A look at the major activity in structured finance over the past seven days
Pipeline
A relatively quiet week for the pipeline was dominated by CMBS, with three new deals marketing. A floorplan auto ABS was also announced.
The CMBS comprise C$250.4m Institutional Mortgage Capital series 2013-3, US$295m RBSCF 2013-SMV and US$1.1bn GSMS 2013-KYO. The ABS is US$200m Navistar Financial Dealer Note Master Owner Trust II Series 2013-1.
Pricings
There were just two pricings last week, given the focus on the ASF conference. The new issues consisted of a US$2.52bn CMBS (Extended Stay America Trust 2013-ESH) and a US$538m auto ABS (Ford Auto Securitization Trust Series 2013-R1).
Markets
There has been a break in primary issuance in the US CLO market as participants return to their desks from the ASF conference. CLO analysts at Bank of America Merrill Lynch note that January as a whole proved very busy, with 18 deals totalling US$9.3bn within a two-week span.
"Currently, there is a deal in the market reportedly talking its triple-A piece in the 125-130 DM context, looking to move tighter than the 129 DM print last week. This is still slightly wider than the post-crisis tight of 120 DM seen in mid-2011," they note. Double-As are being talked in the 190-210 range, single-As at 285-300, triple-Bs at 375-400 and double-Bs at 575-600.
Meanwhile, spreads on vintage US CMBS deals moved 10bp wider last week, report securitised products analysts at Barclays Capital. "New issue, on the other hand, has held up admirably, with the triple-B plus tightening to swaps plus 300bp levels," they add.
Generic 2007 dupers are now about 20bp wider over the past three weeks, while demand in the AM and AJ space appears to be slowing. New issue supply over the coming weeks will remain strong, however, with four deals set to price.
US RMBS non-agency BWIC volume reached moderate levels mid-week, as SCI reported on Thursday (SCI 31 January). SCI's PriceABS data reveals that subprime paper proved the focus for Wednesday's session, with a large list of senior paper trading early on.
The European ABS market spent the latter part of last month taking stock. Primary supply continues to arrive, while one trader reports that limited BWIC volume is also keeping the secondary market ticking over. Deutsche Bank puts European BWIC volumes for ABS, RMBS, CMBS and CLOs at €2.4bn for the first month of the year, which is 122% higher than for January 2012.
Deal news
• The Bruntwood Group is proposing to restructure its UK CMBS, Bruntwood Alpha. The proactivity of the sponsor has been welcomed and - if implemented - the plan is expected to boost BRUNT 2007-1 bond prices in the secondary market, especially for the class B and C notes.
• The Supreme Court of the State of New York has allowed ACA Financial Guaranty Corp to add Paulson & Co to its US$120m lawsuit against Goldman Sachs in connection with the Abacus 2007-AC1 CDO. In its complaint, ACA alleges that Goldman Sachs fraudulently induced it into insuring the Abacus CDO by misrepresenting Paulson's economic interest in the transaction, including Paulson's role in the portfolio selection process and Paulson's short position against the CDO (SCI 7 January 2011).
• CMBX.6.BBB- spreads were approximately 30bp cheap versus similarly-rated cash bonds, following the launch of the index on 25 January. The credit curve is expected to flatten as levered long positions are put on the lower-rated tranches and shorts are rolled into the higher-rated tranches
• With US$8.3bn issuance from 15 US CLOs, January month-to-date has already surpassed last November to be the busiest month for CLO 2.0 volume. A number of CLO 2.0 tranches with high coupons have traded close to par in the secondary market. If spreads tighten further, these bonds may start to trade at or slightly above par, depending on how call risk is viewed.
• Further details have emerged about the sale of London's Woolgate Exchange, one of the properties securing the Cornerstone Titan 2006-1 CMBS (see SCI's CMBS loan events database). The property has been acquired by Ivanhoé Cambridge and TPG for £265M in what is described as a "complex and innovative financial structure".
Regulatory update
• The San Bernardino County Homeownership Protection Program Joint Powers Authority Board has rejected the use of eminent domain to acquire underwater mortgages to help struggling homeowners. The proposal was highly controversial and received stiff opposition from many in the mortgage and finance industries (SCI passim).
• The final rules pertaining to the implementation of the Foreign Account Tax Compliance Act (FATCA) provide a carve-out for legacy CLOs. In view of their restricted documentation that makes it difficult to comply, legacy CLOs in existence prior to 31 December 2011 will be exempt from FATCA and deemed compliant until 31 December 2016.
• The FHFA has voluntarily dismissed its lawsuit against General Electric, resulting in the first settlement to be agreed of the 17 lawsuits that the agency filed as conservator for Fannie Mae and Freddie Mac relating to losses on more than US$200bn in RMBS (SCI passim). Terms of the settlement were not made public.
• Residential Capital has agreed to pay Fannie Mae US$298m to end its objection to the sale of ResCap's mortgage servicing rights to Ocwen. Of the payment, US$33m is debt owed by ResCap to Fannie Mae, while the remaining US$265m is compensation for any losses that the GSE may incur due to the bankruptcy of ResCap.
• The US SEC has charged ex-Jefferies md Jesse Litvak with RMBS fraud. He has been arrested after a federal grand jury sitting in New Haven also returned a 16-count indictment charging him with securities fraud, TARP fraud and making false statements to the government.
• A recent survey, conducted by IPC Systems, has found that financial institutions are underprepared to meet the requirements these regulations will place on them even as they plan to increase their trading activity in OTC derivatives.
Deals added to the SCI database last week:
AABS; Agrobresciano; Arbor Realty Collateralized Loan Obligation 2013-1; Atrium IX; Capital One Multi-asset Execution Trust 2013-1; Calico Finance Number One; CARDS II Trust series 2013-1; Carlyle Global Market Strategies CLO 2013-1; CENT CLO 17; COMM 2013-LC6; Driver Ten; Compass Re 2012-1; Dutch MBS XVIII; Golub Capital Partners CLO 15; GSMS 2013-GC10; Hyundai Auto Receivables Trust 2013-A; KVK CLO 2013-1; LCM XIII; Mountain Hawk I CLO; Nationstar Agency Advance Funding Trust 2013-T1; Nationstar Agency Advance Funding Trust 2013-T2; Nelnet Student Loan Trust 2013-1; Octagon Investment Partners XV; OZLM Funding 3; PYMES Banesto 3; Regatta II Funding; Sequoia Mortgage Trust 2013-2; Skyline Re 2013-1; Storm 2013-I; and Telos CLO 2013-3.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-4; BRUNT 2007-1; BSCMS 2005-PW10; CD 2005-CD1; CSMC 2006-C3; DECO 2006-E4; DECO 2007-E5; DECO 8-C2; ECLIP 2006-1; ECLIP 2006-2; EMC VI; EPC 3; FLTST 3; GCCFC 2006-GG7; GECMC 2005-C4; JPMCC 2005-LDP1; JPMCC 2007-LDPX; JPMCC 2007-LD12; LBUBS 2003-C7; LBUBS 2005-C5; LBUBS 2006-C7; MSC 2007-IQ15; NEMUS 2006-1; RIVOL 2006-1; TAURS 2006-1; TAURS 2006-2; THEAT 2007-1; THEAT 2007-2; TITN 2006-2; TITN 2006-1; TITN 2007-1; TITN 2007-2; TITN 2007-CT1; TMAN 7; WINDM VIII; and WINDM X.
Top stories to come in SCI:
Outlook for the pub sector
Profile of the GRAND CMBS restructuring
Relative value in US CLOs