A look at the major activity in structured finance over the past seven days
Pipeline
Two ABS, one ILS, one RMBS, one CMBS and four CLOs entered the pipeline last week. Of those deals, only the RMBS - a RUB2.504bn Russian deal - was non-US domiciled.
The ABS marketing last week comprised US$512m Hyundai Floorplan Master Owner Trust Series 2013-1 and US$200m New Jersey Student Loan Revenue Bonds 2013-1. The ILS was US$250m Residential Re 2013-1, while the RMBS was RUB2.504bn Mortgage Agent PSB 2013.
The CMBS was US$440m CGCMT-375P, while the CLOs were US$500m CIFC Funding 2013-II, Jubilee CLO X, US$139.65m KCAP Senior Funding I and US$400m KKR FINANCIAL CLO 2013-1.
Pricings
It was a busier week for completed issuance, with five ABS, three ILS, one RMBS, three CMBS and three CLOs printing.
The ABS new issues consisted of: US$700m Capital One Multi-asset Execution Trust 2013-2; US$920m CarMax Auto Owner Trust 2013-2; US$956.2m MOHELA 2013-1; US$224m New Mexico Educational Assistance Foundation Series 2013-1; and US$1.136bn Santander Drive Auto Receivables Trust 2013-3.
The ILS prints were: US$125m Armor Re Series 2013-1; US$150m Blue Danube II Series 2013-1; and US$250m Sanders Re Series 2013-1. The RMBS was A$1.15bn Apollo Trust 2013-1.
The CMBS pricings comprised: US$1.464bn FREMF 2013-K27; US$875m Irvine Core Office Trust 2013-IRV; and €1.075bn Taurus 2013 (GMF1).
Finally, the CLO new issues were: US$507m Benefit Street Partners 2013-2; US$413m Neuberger Berman CLO XIV; and €2.052bn PYMES Santander 5.
Markets
"The non-agency rally continued its momentum [last] week as prices moved higher with broader equity and credit markets," note Barclays Capital US RMBS analysts. Cash prices across sectors were higher by up to a point, with more than US$2bn of trading volumes.
The US CMBS market saw little change in secondary spreads early in the week, as SCI reported on Wednesday (SCI 8 May). Legacy conduit AM and AJ tranches saw some tightening, with the bulk of supply coming from 2005-2007 vintages.
US ABS activity was lighter and dominated by auto paper (SCI 9 May). BWIC volume reached around US$74m on Wednesday, with tranches such as AESOP 2012-3A B and SMAT 2013-1US A4A talked in the low-100s and in the 50s respectively.
Secondary activity also slowed in the US CLO market, according to Bank of America Merrill Lynch securitised products strategists. "Lack of supply, both in the primary and secondary markets, continues to push spreads tighter. Triple-As tightened another 5bp this week, while double-As, single-As, triple-Bs and double-Bs tightened by 10, 15, 10 and 15bp respectively."
In addition, the European CLO sector slowed during the holiday-shortened week, as SCI reported on Friday (10 May). A new Alcentra deal announced in the primary market (Jubilee X) and well-bid equity in secondary fuelled optimism in the sector, however. One trader reports that the level at which the Harbormaster CLO 9 equity tranche recently traded was surprisingly high, with investors competing strongly for the paper.
Deal news
• The UK Supreme Court has handed down judgement on the Eurosail-UK 2007-3BL case, upholding previous judgements that the deal was not balance sheet insolvent and that a post-enforcement call option (PECO) would have no bearing on such a conclusion (SCI 9 March 2011). The outcome of the Lehman-originated RMBS case has implications for both UK securitisations and broader insolvency cases.
• An unusual EOD notice has been issued for the Integral Funding CLO, after a scheduled optional redemption failed to complete on 15 April because of delays in the settlement of collateral sales. Although noteholders' risk of loss has not increased materially as a result, the experience highlights the small but non-trivial risk to CLO investors of relying on trustees' and managers' effective execution of activities relating to redemption.
• The court-appointed receiver for the estate of an alleged Ponzi scheme involving Management Solutions (SCI 14 February 2012) has released a new liquidation plan for a large portfolio of multifamily properties owned by the estate. The 34 properties include three loans securitised in CMBS 2.0 deals (accounting for US$30.8m), two loans securitised in legacy CMBS (US$10.7m) and four agency CMBS loans (US$59.6m).
• The ZUNI 2006-OA1 transaction last month received a payment of about US$50m emanating from loan buy-backs and loss reimbursements. The pay-out equates to around 15% of the bonds outstanding (US$322m), making it one of the larger instances of RMBS loan-level repurchases in recent months.
• The Higher Education Loan Authority of the State of Missouri (MOHELA) is proposing to sell approximately US$11.9m of student loans currently serviced by Great Lakes Educational Loan Services. This represents all of the 3,394 loans that are currently being serviced by Great Lakes and constitutes 1.4% of the 11th General Resolution ABS trust.
• Dock Street Capital Management has been appointed successor collateral manager on Orchid Structured Finance CDO. The ABS CDO was originally managed by ST Asset Management.
• BLC Bank and BSEC - Bemo Securitisation have closed a US$185m securitisation for Lebanese real estate company Solidere, constituting the largest-ever asset-backed issuance in the local capital markets. The transaction involves the establishment of a securitisation fund under Lebanese law for the purposes of liquidating at face value a portion of Solidere's land sales receivables portfolio.
Regulatory update
• The US House Financial Services Committee has passed a number of derivatives-related bills aimed at clarifying and amending Title VII of the Dodd-Frank Act. The bills seek to address cross-border, swaps push-out and end-user margin requirements.
• MBIA Inc and its subsidiaries have agreed a comprehensive settlement with Bank of America. MBIA Corp will receive a net payment of approximately US$1.7bn, consisting of around US$1.6bn in cash and US$137m principal amount of MBIA's 5.7% senior notes due 2034, as well as a US$500m line of credit.
• Société Générale has settled its pending litigations against MBIA which had challenged the insurer's 2009 restructuring. The settlement ends a dispute involving protection written by MBIA and its affiliates covering multiple structured credit products.
• The Sheet Metal Workers Local No. 33 Cleveland District Pension Plan has filed a class action lawsuit against 12 banks in the Illinois Northern District Court. The action alleges that the banks - together with ISDA and Markit - conspired to thwart competition in the CDS market, thereby raising fund managers' costs.
• The DTCC has filed a lawsuit challenging three interrelated actions by the US CFTC and asking a federal court to vacate the CFTC's approval of CME Rule 1001 and ICE Rule 211. It says the CME and ICE Rules are anticompetitive and undermine the core principles of the Dodd-Frank Act (SCI 17 January).
• RBS has disclosed in its 1Q13 Interim Management Statement that it received a Wells notice from the US SEC, informing it that the SEC staff is considering recommending the initiation of a civil or administrative action against RBS Securities Inc. The Wells notice arises out of an inquiry that the SEC staff began in September 2010, when it requested voluntary production of information concerning RMBS underwritten by subsidiaries of RBS during the period from September 2006 to July 2007.
• Assured Guaranty has reached a settlement with UBS to resolve claims related to RMBS that were issued, underwritten or sponsored by UBS and insured by Assured under financial guaranty insurance policies. Assured will receive an initial cash payment of US$358m.
• Mexican President Pena Nieto's affordable housing policies may have negative consequences for existing private-sector RMBS sponsored by Sofoles. This segment is already experiencing an increase in REOs as foreclosures have risen and servicers have been slow to dispose of existing inventories.
Deals added to the SCI database in the last two weeks:
Atrium X; Auto ABS FCT Compartiment 2013-1; Babson CLO 2013-1; Bavarian Sky Europe Compartment 1 Switzerland; Bosphorus 1 Re series 2013-1; Brookside Mill CLO; Citibank Credit Card Issuance Trust 2013-A1; CNH Capital Canada Receivables Trust series 2013-1; CSMC Trust 2013-IVR2; Delamare Cards MTN Issuer series 2013-1; Discover Card Execution Note Trust 2013-A3; Exeter Automobile Receivables Trust 2013-1; FNA 2013-1 Trust; FREMF 2013-K26; FREMF 2013-KS01; GE Dealer Floorplan Master Note Trust Series 2013-1; Global SC Finance II Series 2013-1; GSMS 2013-PEMB; Illawarra Series 2013-1 RMBS Trust; JPMCC 2013-FL3; JPMCC 2013-LC11; Master Credit Card Trust II series 2013-1; Monviso 2013; Nelnet Student Loan Trust 2013-3; Oak Hill Credit Partners VIII; Pelican Re series 2013-1; Sanders Re series 2013-1; Sequoia Mortgage Trust 2013-6; SLM Private Education Loan Trust 2013-B
Deals added to the SCI CMBS Loan Events database in the last two weeks:
BACM 2003-2; BACM 2004-1; BACM 2007-1; BLONN 2006-1; BSCMS 2005-PWR7; BSCMS 2007-T26; CD 2005-CD1; CMLT 2008-LS1; COMM 2003-LB1; COMM 2005-FL10; CSFB 2001-CP4; CSFB 2005-C1; DECO 2007-C4; DECO 2007-E5; DECO 2007-E7; DECO 7-E2; ECLIP 2005-2; ECLIP 2007-2; EPC 3; EURO 23; EURO 25; EURO 28; FLTST 3; GCCFC 2007-GG9; GMACC 2003-C2; GSMS 2006-GG8; INFIN SOPR; JPMCC 2003-C1; JPMCC 2003-PM1A; JPMCC 2005-LD2; LBUBS 2005-C5; LBUBS 2007-C1; LBUBS 2007-C2; MLCFC 2006-3; PROUL 1; TAURS 2006-1; TAURS 2007-1; THEAT 2007-1; TITN 2006-1; TITN 2006-2; TITN 2006-3; TITN 2007-2; TITN 2007-3; TMAN 4; TMAN 6; TMAN 7; WBCMT 2003-C9; WBCMT 2006-C29; WINDM XIV
Top stories to come in SCI:
Developments in CDS futures
Regulatory arbitrage in Asia Pacific
Trends in US non-agency RMBS