A look at the major activity in structured finance over the past seven days
Pipeline
Despite a predictably quiet week for the market, nine new deals were added to the pipeline. These transactions comprised two ABS, two RMBS and five CLOs.
The ABS were €606m SC Germany Auto 2013-2 and US$375m TACSEE Funding Co. The RMBS consisted of €225m Rural Hipotecario XIV and US$875.44m Springleaf Mortgage Loan Trust 2013-2.
Finally, the CLOs comprised: US$500m Ares Enhanced Loan Investment Strategy IR; €1.569bn Berica PMI; €309.26m Cadogan Square CLO V; €847.7m Geldilux TS 2013; and €410m Herbert Park CLO.
Pricings
A little more variety was observed among the new issues last week. As well as an ABS, four ILS, two RMBS and two CMBS printed.
The ABS issuance was the US$638m Tobacco Settlement Financing Corporation (Louisiana) Series 2013A. The ILS comprised: €150m Green Fields Capital Series 2013-1; US$125m Mona Lisa Re series 2013-2; US$75m Queen Street VIII Re; and US$100m Tradewynd Re series 2013-1.
The RMBS prints included £326m Albion No.2 and €2.044bn Orange Lion 2013-10. Finally, the US$1.3bn COMM 2013-CCRE9 and US$961.2m JPMCC 2013-C13 CMBS rounded the issuance out.
Markets
The European RMBS market maintained a level of activity, even as other sectors effectively closed for the holiday in the US, as SCI reported on Friday (SCI 5 July). Thursday's session saw peripheral paper from Portugal circulating, as well as a few UK non-conforming bonds.
The market was possibly still digesting ING's Orange Lion 2013-10, which one trader notes had an unusual structure (SCI 4 July). "It has no call option or step up, so the bond would naturally be longer than the five years to call," he explains. "I think the main reason for this structure will be a reverse inquiry from an investor, who is looking for longer exposure than the usual five years."
US RMBS was quiet, even at the start of the week (SCI 2 July). Dealer offering levels were largely unchanged to begin the quarter, with subprime supply holding up better than other non-agency sectors.
SCI's PriceABS data shows subprime names such as CARR 2006-NC1 M2 (talked in the low/mid-20s) and CWL 2006-2 M2 (talked in the high-single digits), which did not trade. By contrast, PPSI 2005-WCH1 M5 traded successfully during Monday's session.
US CMBS secondary activity picked up a little after a quiet start, before shutting down for Independence Day, as SCI reported mid-week (SCI 3 July). PriceABS shows covers for BSCMS 2004-PWR6 A6, BSCMS 2005-PWR8 A4, BSCMS 2006-PW11 A4, BSCMS 2006-T24 A3, BSCMS 2006-T24 A4 and BSCMS 2007-T26 A4, amid strongly divergent price talk.
A couple of other tranches of note include CGCMT 2006-C4 A3 (which was covered at 111, after having been previously covered at 58) and LBUBS 2007-C2 AM, which traded with price talk in the mid/high-300s, 400 area and mid/high-400s. Talk on the latter tranche had been in the high-200s on 15 May and the previous cover was at 293 on 25 April.
Deal news
• Nationstar intends to revise the reporting of principal forbearance modifications, resulting in approximately US$1bn in losses for RMBS collateralised with loans it services, with the revision likely to occur in the July distribution. Fitch expects the impact to be concentrated in classes currently rated double-C or below and currently does not anticipate significant rating changes as a result of the revision.
• Deutsche Annington has postponed its IPO, which was planned for 3 July, citing adverse market conditions. The company was seeking to raise €1.1bn, which would have contributed to the full repayment of the GRAND CMBS before the October 2013 IPD.
• An unusual catastrophe bond, sponsored by AIG, is expected to close this week. Dubbed Tradewynd Re 2013, the transaction features a variable attachment point, designed to provide the sponsor with risk management flexibility.
• Bankia has announced a tender offer for 17 senior Spanish RMBS tranches - across 12 2004-2007 vintage CAJAM, BCJAF and BCJAM transactions - in a repeat exercise of its previous offering for the same bonds last year (SCI 28 March 2012). The bank is offering to repurchase up to €500m of paper, half of what it had planned in its 2012 tender offer.
• Swiss Re Capital Markets has priced Green Fields II Capital Series 2013-1, which at €280m is the largest European windstorm catastrophe bond ever issued and the largest euro-denominated deal to date. The deal's single tranche priced at three-month Euribor plus 252bp and has been rated double-B by S&P.
• The loan modification programme that Patrimonio plans to implement in connection with eleven Mexican RMBS could have mixed results, depending on the transaction and the assumptions used in the analysis. The agency says it will monitor the implementation and results of the programme as information becomes available.
• BlueMountain Capital Management has been appointed replacement investment manager to Channel Capital under the provisions of a new investment management agreement. The terms of the appointment do not alter the responsibilities, duties and obligations of the investment manager under the prior investment management agreement.
Regulatory update
• The US Fed has approved a final rule to implement the Basel 3 regulatory capital reforms and certain changes required by the Dodd-Frank Act. The final rule establishes an integrated regulatory capital framework that addresses shortcomings in capital requirements - particularly for larger, internationally active banking organisations - that became apparent during the recent financial crisis, while minimising the burden on smaller, less complex financial institutions.
• The European Commission (EC) has informed a group of investment banks of its preliminary conclusion that they infringed EU antitrust rules by colluding to prevent exchanges from entering the credit derivatives business. If this is found to be the case then the companies in question could be fined 10% of their annual worldwide turnover.
• As of 1 July, interest rates on federal direct subsidised loans (FDSL) for US college students will double to 6.8%. Although the increase is being portrayed as harmful to students who would be driven further into debt, Moody's expects the overall effect on student loan securitisations to be minimal.
• Fitch believes that the Chinese securitisation market is underdeveloped, reflected in the small programme size of the third round of the credit asset securitisation (CAS) pilot programme launched in May 2012 at RMB50bn (US$8.2bn). The programme limit - accounting for less than 0.1% of the commercial banking system's assets in the country - is insufficient to fulfil the needs of Chinese banks, according to the agency.
• The Basel Committee has released two consultative papers on the treatment of derivatives-related transactions under the capital adequacy framework.
• The Commercial Real Estate Finance Council is releasing CREFC IRP version 7.0, with an effective date of 1 October 2013. The latest version of the CMBS reporting template comprises a number of changes.
Deals added to the SCI database last week:
AA Bond Co; Alba 2013-1; Alchera; Ares XXVII CLO; Credit Suisse ABS Repackaging Trust 2013-A; CSMC Trust 2013-HYB1; CSMC Trust 2013-IVR4; Driver Eleven; Ford Floorplan Auto securitization Trust series 2013-F1; Gallatin CLO V 2013-1; Green Fields II Capital series 2013-1; Halcyon Loan Advisors 2013-2; Ibis Re II series 2013-1; JPMCC 2013-C13; LCM XIV Partnership; Massachusetts Educational Financing Authority Issue K series 2013; MSBAM 2013-C10; Mythen Re series 2013-1; OHA Loan Funding 2013-1; Queen Street VIII Re; Sequoia Mortgage Trust 2013-9; Shellpoint Asset Funding Trust 2013-1; Tramline Re II series 2013-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-3; COMM 04-LB2 & 04-LB3, GECMC 04-C2 & GMACC 04-C1; DECO 2005-C1; DECO 2007-E7; ECLIP 2006-3; GRND 1; GSMS 2004-GG2; JPMCC 06-LDP8 & 06-LDP9; JPMCC 2005-CB13; JPMCC 2005-LD1; NEMUS 2006-2; OPERA CMH; RIVOL 2006-1; TAHIT 1; TAURS 2006-1; TITN 2007-2
Top stories to come in SCI:
CLO structuring innovations
Basel 3 developments
Credit investment trends