A look at the major activity in structured finance over the past seven days
Pipeline
New deals continued to join the pipeline last week, with three ABS, two RMBS and two CMBS announced. The ABS were US$205m CPS Auto Receivables Trust 2013-B, US$153m Nations Equipment Finance Funding I and US$15.87m Vermont Student Assistance Corporation Senior Series 2013A.
The RMBS were US$460.16m Sequoia Mortgage Trust 2013-8 and A$500m Series 2013-1 Harvey Trust. The newly announced CMBS comprised €2.1bn German Residential Funding 2013-1 and US$1.25bn JPMBB 2013-C12.
Pricings
New issuance for the week was largely skewed towards CLOs, although five ABS, five RMBS and a CMBS also priced. In total, eight CLOs printed during the week.
The ABS new issues consisted of: €494.55m Auto ABS FCT Compartiment 2013-2, US$700m Chesapeake Funding Series 2013-1, US$300m CLI Funding V Series 2013-2, US$583.95m PHEAA SLT 2013-1 and €3.5bn Quarzo 2013. The RMBS prints comprised: US$304m EverBank Mortgage Loan Trust 2013-2, US$843m-equivalent Lanark Master Issuer Series 2013-1, US$350m Nationstar Mortgage Advance Receivables 2013-T1, US$350m Nationstar Mortgage Advance Receivables 2013-T2 and US$300m Nationstar Mortgage Advance Receivables 2013-T3. The £380m UNITE (USAF) II CMBS also priced.
Finally, the CLO issuance consisted of: US$514.6m Anchorage Capital CLO 2013-1, US$516.75m Avery Point II CLO 2013-2A, US$465m Catamaran CLO 2013-1, US$426m GLG Ore Hill CLO 2013-1, €300.32m GoldenTree Credit Opportunities European CLO, US$519.4m KKR Financial CLO 2013-1, US$517m Mountain Hawk II CLO and US$600m OZLM Funding IV.
Markets
Last week saw the second largest weekly issuance total of the year for the US CLO market, pushing year-to-date issuance to US$43bn across 89 CLOs. Another US$16.72bn is understood to be in the pipeline, according to JPMorgan fixed income strategists.
"This week, new issue spreads widened considerably, reflecting macro driven volatility. Although we observe primary triple-As widened 5bp on the week, there is increased tiering among prints and hence greater difficulty in arriving at 'mid' levels," they comment.
It was a strong start to the week for US ABS, as SCI reported on 4 June. Large quantities of US auto, credit card and student loan ABS were out for the bid, with both recent vintages and pre-crisis names appearing in SCI's PriceABS data.
Among the names out for the bid were BAAT 2012-1 A2, ACCSS 2005-A A2 and AMXCA 2008-5 A. The BAAT tranche traded during Monday's session, while ACCSS and AMXCA were talked in the high-90s and very low-singles, respectively.
Spreads in US CMBS moved sharply wider last week, with vintage AJs dropping by five points and new issue triple-Bs giving up 60bp, note Barclays Capital CMBS analysts. The moves were driven by heightened volatility in the broader credit and equity markets, with generic 2007 dupers moving 20bp wider to finish the week at swaps plus 125bp.
US RMBS non-agencies also saw some weakening, with bonds trading substantially lower for the first time since QE3 was announced. Bank of America Merrill Lynch structured products strategists point out that bid/ask spreads exceeded three points in many instances, with the high level of BWIC activity actually leading to a remarkably low number of trades.
"At these levels, investors do not appear particularly incented to sell and the motivation of many of the lists appear to be aimed more at gaining price transparency as opposed to repositioning portfolios," they explain. "The largest weakness continues to be seen in Alt-A, while subprime received substantially more interest on the dip. The bonds that did trade were oftentimes lifted by hedge funds and opportunity funds, and we generally saw trades clearing 2-3 points lower than where we opened the week."
Deal news
• Further details of the Kennedy Wilson/Värde Partners Europe restructuring proposal for the Opera Finance (CMH) CMBS have been disclosed ahead of a noteholder meeting on 26 June. The proposal involves the acquisition of all the properties for cash in a pre-pack enforcement sale undertaken by a receiver (see SCI's CMBS loan events database).
• CREFC Europe has released 'Guidelines for interest rate hedging in European CRE finance transactions'. The association established a hedging working group last year to study and report on interest rate hedging practices used in European CRE finance transactions.
• Newcastle Investment Corp has divested 100% of the assets in Newcastle CDO IV. The firm sold US$153m face amount of collateral at an average price of 95% of par. The sale will result in US$77m of third-party debt being paid off at par and the termination of the trust.
• The second auction of the year is being held for Independence IV CDO on 27 June, after proceeds from an auction in March failed to meet the required redemption amount. The underlying assets comprise RMBS, CMBS and ABS CDO securities.
Regulatory update
• The US SEC is proposing to reform the way that money market funds operate in order to make them less susceptible to runs that could harm investors. The proposal includes two principal alternative reforms that could be adopted alone or in combination.
• The Consumer Financial Protection Bureau (CFPB) has amended its ability-to-repay rule for small creditors, community development lenders and housing stabilisation programmes (SCI 11 January). It has also revised the rules on how to calculate loan origination compensation for certain purposes.
• The American Securitization Forum has submitted a comment letter in response to the Uniform Law Commission's (ULC) draft residential real estate mortgage foreclosure process and protections. The ULC is proposing to reverse the holder in due course doctrine, which currently provides that a mortgage assignee that paid value for a loan in good faith and that lacked notice of certain claims and defenses to payment that the borrower has against the original lender takes the loan free of those claims and defenses; the assignee remains subject to real defenses, such as duress.
• ESMA has published technical advice evaluating the impact of the regulation on short selling and certain aspects of credit default swaps on European financial markets. The document is in response to a European Commission request for technical advice to inform its report to the European Parliament and Council on the impact of the regulation, due by end-June.
• ESMA and the EBA have published their final report setting out their 'Principles for Benchmark-Setting Processes in the EU'. The principles are designed to address the problems identified with benchmark-setting processes and will provide benchmark users, administrators, calculation agents, publishers and data submitters with a common framework for carrying out these activities.
• Former Goldman Sachs trader Fabrice Tourre has failed in his attempt to narrow a US SEC lawsuit against him by eliminating a fraud claim based on foreign transactions. The SEC filed the lawsuit in 2010, alleging that Tourre defrauded investors in the Abacus 2007-AC1 CDO by failing to disclose the role of hedge fund Paulson in selecting the underlying securities and betting against them (SCI passim).
• New York Attorney General Eric Schneiderman has filed a lawsuit against HSBC Bank USA and HSBC Mortgage Corporation for failing to follow state law in its foreclosure actions. By failing to lodge certain paperwork in a timely fashion, HSBC and other companies are alleged to have prevented homeowners from accessing settlement conferences which could help them keep their homes.
Deals added to the SCI database last week:
Ally Auto Receivables Trust 2013-SN1; Atlantes SME No. 2; Bavarian Sky German Auto Loans I; CarNow Auto Receivables Trust 2013-1; CSMC Trust 2013-IVR3; Florence; JP Morgan Mortgage Trust 2013-2; NewMark Capital Funding CLO 2013-1; Residential Reinsurance series 2013-I; Tryon Park CLO
Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-6; CD 2006-CD3 & GSMS 2006-GG8; CD 2006-CD3 & MSC 2006-IQ12; CGCMT 2005-C3; CMLT 2008-LS1; CSMC 2006-C1; CSMC 2006-C5; CSMC 2007-C3; CSMC 2007-C4; CWCI 2006-1; CWCI 2007-C3; DBUBS 2011-LC3; DECO 2007-C4; ECLIP 2006-3; EMC VI; GCCFC 2005-GG5; GECMC 2005-C2 & GECMC 2005-C4; GECMC 2007-C1; GMACC 2003-C1; GSMS 2007-GG10; INFIN CLAS; JPMCC 2005-CB11; JPMCC 2005-CB13; JPMCC 2006-LDP 7 & JPMCC 2006-CB16; JPMCC 2008-C2; MLCFC 2007-5; MLCFC 2007-7; MLMT 2006-C1; MLMT 2006-C2; OPERA CMH; RIVOL 2006-1; TITN 2006-5; TITN 2007-2; TMAN 6; VNDO 2012-6AVE; WBCMT 2006-C25; WBCMT 2007-C30; WINDM VIII; WINDM XIV; WTOW 2007-1
Top stories to come in SCI:
Developments in Russian RMBS