A look at the major activity in structured finance over the past seven days
Pipeline
Last week was a quiet one for the pipeline, with ABS dominating proceedings. Among the five newly announced deals, three were auto ABS.
Those auto deals were E-Carat Compartment No.5, €718.5m VCL 17 and US$350m World Omni Master Owner Trust Series 2013-1. In addition, a US$271.75m container ABS (TAL Advantage V Series 2013-1) and a £750m whole business securitisation (Arqiva Financing) were announced.
Pricings
ABS dominated the new issue prints as well. An RMBS, four CMBS and three CLOs also priced during the week.
The ABS comprised: US$1bn Ally Master Owner Trust 2013-1, US$750m Chase Issuance Trust 2013-1, US$1.252bn CNH Equipment Trust 2013-A, US$323.62m South Carolina Student Loan Corp 2013-1, US$567.9m Springleaf Funding Trust 2013-A and US$375m World Financial Network Credit Card Master Note Trust Series 2013-A.
The RMBS was A$750m Series 2013-1 WST Trust, while the CMBS consisted of US$1.53bn FREMF 2013-K25, US$498.5m GSMS 2013-KING, C$250.4m Institutional Mortgage Capital series 2013-3 and US$193m Morgan Stanley Capital I Trust 2013-WLSR.
Finally, US$598m Galaxy XV, US$411.9m Nomad CLO and US$520.46m Sheridan Square CLO rounded out the issuance.
Markets
US CMBS spreads continued to tighten last week, with GG10 dupers reaching swaps plus 137/136 by mid-week, as SCI reported on Thursday (14 February). Secondary supply in Wednesday's session was moderate, with around US$450m coming through BWICs.
US RMBS started the week quietly as heavy snow hit the north-eastern US. Monday's session still saw reasonable supply, however, as SCI reported on Tuesday (12 February).
SCI's PriceABS data shows agency RMBS tranches - such as FNR 2012-19 JS - attracting covers in the session, as well as a limited amount of non-agency supply. The CWL 2002-S3 A5 tranche stood out in the session as an early-vintage name and was talked at low-par.
European ABS, RMBS and CMBS secondary markets were generally active but unchanged, according to analysts at JPMorgan. "Busy week in the secondary space, with a large number of BWICs - mostly containing CMBS bonds - coming to the market. Despite this, spreads closed the week unchanged across all asset classes," they note.
Deal news
• The expropriation of subordinated bondholders at SNS Reaal has implications for the entire CDS market. The move has engendered questions about the value of sub protection and concern that CDS liquidity could be hit unless these issues are addressed.
• Markit has launched IOS, PO and MBX indices referencing 3% and 3.5% Fannie Mae pools issued in 2012. MBS analysts at Barclays Capital suggest that the closest comparable index for the 3.5 2012 cohort is the 3.5 2010 index, albeit the 2012 cohort is expected to pay slower and thus trade better than the 2010 cohort.
• Several noteworthy price points were observed on the XA and five-year A2 tranches of the recently-priced MSBAM 2013-C8 CMBS. The unusual call protection provisions on two large loans securitised in the deal - the Boston Park Plaza and the Hyatt Regency Hill Country Resort - are said to have driven the move.
• A recent presentation by the borrower behind TITAN 2007-1 NHP provided an insight into the first 12 months trading of HC-One and its business plan going forward (see SCI's CMBS loan events database). The information provided suggests that the turnaround of the ex-Southern Cross nursing home CMBS is progressing at a slower pace than was originally envisaged.
• Punch Taverns has announced proposed amendments to the capital structure of both its Punch A and Punch B securitisations, with mixed implications for the bonds. Elsewhere, the pub sector continues to offer good value, with managed pubco paper looking most attractive.
• Arqiva Financing, a £750m UK whole business securitisation originated by the Arqiva group, has hit the market. The transaction is unique in that the bank lenders will grant term facilities to FinCo - a newly created SPV outside the securitisation group - rather than providing funding directly to the borrower.
• NorthStar Realty Finance Corp indicated in its 4Q12 earnings call last week that it may unwind some of its CRE CDOs over the next several years. According to RBS figures, NorthStar currently manages six CRE CDO, with a total collateral balance of approximately US$2.3bn - the majority (81%) of which is secured by CMBS.
• CR Investment Management has been awarded the asset management mandate for the Treveria D-Silo facility backing the Treveria II/Sunrise II loan respectively securitised in the DECO 2006 E4X and EMC VI CMBS. The firm will advise and work with Treveria on the implementation of the business plan, which will create value by selling-down the portfolio over time.
• TCW Asset Management Company (TAMCO) has assigned its rights and obligations under the investment advisory agreement for TCW Global Project Fund III to EIG Management Company, effective from 31 January. The transaction is a project finance CDO.
• Fitch says that programme features rather than the nature of the underlying assets were the key factor in determining how it approached Commerzbank's SME structured covered bond programme. The agency applied its covered bond criteria rather than structured finance criteria when rating the programme, despite it not being governed by the German Pfandbrief regulation due to the ineligibility of the underlying SME loans for inclusion in Pfandbrief cover pools.
Regulatory update
• New Imperial College research presented at the latest 'Peregrine Perspectives' discussion series suggests that credit default swap spreads are a poor proxy for sovereign default risk. Discussion around this research found that there is little evidence to suggest that the EU-wide ban on naked CDS positions will achieve its aims.
• FHA reform discussions are gaining momentum, with the House Financial Services Committee holding the first of two meetings scheduled for February to discuss changes to the FHA programme. Testimony at the hearing stressed that the FHA should focus on its original core mission: insuring mortgages for low- and moderate-income borrowers and first-time home buyers.
• The US District Court for the Southern District of New York last week ruled that Flagstar Bancorp was liable for representation and warranty breaches on two HELOC RMBS that had been guaranteed by FSA. The decision is the first final court judgment in a rep and warranty case and is expected to influence other court decisions, including MBIA's case against Countrywide.
• The UK FSA has fined UBS for failures in the sale of the AIG Enhanced Variable Rate Fund, which led to UBS customers being exposed to an unacceptable risk of an unsuitable sale of the fund. UBS also failed to deal properly with complaints from customers about sales of the fund, the FSA says.
Deals added to the SCI database last week:
Avis Budget Series 2013-1; CarMax Auto Owner Trust 2013-1; CIFC Funding 2013-II; Discover Card Execution Note Trust 2013-1; Discover Card Execution Note Trust 2013-2; Extended Stay America Trust 2013-ESH; FREMF 2013-K25; GreatAmerica Leasing Receivables Funding series 2013-1; GSMS 2013-KYO; High Speed 1; MidOcean Credit CLO I; MSBAM 2013-C8; Navistar Financial Dealer Note Master Owner Trust II Series 2013-1; PFS Financing Corp 2013-A; Red & Black TME Germany 1; SLM Student Loan ABS Repackaging Trust 2013-R1; SLM Student Loan Trust 2013-1; Tesco Property Finance 6.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-2; BACM 2007-5; BSCMS 2005-PW10; BSCMS 2005-PWR9; BSCMS 2006-PW13; CD 2007-CD4; CSMC 2006-C4; DECO 2005-C1; DECO 2006-E4; ECLIP 2006-2; EMC VI; EURO 25; GECMC 2005-C4; GRF 2006-1; GSMS 2007-GG10; JPMCC 2007-LDP10; LBCMT 2007-C3; LBUBS 2007-C7; MALLF 1; MSC 2005-T17; MSC 2007-T27; RIVOL 2006-1; TAURS 2006-3; TITN 2006-2; TMAN 6; VNDO 2012-6AVE; VWALL 1.
Top stories to come in SCI:
Relative value in US CLO equity
Focus on European CMBS