A look at the major activity in structured finance over the past seven days
Pipeline
Three new ILS deals joined the pipeline last week, as well as a further four ABS and two RMBS. All three catastrophe bonds reference US hurricane risk as the main peril and the proposed paper totals US$550m.
Those ILS deals comprise: US$150m Blue Danube II series 2013-1; US$150m Long Point Re III series 2013-1; and US$250m Sanders Re Series 2013-1.
The ABS consist of: €808.2m Auto ABS DFP Master Compartment France 2013; Sfr220.5 Bavarian Sky Europe Compartment 1 Switzerland; C$412m CNH Capital Canada Receivables Trust 2013-1; and US$224m New Mexico Educational Assistance Foundation Series 2013-1.
The RMBS were: A$300m Illawarra Series 2013-1 and RUB4.94bn Mortgage Agent KHMB-1.
Pricings
The week also saw two ILS prints, as well as five ABS, two CMBS, one RMBS and three CLO pricings. Those ILS were US$100m Bosphorus 1 Re and US$100m Pelican Re Series 2013-1.
The ABS consisted of: US$85m FNA 2013-1; US$500m GE Dealer Floorplan Master Note Trust Series 2013-1; US$765m Nelnet Student Loan Trust 2013-3; US$1.135bn SLM Private Education Loan Trust 2013-B; and US$400m Global SC Finance II Series 2013-1.
The CMBS prints were US$1.46bn FREMF 2013-K26 and US$505m JPMCC 2013-FL3, while the RMBS new issue was US$425m Sequoia Mortgage Trust 2013-6. Finally, the US$664m Atrium X, US$471m Brookside Mill CLO and US$417.75m NewMark 2013-1 CLO rounded the issuance out.
Markets
European CMBS investors appear to be becoming more flexible in the paper they will buy, according to one trader (SCI 26 April). Secondary volumes were limited last week, with several small BWICs circulating.
SCI's PriceABS data shows 84 European CMBS line items for the week to Thursday, with levels flat to slightly up. The trader notes that investors have broadened their horizons to second- and third-pays and are giving more thought to cuspier paper.
The US CMBS market saw spreads tighten, with vintage AM/AJ tranches coming in by 10bp-30bp, according to Barclays Capital CMBS analysts. Further compression is expected for the secondary market in the near term.
"CMBS spreads continued to tighten this week, buoyed by the strong recovery in equity markets. Generic 2007 vintage dupers finished Thursday 3bp tighter than last week's close," say the analysts. "While 2007 dupers felt some pressure in the early part of the year, widening 30bp due to prepayment concerns, they have recovered about two-thirds of that over the past few weeks."
After a quiet spell for the US RMBS secondary market, Tuesday saw non-agency supply finally rise to around US$662m, as SCI reported last week (SCI 24 April). Dealer offering levels were mostly unchanged, with fixed-rate BWIC covers at the upper end of guidance.
PriceABS shows names such as CMLTI 2009-9 3A2, CMLTI 2010-6 4A2 and CMLTI 2011-12 1A2 all out for the bid. Subprime names such as SASC 2004-GEL3 M1 were also available, with that tranche talked in the mid/high-80s and covered at 87 handle.
Secondary activity also picked up for the US CLO market, which has been quiet lately. However, Bank of America Merrill Lynch structured products analysts note that volumes are still well below those seen at the beginning of the year.
"Most of the BWIC volume remains in triple-B, double-B and equity tranches, while triple-A and double-A volumes continue to be light. Given the lack of secondary supply and a slow-down in the primary market this week, secondary CLO spreads tightened, benefitting from demand from investors looking for yield," they add.
Triple-A tranches tightened by 5bp, double-As and single-As came in by 20bp and triple-B and double-Bs tightened by 30bp. Secondary spreads are all now at post-crisis tights across the capital structure.
Deal news
• The triple-A, single-A and triple-B rated tranches of the 2011-vintage OHA Intrepid Leveraged Loan Fund have been refinanced. Unlike other recent CLO refinancings (SCI 8 March), the Oak Hill Advisors deal refinancing was syndicated (via Morgan Stanley).
• Comprising 33 loans, down to 18 currently, Cornerstone Titan 2007-1 has the largest loan count among European conduit CMBS. The majority of the remaining loans is already in special servicing and the transaction is expected to be backed by a fully non-performing loan portfolio soon.
• The impact of a rare instance of credit card ABS early amortisation in Canada is credit neutral for the SCORE Trust securitisation for two reasons. First, these notes will enter early amortisation because of unique structural provisions that result in a breach of an excess spread trigger during the accumulation period, rather than deteriorating performance. Second, credit performance remains within expectations.
• Morningstar has added the US$23.1m Walnut Hill Plaza loan, securitised in MLCFC 2006-3, to its watchlist as it was reported 30+ days delinquent with last month's remittance data. The loan is the twentieth largest remaining in the transaction, representing roughly 1.1% of the pool by unpaid principal balance (UPB).
• Deutsche Bank has implemented a complete overhaul of the programme documents for its Rhein-main Securitisation Limited (RMSL) and Rheingold Securitisation Limited (RGSL) ABCP conduits. In conjunction with the programme amendments, any maturing ABCP issued out of RGSL will be refinanced by RMSL or repaid through drawings under the liquidity facilities. No further ABCP can be issued out of RGSL going forward.
Regulatory update
• The Bank of England and the UK Treasury have extended the Funding for Lending Scheme (FLS) by one year to January 2015. The aim is to provide participating lenders with confidence that they will be able to access funding on reasonable terms for longer in the light of continued uncertainty in the euro area.
• The Reserve Bank of Australia (RBA) last week published the final reporting templates for issuers of RMBS under its repo eligibility criteria, following a consultation period (SCI 22 October 2012). The templates modify the initial draft by adding a requirement for issuers to supply a cashflow waterfall template, while removing a requirement for mandatory pool-level reporting.
• ISDA has published a form of confirmation for a market agreed coupon (MAC) contract as an additional choice for market participants that wish to use OTC interest rate swaps (IRS) that have common, pre-agreed terms. The MAC confirmation features a range of pre-set terms in such areas as start and end dates, payment dates, fixed coupons, currencies and maturities.
• The Japanese Consumer's Class Action bill - which has been sent to the ordinary session of the Diet for approval - is credit negative for instalment sales loan ABS in the country. The agency notes that if the securitised pool includes receivables originated through merchants involved in a class action for fraudulent practices, their receivables will become uncollectible if the fraud is proven and the merchant loses the case. This is expected to lead to deterioration of the pool performance.
• Fitch believes that it is possible for an obscure aspect of the Budget Control Act of 2011 to affect FFELP student loan ABS deals. Smaller not-for-profit servicers of the Federal Direct Loan Program (FDLP) are likely to be pressured by a cap on the allocations of borrower accounts to existing not-for-profit (NFP) servicers in 2013, the agency explains.
• The UK government has unveiled its proposals to regulate the tied tenanted pubco sector with a new statutory Code of Practice, backed by an independent adjudicator. The reforms could transfer an estimated £4,250 per pub in profits from the owners of tied pubs to the tenant in the median case.
Deals added to the SCI database last week:
A10 Securitization 2013-1; Ally Master Owner Trust 2013-2; ALME Loan Funding 2013-1; BlueMountain CLO 2013-1; Canadian Credit Card Trust series 2013-1; CCG Receivables Trust 2013-1; CGCMT 2013-GCJ11; Credit Acceptance Auto Loan Trust 2013-1; Cronos Containers Program I Series 2013-1; Harley-Davidson Motorcycle Trust 2013-1; Honda Auto Receivables 2013-2 Owner Trust; Mercedes-Benz Auto Lease Trust 2013-A; Mountain View CLO 2013-1; MSBAM 2013-C9; OHA Credit Partners VIII; Palmer Square CLO 2013-1; Pepper Residential Securities Trust No.10; Rialto Capital series 2013-LT2; SBA Tower Trust series 2013-1; SBA Tower Trust series 2013-2; Virgil Mortgage No.1; WFRBS 2013-C13
Deals added to the SCI CMBS Loan Events database last week:
CD 2006-CD2; CSFB 2005-C5; CWCI 2007-C3; DECO 2005-E1; DECO 2006-C3; DECO 2006-E4; DECO 2007-E6; DECO 2007-E7; DECO 7-E2; DECO 9-E3; ECLIP 2006-1; EMC IV; EMC VI; EURO 22; FLTST 3; GCCFC 2007-RR2; GSMS 2006-GG8; JPMCC 2006-LDP9; LBUBS 2004-C7; LBUBS 2007-C7; LBUBS 2008-C1; MALLF 1; OPERA CSC3; PROMI 2; TAURS 2006-1; THEAT 2007-1; THEAT 2007-2; TITN 2006-2; TITN 2006-3; TITN 2006-5; TITN 2007-2; TITN 2007-CT1; TMAN 1; TMAN 4; TMAN 7; WBCMT 2007-C30
Top stories to come in SCI:
Developments in CDS futures
Focus on Australian RMBS
First-time CLO managers' to-do list