rating watch on four tranches to positive, placed three additional tranches on rating watch positive and downgraded 26 tranches of 52 Spanish structured finance (SF) transactions. 66 tranches of 31 Spanish RMBS transactions remain on RWN pending a full review of the performance of their collateral portfolios, given the deteriorating conditions in the housing market.
• S&P has placed or kept on credit watch negative its ratings on 100 tranches in 33 European SME CLOs, following an update to its criteria that addresses credit quality of the securitised assets and payment structure/cashflow mechanics (SCI 11 January). The move affects approximately 33.6% (by number) of the European SME CLO tranches that the agency currently rates.
Regulatory update
• The CFPB has issued its final mortgage servicing rules, which the majority of servicers must adhere to by 10 January 2014. The final rules are based on the servicing standards set by last year's national servicer settlement and the OCC consent order issued in April 2011 (SCI passim).
• The DTCC has filed a comment letter with the CFTC expressing concern over the lack of clarity as part of an overall arbitrary and inconsistent rulemaking process to determine the regulatory reporting structure for OTC derivatives. The letter details the most recent in a series of what the DTCC says are CFTC missteps that have "raised serious questions about decision-making at the agency".
• New credit rating agency rules - CRA 3 - have been approved by the European Parliament (SCI 6 December 2012). They allow rating agencies to issue unsolicited sovereign debt ratings only on set dates and enable private investors to sue them for negligence. Agencies' shareholdings in rated firms will also be capped, to reduce conflicts of interest.
• The OCC has issued a cease and desist order against JPMorgan Chase for unsafe and unsound practices and violations of law or regulation related to derivatives trading activities conducted on behalf of the bank by the chief investment office (CIO). The CIO's credit derivatives trading resulted in more than US$6bn in losses for the bank (SCI 15 May 2012).
• The CFTC has issued an order granting a request made by Ice Clear Credit (ICC). The order sets forth terms and conditions under which ICC and its clearing members that are dually registered as futures commission merchants and broker-dealers may hold credit default swaps and security-based CDS in a cleared swaps customer account, as well as portfolio margin such contracts held in the cleared swaps customer account.
• TALF is being wound down, following the repayment of the programme with interest. Accounting for interest and other gains above principal, repayments to date from the programme total US$173m - with additional payments expected in the future.
Deals added to the SCI database last week:
FREMF 2012-K24; MSBAM 2013-C7; Nissan Auto Receivables 2013-A Owner Trust; QCMT 2013-QC; Santander Drive Auto Receivables Trust 2013-1; Sequoia Mortgage Trust 2013-1.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-3; BSCMS 07-PW17, BSCMS 07-PW18 & MLMT 07-C1; BSCMS 2006-T24; COMM 2006-C7; CSMS 2007-C3; CWCI 2006-C1; DECO 2005-C1; ECLIP 2006-1; ECLIP 2007-1; EURO 19; EURO 21; EURO 23; EURO 27; GRND 1; JPMCC 2004-CBX; LBUBS 2006-C7; MALLF 1; MLCFC 2007-7; MSC 2007-IQ14; MSC 2007-IQ15; OPERA CMH; PROMI 2; TITN 2006-1; TITN 2006-3; TITN 2006-CT1; TITN 2007-2; TITN 2007-3; TMAN 3; TMAN 4; TMAN 5; TMAN 6; TMAN 7; WINDM VII; WINDM X; WINDM XI; WINDM XIV; WTOW 2007-1.
Top stories to come in SCI:
Structured finance recruitment trends
2013 ILS outlook