A look at the major activity in structured finance over the past seven days
Pipeline
Five new deals remain in the pipeline from last week. These include one ABS, one CLO and three CMBS.
The ABS is Auto ABS FCT Compartiment 2013-1, while the CLO is €404m Grand Harbour I. The CMBS comprise US$1.46bn FREMF 2013-K26, US$245m Global Tower Series 2013-1 and US$505m JPMCC 2013-FL3.
Pricings
Many of the deals that joined the pipeline last week went on to price by Friday. In total there were 16 prints, including seven ABS, one RMBS, three CMBS and four CLOs.
The ABS new issues consisted of: US$550m Ally Master Owner Trust 2013-2; US$194.47m CCG Receivables Trust 2013-1; US$140.25m Credit Acceptance Auto Loan Trust 2013-1; US$300m Cronos Containers Program I Series 2013-1; US$650m Harley-Davidson Motorcycle Trust 2013-1; US$1.25bn Honda Auto Receivables 2013-2 Owner Trust; and US$2.019bn Mercedes-Benz 2013.
The RMBS was £125m Virgil Mortgage No.1, the first UK RMBS of the year to be placed with investors. The CMBS comprised: US$1.207bn Citigroup Commercial Mortgage Trust 2013-GCJ11; US$1.28bn MSBAM 2013-C9; and US$876.7m WFRBS Commercial Mortgage Trust 2013-C13.
Finally, the CLO prints were: US$514m BlueMountain CLO 2013-1; US$421m Mountain View CLO 2013-1; US$415m OHA Credit Partners VIII; and US$362m Palmer Square CLO 2013-1.
Markets
US ABS BWIC volumes reached US$181m on Thursday, as SCI reported last week (SCI 19 April). Auto and student loan paper led the way, with credit card tranches also circulating.
SCI's PriceABS data shows auto supply concentrated around blocks of ALLY 11-1 and MBART 11-1 A3 tranches, with talk on ACCSS 2006-1 B and KSLT 2004-A in the student loan sector each talked from the high-80s to 90. The KSLT tranche was also covered in the high-80s.
US CMBS spreads tightened sharply last week, despite broader weakness in the equity markets, according to Barclays Capital CMBS analysts. Spreads also compressed significantly on the last few new issues that priced.
The US CLO secondary market remained quiet, meanwhile, with Bank of America Merrill Lynch placing weekly BWIC volume at US$500m for the sector. Many CLO 2.0 equity pieces traded during the week, while the new issue calendar has also started to pick back up.
JPMorgan ABS analysts believe that RMBS will keep the international ABS primary markets ticking over, with the recent pricings of the Australian Pepper Residential Securities Trust No.10 and the UK Virgil Mortgage No.1 deals. "On the ABS secondary market, BWICs continue to keep investors relatively busy, while general trading flows remain somewhat subdued and spreads closed the week unchanged," they add.
Deal news
• At around US$9bn, US single-asset/single-borrower CMBS issuance in the first quarter almost equalled the total for all of 2012. However, it remains to be seen whether that pace of issuance can be maintained and what the effect will be on the conduit CMBS sector.
• The recent £800m Intu (SGS) Finance 2013 series 1 transaction represents a watershed in UK CMBS as it uses a complex legal structure to achieve a commercially simple end result. Indeed, it is hoped that the issue's success will tempt other real estate companies that moved into unsecured debt post-financial crisis back to the CMBS market.
• A recent spate of loan liquidations has wiped out nearly nine classes of the LBUBS 2006-C7 CMBS. The combined losses from the eight liquidations totals US$130m, equating to an average 80% severity.
• The US$68.7m Stuyvesant Town-Peter Cooper Village settlement (SCI 3 December 2012) was approved by the New York State Supreme Court last week, clearing one of the last remaining hurdles to the eventual liquidation of the property that is securitised in five CMBS.
• The US Treasury Market Practices Group (TMPG) has updated its recommendation regarding the margining of forward-settling agency MBS transactions. Specifically, the implementation timeline has been modified, while two aspects of the margining recommendation has been clarified in response to feedback received from market participants.
• New issue Aa2 rated US CMBS bonds have tightened by 105bp over the past year and have continued tightening in 2013, even as new issue triple-A rated classes have widened. AS bonds have underperformed new issue Aa2 bonds by 7bp year to date, leading CMBS analysts at Wells Fargo to recommend them.
• US CLO new issuance increased nearly five-fold in Q1 compared to the same period in 2012, though issuance is likely to level off as the year progresses. First quarter volumes stand at over US$26bn (compared to US$6bn in 1Q12), with the general consensus being that they will finish the year in the US$55bn-US$75bn range.
• Barclays Capital has commenced a tender offer to purchase for cash all of the outstanding class A-1, B-1 and B-2 notes of Coronado CDO. The bank is offering to buy back the respective notes at US$940, US$210 and US$210 per each US$1000 outstanding. The offer will expire on 9 May, unless extended.
Regulatory update
• Bloomberg has filed a lawsuit in the US District Court for the District of Columbia to prevent the US CFTC from implementing what it says is flawed regulation relating to the clearing of swaps that "will put financial markets in jeopardy". The firm notes that the regulation, which enters into effect on 10 June, requires far more upfront costs - five times the margin requirements - to trade a cleared financial swap than an identical cleared financial swap future.
• Ireland's Department of Finance (DoF) and the Central Bank of Ireland have announced new measures to strengthen lenders' ability to deal with the country's growing mortgage arrears problem. The DoF plans to introduce by the end of this month new legislation that removes the current legal ban on repossessions, while the central bank has proposed several changes to the Code of Conduct on Mortgage Arrears (CCMA) that increase lenders' powers when dealing with delinquent borrowers.
• Former Credit Suisse md and global head of structured credit Kareem Serageldin has pled guilty to conspiring to falsify the books and records of Credit Suisse before US District Judge Alvin Hellerstein. Serageldin was extradited from the UK to face charges that he fraudulently inflated the prices of asset-backed bonds in Credit Suisse's trading book in late 2007 and early 2008 (SCI 2 February 2012).
• The EU Court of Justice last month ruled that the current Spanish mortgage foreclosure process is not in line with current EU laws in terms of consumer rights, as Spanish borrowers have limited grounds to stay the foreclosure process, even if they claim that there are "unfair terms" in the mortgage loan. Spain plans to incorporate the EU ruling into its ongoing review of the country's foreclosure laws, which began at end-2012 and are expected to be concluded over the coming months.
• The Home Affordable Refinance Program (HARP) has been extended by two years to 31 December 2015. The programme was due to expire on 31 December 2013.
• A US$500m settlement has been agreed in the MBS class action litigation against Countrywide Financial Corporation and others, led by lead plaintiff the Iowa Public Employees' Retirement System (IPERS). It marks the largest MBS-federal securities class action settlement in the US to date.
• Unsecured creditors of ResCap are seeking permission from the bankruptcy court to sue Ally on the basis that the US$750m it has offered to settle all its ResCap liabilities is not enough (SCI 12 February). The creditors claim that Ally has exploited its control over ResCap and, as such, may be responsible for all of ResCap's unsecured liabilities - which could be up to US$25bn.
• Ambac Financial Group has reached an agreement with the US Internal Revenue Service that will bring resolution to claims filed against it and related litigation (SCI 28 February 2012). The settlement is expected to put the insurer in a favourable position to emerge from bankruptcy and move forward with managing its existing business, as well as exploring new business opportunities.
• The Michigan Court of Appeals last week upheld the constitutionality of the Nonrecourse Mortgage Loan Act, reversing its surprising December 2011 decision - known as the Cherryland case - that prompted passage of the act in March 2012 (SCI 5 April 2012). Moody's notes in its latest Credit Outlook publications that the ruling is credit positive for US CMBS because it restores - in Michigan at least - the market expectations of commercial real estate participants.
• IOSCO has published a consultation paper, entitled 'Principles for Financial Benchmarks', which seeks public comments on a set of high-level principles for benchmarks used in global financial markets. Because of the wide diversity of benchmarks, IOSCO also is asking for public comment on a subset of more detailed principles for benchmarks having specific risks arising from their reliance on submissions and/or their ownership structure.
Deals added to the SCI database last week:
Arrowpoint CLO 2013-1; Ballyrock CLO 2013-1; BAMLL 2013-WBRK; Caelus Re 2013-2; Chase Issuance Trust 2013-3; COMM 2013-CCRE7; Dryden CLO XXVII; Flagship Credit Auto Trust 2013-1; FREMF 2013-K712; FRS I series 2013-1; Liberty Series 2013-2 Trust; Merna Re IV series 2013-1; Multi Lease AS; Permanent Master Issuer series 2013-1; Sequoia Mortgage Trust 2013-5; SpringCastle Funding 2013-A; Springleaf Mortgage Loan Trust 2013-1; Storm 2013-II; Swiss Credit Card Issuance No.2 series 2013-1; Toyota Auto Receivables 2013-A Owner Trust; UBSBB 2013-C6; WFCM 2013-BTC
Deals added to the SCI CMBS Loan Events database last week:
BSCMS 2005-PWR7; CD 2006-CD3; CSFB 2007-TFL1; CSMC 2006-C4; CSMC 2006-C5; CSMC 2007-C1; CSMC 2007-C3; DECO 2006-C3; DECO 7-E2; ECLIP 2007-1; EMC VI; GSMS 2007-GG10; JPMCC 2004-CB8; JPMCC 2007-LD11; JPMCC 2007-LDP9; LBUBS 2006-C7; LBUBS 2007-C7; MLCFC 07-8, MLCFC 07-9, MLMT 08-C1 & BALL 07-BMB1; MLCFC 2007-7; MLMT 2005-CKI1; MSC 2005-HQ6; MSC 2005-IQ10; MSC 2007-HQ12; MSC 2007-HQ13; Nemus 2006-2; REC 3; TAURS 2006-3; TITN 2006-3; TITN 2007-CT1; TMAN 7; Various; WBCMT 2007-C30; WINDM XIV
Top stories to come in SCI:
Filling the UK RMBS vacuum
Developments in CDS futures
Focus on Australian RMBS