A look at the major activity in structured finance over the past seven days
Pipeline
In a week dominated by new issuance, only three deals joined the pipeline and remained there by the week's end. These included two auto ABS and one CMBS.
The auto ABS comprise US$538m Ford Auto Securitisation Trust Series 2013-R1 and €606m Red & Black TME Germany 1. The CMBS was US$2.52bn Extended Stay America Trust 2013-ESH.
Pricings
Once again, a long list of deals printed during the week. Along with six ABS, four RMBS, two CMBS and no fewer than 11 CLOs were issued.
After the eight auto ABS deals that priced the week before, a further two - €953m Driver Ten and US$1.48bn Hyundai Auto Receivables Trust 2013-A - printed last week. Two servicer advance receivables ABS (US$200m Nationstar Agency Advance Funding Trust 2013-T1 and US$100m Nationstar Agency Advance Funding Trust 2013-T2) were also issued, as well as a credit card deal (US$750m Capital One Multi-asset Execution Trust 2013-1) and a student loans ABS (US$437.5m Nelnet Student Loan Trust 2013-1).
The RMBS new issues consisted of: €143m Agrobresciano 1, €530m Dutch MBS XVIII, US$666m Sequoia Mortgage Trust 2013-2 and €753m STORM 2013-I. The CMBS prints, meanwhile, were US$1.49bn COMM 2013-LC6 and US$859m and GSMS 2013-GC10.
Finally, the CLOs were: US$832m Atrium IX, US$604.9m Carlyle Global Market Strategies CLO 2013-1, US$414m CENT CLO 17, US$513.2m Golub Capital Partners CLO 15, US$519m LCM XIII, US$501.25m Mountain Hawk CLO 1, US$516.19m Octagon Investment Partners XV, US$653.25m OZLM Funding 3, US$415m Regatta CLO 2, US$361m Telos CLO 2013-3 and US$325m MCF CLO I.
Markets
Volumes in both the primary and secondary US CLO markets picked up last week. Securitised products strategists at Bank of America Merrill Lynch note that the market tone remains positive as the debt ceiling issue has been temporarily resolved
"Secondary spreads ended up the week flat versus last week as the market adjusts to the significant tightening seen last week. Primary volumes spiked this week with at least ten deals pricing totaling over US$5.3bn. This brings year-to-date issuance close to US$10bn across sixteen deals, making it the largest issuance month since October 2007," they note.
Secondary volume climbed mid-week for US CMBS, as SCI reported on Wednesday (SCI 23 January). AM and AJ tranches dominated Tuesday's session in particular as the market resumed after Martin Luther King Day, with the bellwether GSMS 2007-GG10 A4 bond widening by 4bp.
In an extremely busy session across asset classes, US RMBS secondary volume on Thursday reached about US$3bn, as SCI reported last week (SCI 25 January). Prime hybrid, Alt-A hybrid, option ARM, fixed rate and subprime bonds were all well received, with SCI's PriceABS data showing subprime names such as SAST 2006-3 A3 being talked in the mid-80s, comfortably up from the mid/high-60s price talk at the end of last year.
US ABS analysts at Citi see value in FFELP student loan ABS. They believe the recent FFELP prepayment spike should prove temporary and note that some SLMA trusts are already normalising.
"Long-WAL crisis-vintage premium FFELP bonds pick up roughly 10bp to equivalent WAL par-priced FFELP ABS, and shorter WAL picks up 5bp. The spread pick-ups compensate for the risk of a rise in prepayments, and we think the pick-ups are attractive," they add.
As auto deals continued to launch into the primary market, secondary spreads for European ABS were largely unchanged, report ABS analysts at JPMorgan. There was some tightening in RMBS, particularly for Spanish spreads.
Deal news
• Credit Suisse is circulating the preliminary capital structure of Cairn Capital's long-awaited €300.5m European CLO. Cairn CLO III features a €181.5m senior tranche and appears to be relatively low-levered, with the subordinated notes accounting for around 20% of the capital structure.
• Two concerning trends are said to be emerging in the Freddie Mac K-Deal CMBS space: the appearance of very low debt yields and increasing interest-only loan exposure across deals.
• What was originally the triple-B class in BSCMS 2007-PW18 has received an interest payment that exceeded the principal balance by nearly four times. Such windfalls are expected to become more common this year as CMBS loans transition through the workout process.
• The covered bond market in Russia is expected to expand rapidly as the instrument proves to be an effective funding source for the country's residential mortgage market. Moody's last month assigned a first-time Baa1 rating to the series 09-IP covered bonds issued by DeltaCredit Bank, the first rating issued in the jurisdiction under the agency's covered bond methodology.
• Moody's has placed under review with direction uncertain a number of term tobacco settlement revenue bonds. The transactions are securitisations of payments that major tobacco manufacturers owe to 46 states and certain territories, pursuant to the 1998 Master Settlement Agreement (MSA).
• Moody's has downgraded the ratings of 225 classes of US structured finance securities wrapped by Assured Guaranty Municipal Corp (AGM), Assured Guaranty Corp (AGC) and their affiliated insurance operating companies. The affected securities include certain RMBS, ABS, structured notes and Trups CDOs.
Regulatory update
• The US Fed, CFPB, FDIC, FHFA, NCUA and OCC have released the final rule that establishes new appraisal requirements for 'higher-priced mortgage loans' under Dodd-Frank. Mortgage loans are higher-priced if they are secured by a consumer's home and have interest rates above certain thresholds.
• Regulatory changes could have a significant impact on Australian structured finance issuance in 2013. Specifically, the potential revision of Prudential Standard APS120 would have a direct impact on issuance levels by determining the capital treatment of securitisations and potentially opening up new issuance structures.
• Access to underlying sales proceeds can be limited in case of seller/lessor insolvency in French auto lease receivables securitisations. This is due to the specifics of insolvency proceedings under French law and is, in the agency's opinion, making assessment of the legal implications of the seller/lessor insolvency essential for such deals.
• Goldman Sachs and Morgan Stanley have reached agreements in principle with the Federal Reserve Board to pay US$557m to help mortgage borrowers. The agreements are similar to those announced between 10 servicers and the OCC and Fed (SCI 9 January).
• US ABCP outstandings are likely to remain flat or modestly decline, until the SEC clarifies the extent to which the Volcker Rule will apply to ABCP conduits. If the SEC determines that the Volcker Rule will apply in all respects to ABCP conduits, outstandings are projected to decline from US$308.9bn to US$230bn-US$250bn by end-2013.
• The European Securities and Markets Authority (ESMA) has published its '2013 CRA Supervision and Policy Work Plan', which sets out the key elements of its supervisory programme for the 19 registered and one certified credit rating agencies (CRAs) in the EU. The aim is to embed good practices internally at CRAs and to ensure that they meet the requirements of the CRA Regulation.
• The introduction of global legal entity identifiers (LEIs) in March 2013 - designed to accurately identify which legal entities are involved in financial transactions - is said to be a critically important step. But the rate of adoption by global regulators will determine the timeframe in which the benefits are fully realised.
Deals added to the SCI database last week:
AmeriCredit Automobile Receivables Trust 2013-1; Black Diamond CLO 2012-1; BMW Vehicle Lease Trust 2013-1; Canyon Capital CLO 2012-1; Capital Auto Receivables Asset Trust 2013-1; CIT CLO 2012-1; Diamond Resorts Owner Trust 2013-1; First Investors Auto Owner Trust 2013-1; Ford Credit Floorplan Master Owner Trust Series 2013-1; Hertz Vehicle Financing Series 2013-1; HLSS Servicer Advance Receivables Trust series 2013-T1; Honda Auto Receivables 2013-1 Owner Trust; Longfellow Place CLO; Marathon CLO V; OFSI Fund V; OHA Loan Funding 2012-1; Orange Lion 2013-8 RMBS; SMART ABS series 2013-1US Trust; State of North Carolina State Education Assistance Authority Series 2013-1; Symphony CLO XI; Vitality Re IV series 2013-1; WhiteHorse VI.
Deals added to the SCI CMBS Loan Events database last week:
BSCMS 2007-PW17; BSCMS 2007-PW18; CSMC 2006-C5; CSMC 2007-C3; DECO 2005-C1; DECO 2006-C3; DECO 2006-E4; DECO 2007-C4; DECO 2007-E6; DECO 7-E2; DECO 8-C2; DECO 9-E3; ECLIP 2006-2; EMC IV; EMC VI; EPICP BROD; EURO 22; JPMCC 2007-LD11; LBUBS 2006-C6; LBUBS 2006-C7; MALLF 1; OPERA CMH; RIVOL 2006-1; TAURS 2006-1; TAURS 2006-2; TITN 2005-CT2; TITN 2006-CT1; TITN 2007-CT1; TMAN 5; TMAN 6; TMAN 7; WBCMT 2007-30; WINDM IX & DECO 2007-E5; WINDM VIII.
Top stories to come in SCI:
Structured finance recruitment trends
Outlook for the pub sector
Profile of the GRAND CMBS restructuring