A look at the major activity in structured finance over the past seven days
Pipeline
Many of the deals which joined the pipeline last week priced soon afterwards but a handful still remained when the weekend rolled around. This included two ABS, one ILS, one RMBS and three CMBS.
The ABS were US$304.72m Massachusetts Educational Financing Authority Series 2013 and €76m TruckLease Compartment No.3, while the ILS was US$75m Queen Street VIII Re. The RMBS was A$500m TORRENS Series 2013-2 and the CMBS were US$775m COMM 2013-THL, US$1.9bn FREMF 2013 Series 2013-K28 and US$1.5bn MSBAM 2013-C10.
Pricings
It was a very busy week for new prints, with ABS dominating issuance. Along with a long list of ABS, there were three RMBS, two CMBS and four new CLOs.
Many of the ABS were auto deals. These included: US$1bn AmeriCredit Automobile Receivables Trust 2013-3; US$238m California Republic Auto Receivables Trust 2013-1; US$205m CPS Auto Receivables Trust 2013-B; US$237m DT Auto Owner Trust 2013-1; €750m FCT Cars Alliance DFP France 2013-1; US$200m First Investors Auto Owner Trust 2013-2; US$690.2m Ford Credit Floorplan Master Owner Trust A 2013-3; US$460.13m Ford Credit Floorplan Master Owner Trust A 2013-4; £1bn Motor 2013-1; and Sfr269m Swiss Auto Lease 2013-1.
The non-auto ABS consisted of: US$445m FirstEnergy Ohio PIRB Special Purpose Trust 2013; US$275m Icon Brand Holdings series 2013-1; US$300m PFS Financing Corp Series 2013-B; US$1.246bn SLM Student Loan Trust 2013-3; US$104.3m South Texas Higher Education Authority Series 2013-1; US$400m Springleaf Funding Trust 2013-B; and US$371.4m Vermont Student Assistance Corporation Senior Series 2013A.
The RMBS were €1.01bn Phedina Hypotheken 2013-I, A$675m Series 2013-1 Harvey Trust and US$460.16m Sequoia Mortgage Trust 2013-8. The CMBS were €2.1bn German Residential Funding 2013-1 and C$220m TD Canada Trust Tower Senior Secured Bonds.
Lastly, the CLOs were US$617m Apidos CLO XIV, US$517m Carlyle Global Market Strategies CLO 2013-3, €400m Jubilee CLO X and US$655m Oaktree Enhanced Income Funding 2013-3.
Markets
It was a mixed start to the week for US RMBS, as SCI reported on Tuesday (SCI 11 June). Agency supply was up and remained strong throughout the week, although non-agency BWIC volume was markedly down on Monday. SCI's PriceABS archive lists several covers for agency bonds during the week's first session, but fewer for non-agencies.
PriceABS shows that both FNR 2013-18 QS and FHR 3919 LS did not trade during the session, although tranches such as FHR 4120 ST did. Several other tranches achieved covers, including FNR 2013-76 SC, which was covered in the mid-20s.
Vintage US CMBS spreads moved slightly tighter last week and new issue spreads widened, according to Barclays Capital CMBS analysts. 2007 dupers tightened 5bp, with vintage AMs moving 5bp-10bp.
"Agency CMBS spreads, which had held up relatively well over the past two weeks, broke wider. Some of this can be attributed to new supply in the face of market weakness; both GSEs announced new 10-year deals, adding approximately US$2.6bn of supply. Spreads on the 10-year guaranteed tranche widened about 10bp to finish at swaps plus 63bp," they say.
BWIC volume reached over US$1bn last week for the US CLO market, say Bank of America Merrill Lynch securitised products strategists. The secondary market started exhibiting weakness towards the end of the week and legacy line items largely performed better than newer deal tranches.
Legacy CLO spreads finished the week at 105bp at triple-A through 145bp, 210bp and 310bp to 550bp at double-B. In the primary market, Carlyle's newest issuance printed with DMs of 115, 155, 270, 375, 550 and 700.
The European ABS market was boosted by a 152 line BWIC in mid-week, as SCI reported on Friday (SCI 14 June). The list traded well and also included RMBS and CMBS paper.
"It has been a busy week for the market and levels, in context, have been pretty good. Next week everything will shut down, but it will be interesting to see how things pick up afterwards," notes one trader.
Deal news
• GRAND sponsor Deutsche Annington (DAIG) intends to list on the Frankfurt Stock Exchange. As it seeks to rebalance its funding, the likelihood of the GRAND CMBS being redeemed on or before its October IPD has greatly increased.
• The recent sale of the Wells Fargo Center has resulted in an estimated US$267m pay-down for the Beacon Seattle & DC portfolio, based on remittance data available for BACM 2007-2, the first of the Beacon CMBS to report in June. At a reported US$390m, the ultimate selling price for the property was higher than expected.
• A revised restructuring proposal from pub operator Punch appears to address some of the main concerns with the previous proposal (SCI 11 February), while also containing a number of optional extras. The flexibility and improvement in terms for senior bondholders mean that the restructuring is more likely to be agreed, according to MBS analysts at Barclays Capital.
• The European Wholesale Securities Market (EWSM) has announced its inaugural listing. Grand Harbour I, a CLO registered in the Netherlands, listed seven classes of securities on the EU-regulated market on 5 June. The transaction was arranged by Citi, with Mediterranean Bank acting as initial seller and sub-advisor to the collateral manager GSO/Blackstone Debt Funds Management.
• GoldenTree Asset Management has priced a European CLO that is said to not comply with risk retention criteria. The €300.32m-equivalent Goldentree Credit Opportunities European CLO 2013-1 - via Morgan Stanley - comprises eight tranches of floating- and fixed-rate notes.
• An auction is to be conducted for RFC CDO I on 28 June. An auction was previously conducted for the deal on 28 March, but sale proceeds didn't meet the auction call redemption amount.
Regulatory update
• Stricter loan-level requirements have come into force for European CMBS looking to retain ECB repo-eligibility. CMBS bonds are now mostly absent from the list of repo-eligible securities, with possible negative pricing implications.
• The US SEC has settled an enforcement proceeding against eight former directors of five Regions Morgan Keegan funds that were heavily invested in subprime RMBS. The proceeding began last year and alleged that the directors failed to satisfy their pricing responsibilities (SCI 11 December 2012).
• A recent tax amendment relating to income distributed by securitisation trusts to Indian pass-through certificates may impact ratings, says Fitch. Changes must be made to transaction documentation to avoid downgrades.
• Recent changes to Spanish mortgage legislation could increase loan repossession periods and potentially push up realised loan losses, according to S&P. At the same time, new guidelines that Spanish banks must employ when classifying loan restructurings in their financial statements may increase the transparency of lender asset quality.
• The US OCC has granted seven banks extra time to comply with the swaps push-out rule under Dodd-Frank by extending its effective date by two years. The rule seeks to prevent entities that receive government backstops from participating in certain trading activities that are deemed to be risky.
• ISDA and the Futures and Options Association (FOA) have launched the ISDA/FOA Client Cleared OTC Derivatives Addendum. It is a template for cleared swaps market participants to document the relationship between a clearing member and its client for purposes of clearing OTC derivatives transactions across CCPs that use the principal-to-principal client clearing model.
• FCMs Bank of America Merrill Lynch, Barclays, JPMorgan and UBS have confirmed their support for the Clearing Connectivity Standard (CCS) initiative to standardise reporting for cleared OTC derivatives (SCI 25 October 2012). Custodian banks BNY Mellon, JPMorgan, Northern Trust and State Street also support the standard.
• ISDA has published the 2013 Standard Credit Support Annex (SCSA), which seeks to standardise market practices in collateral management for OTC derivatives. It removes embedded optionality in the existing CSA, promotes the adoption of overnight index swap (OIS) discounting and aligns the mechanics and economics of collateralisation between the bilateral and cleared OTC derivative markets, the association says.
Top stories to come in SCI:
Corporate trust market concerns
GSE selling considerations
Next steps for Basel 3