A look at the major activity in structured finance over the past seven days
Pipeline
After only seeing a single deal in the previous week, ABS returned to the pipeline last week. Three new ABS deals were announced, together with two ILS, three RMBS, one CMBS and four CLOs.
The ABS comprised: US$267.4m AEPOH 2013-1; US$173m JGWPT 2013-2; and US$1bn Nissan Auto Receivables 2013-B. The ILS were MetroCat Re Series 2013-1 and US$150m Northshore Re Series 2013-1.
The RMBS were made up of: ZAR1.6bn Fox Street 1; €150m Rural Hipotecario XVI; and US$400m STACR 2013-DN1. The CMBS was US$218.5m STORE Master Funding Series 2013-2.
As for the CLOs, US$417.4m CIFC 2013-III, Emerson Park CLO, €307m Harvest CLO VII and US$193.5m OHA Loan Funding 2013-2 rounded out the pipeline.
Pricings
In addition, considerably more new ABS issuance was seen than in the previous week. Along with three RMBS, three CMBS and three CLOs, there were eight ABS prints in the week.
The ABS new issuance comprised: US$900m Chase Issuance Trust 2013-6; US$550m Discover Card Execution Note Trust 2013-4; US$1.5bn Honda Auto Receivables 2013-3 Owner Trust; US$331m PHEAA 2013-2; €400m Retail Automotive CP Germany 2013; US$325m Sierra Timeshare 2013-2; US$155m Sonic Capital Series 2013-1; and US$1.25bn Volkswagen Auto Lease Trust 2013-A.
The RMBS prints comprised: US$440m NRP Mortgage Trust 2013-1; €225m Rural Hipotecario XIV; and €530m Rural Hipotecario XV. As for the three CMBS, they were: US$600m CGBAM 2013-BREH; US$1.3bn GSMS 2013-GC13; and €1.409bn WFCM 2013-LC12.
Finally, the CLO prints consisted of: €310.5m Ares European CLO VI; US$414m North End CLO; and €400m St Paul's CLO II.
Markets
While most sectors were quiet at the start of last week, the secondary US RMBS market remained busy (SCI 16 July). SCI's PriceABS data shows a number of names from the session, although many non-agency tranches failed to trade.
Among the DNTs were bonds such as CSMC 2006-8 3A1 OOMLT 2005-4 M1. However, other tranches did trade successfully, such as SAST 2006-2 A3C, which was covered at mid-85.
In the agency space, lower coupons ground tighter over the week. Barclays Capital RMBS analysts report that FN 3s, 3.5s and 4s were up by 10 to 12 ticks versus Treasury hedges.
"Dovish comments by Chairman Bernanke and reduced volatility also helped the basis outperform. The outperformance was largely focused towards the lower coupons, with higher coupons rising only moderately," they add.
Despite the quiet start, US ABS activity did pick up, as SCI reported on Wednesday (SCI 17 July). Tuesday's session in particular saw a variety of paper out for the bid, with auto, aircraft and container bonds all circulating. Much of the auto talk was in the teens and low-20s.
US CMBS BWIC volumes also picked up and finished the week strongly, with US$857m circulating on Thursday, as SCI reported (SCI 19 July). Spreads tightened and a number of senior bonds - such as BACM 2006-4 A1A, CGCMT 2006-C5 A1A and GSMS 2007-GG10 A1A - attracted covers during the session.
Secondary volume for US CLOs was muted last week and totalled only around US$300m, according to Bank of America Merrill Lynch analysts, with several days almost bereft of bonds. The market appears to have moved into summer mode, with relatively light activity.
Most bonds offered on CLO BWICs this week were investment grade, with the exception of a few equity tranches. CLO 1.0 spreads remain unchanged down the capital structure at 120bp, 160bp, 240bp, 325bp and 575bp.
Deal news
• The first in a series of hotly-anticipated Freddie Mac risk-sharing transactions (SCI 8 July) has been announced. Dubbed Structured Agency Credit Risk (STACR) series 2013-DN1, the securities are linked to the credit risk of a pool of recently-originated residential mortgage loans.
• The July remittance for LBUBS 2007-C2 indicates that US$773m of delinquent loans have been liquidated at an average 40% loss severity, wiping out nine outstanding mezzanine bonds and imposing a 10% loss on the AJ note. The spurt in liquidations was widely expected and follows an auction of the trust's delinquent loans by Orix (SCI 30 April).
• Each of the GRAND REF note issuers have prepaid in full, with the redemption of the CMBS notes expected on the 22 July IPD. The move follows DAIG's IPO: the company is partially funding the repayment with an unsecured loan, which was contingent on generating IPO proceeds of at least €400m.
• Eight of the 20 properties securing the £162.3m Mapeley loan, securitised in the Deco 6 - UK Large Loan 2 CMBS, have been sold since the loan was accelerated and enforced a year ago (see SCI's CMBS loan events database). So far, the work-out process appears to have been relatively successful.
• The first transaction to be issued under the EU's Europe 2020 Project Bond Initiative has hit the market. Dubbed Watercraft Capital, the €1.43bn bond will refinance outstanding loans in connection with the construction and operation of an underground gas storage facility off the northern Spanish Mediterranean coast.
• GC Securities and Goldman Sachs are in the market with what is believed to be the first natural peril catastrophe bond whose trigger is linked solely to storm surge. Dubbed MetroCat Re series 2013-1, the transaction provides parametric coverage for First Mutual Transportation Assurance Co (FMTAC), a subsidiary of the New York Metropolitan Transportation Authority.
• Only two properties securitised in US CMBS are set for a note sale via Auction.com in August. The first is the US$42.9m Tallahassee Mall securitised in CSFB1999-C1, which has been in REO since January 2011.
Regulatory update
• US Representative Mel Watt is strongly tipped to become the next FHFA director. His successful nomination could escalate RMBS policy concerns, although an over-reaction would present a strong buying opportunity.
• ISDA has released new information on the implementation of its revised credit derivatives definitions (SCI passim). The association expects the documentation to be in place in order for contracts using the new definitions to begin trading on 20 March 2014.
• The ECB's governing council has adjusted its risk control framework to tighten covered bond rules in favour of ABS. The changes provide updated haircuts for marketable instruments and an expanded list of collateral which will be accepted under the permanent Eurosystem collateral framework.
• ISDA has launched a new protocol and reporting guidance note. The ISDA 2013 EMIR Portfolio Reconciliation, Dispute Resolution and Disclosure Protocol is intended to allow swap market participants to amend agreement terms to reflect certain portfolio reconciliation and dispute resolution obligations imposed by regulation on OTC derivatives, central counterparties and trade repositories.
• The Reserve Bank of Australia has published its finalised cashflow waterfall reporting template for repo-eligible RMBS. The template is one of four new reporting templates that will need to be completed for RMBS to be considered for eligibility for repurchase agreement with the Reserve Bank from 31 December 2014.
• ESMA has launched a consultation on draft regulatory technical standards (RTS) designed to implement EMIR provisions related to OTC derivative transactions by non-EU counterparties in certain cases and prevent attempts by non-EU counterparties to evade EMIR's provisions. The paper clarifies the conditions where EMIR's provisions regarding central clearing or risk mitigation techniques would apply to OTC derivative trades undertaken by two non-EU counterparties that have a direct, substantial and foreseeable effect in the EU.
• The Reserve Bank of Australia, Australian Prudential Regulation Authority and Australian Securities and Investments Commission have released a report on the Australian OTC derivatives market. The report constitutes the latest advice from the regulators regarding mandatory requirements for trade reporting, central clearing and platform trading of OTC derivatives.
• The EBA has launched a consultation on draft implementing technical standards (ITS) on the reporting of the hypothetical capital of a central counterparty (CCP). These ITS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in Europe. The consultation runs until 30 September.
• Liquidators of two Bear Stearns funds have filed a lawsuit in the New York Supreme Court against McGraw Hill Financial, Moody's Corp and Fitch Group. They are seeking more than US$1bn for fraudulent investment ratings on RMBS and CDOs.
• A federal court in Kansas has dismissed an action by the NCUA against Barclays Capital as time-barred. The lawsuit was filed last year, alleging US$555m of RMBS was misrepresented when it was sold to the US Central and Western Corporate credit unions.
• Four Danish pension funds have filed a lawsuit against a group of banks which they accuse of blocking the entry of exchanges into the CDS market. All of the accused are also subject to an antitrust investigation by the European Commission (SCI 1 July) and a separate lawsuit brought by a US pension fund (SCI 7 May).
• The European Council's proposal to give depositors preference over senior unsecured creditors would be credit positive for EMEA RMBS and ABS. The proposal would increase the likelihood of undisrupted payments to depositors of a defaulting institution, increase potential recoveries on defaulting deposits and potentially mitigate set-off risk.
Deals added to the SCI database last week:
BASS Master Issuer series 0-2008-I (tap); CNH Capital Australia Receivables Trust Series 2013-1; Debussy DTC; Hypenn RMBS I; Lowland Mortgage Backed Securities 2; Marche Mutui 6; Santander Drive Auto Receivables Trust 2013-4; SC Germany Auto 2013-2; Tradewynd Re series 2013-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2003-1; BACM 2003-2 & BACM 2004-1; BSCMS 2007-PW15; COMM 2004-LB3A; CSFB 1999-C1; DECO 6-UK2; DECO 9-E3; ECLIP 2006-1; ECLIP 2006-3; EMC IV; EURO 22; FB 2005-1, LBUBS 2005-C5 & BSCMS 2005-T20; GCCFC 2007-GG9; GECMC 2003-C1; GECMC 2006-C1; GRND 1; GSMS 2006-GG8; JPMCC 2005-CB13; JPMCC 2005-LDP4; JPMCC 2007-FL1; JPMCC 2007-LDPX; LBUBS 2001-C3; LBUBS 2005-C1; LBUBS 2007-C2; MLCFC 2006-3; MLMT 2005-LC1; MLMT 2005-MCP1; RIVOL 2006-1; TAURS 2006-3; TITN 2006-3; TITN 2006-CT1; TITN 2007-2; TITN 2007-CT1; TMAN 5; WINDM VII; WINDM X; WINDM XI; WINDM XIV
Top stories to come in SCI:
CLO structuring innovations
Basel 3 developments