A look at the major activity in structured finance over the past seven days

Pipeline
By the end of a relatively busy week for new issuance, only four transactions remained in the pipeline on Friday - two CMBS, and RMBS and a CLO. The CMBS are US$1.69bn FREMF 2013-K30 and US$200m STWD 2013-FV1 Mortgage Trust. The RMBS is US$400.67m Sequoia Mortgage Trust 2013-10, while the CLO is US$400m Sound Point CLO III.

Pricings
Auto ABS and RMBS dominated last week's pricings. Several esoteric transactions also printed.

The auto ABS new issues comprised: US$1.34bn Ford Credit Auto Owner Trust 2013-C, US$975m Mercedes-Benz Auto Receivables Trust 2013-1, US$1.418bn Nissan Auto Receivables 2013-B, €85m VCL Master Compartment 1 series 2013-1 and €226m Globaldrive (Italy) IV. In addition, a couple of credit card ABS priced - US$1.05bn American Express Credit Account Master Trust Series 2013-1 and US$529.1m Master Credit Card Trust II Series 2013-3.

The esoteric ABS prints consisted of: US$267.41m Ohio Phase-In-Recovery Funding 2013-1, US$183.45m Trinity Rail Leasing Series 2013-1 and US$174.67m JGWPT XXVIII series 2013-2. The US$475.7m GE Equipment Small Ticket 2013-1 rounded out last week's ABS issuance.

Meanwhile, the RMBS pricings included: €839.8m Dutch Mortgage Portfolio Loans XI, €150m Rural Hipotecario XVI, A$851m Series 2013-1 REDS Trust, US$500m STACR 2013-DN1 and €230m Volterra 2. The US$402.65m Ocean Trails CLO IV also printed.

Markets
A hotly anticipated US$2bn US RMBS bid-list hit the market last Wednesday, accounting for almost all of the non-agency secondary supply for the day (SCI 25 July). The BWIC is believed to be from either Fannie Mae or Freddie Mac, as most of the securities on the list were block-sized, with many comprising the entire tranche. The list consisted of almost 50% fixed-rate collateral, with bond quality appearing to be substantially lower than previous GSE bid-lists.

Overall the lists traded relatively well, but it is unclear whether the positions went to end accounts or if portions remain on dealer balance sheets. The tone of the non-agency market remained positive last week and prices were flat, with subprime marginally higher.

The US CMBS secondary market was also relatively flat last week, except for some modest spread tightening at the top of the capital stack. Generic 2007 last cashflow tranches tightened by 5bp, according to Barclays Capital figures, to end Thursday at swaps plus 115bp. 2007 AMs were also about 5bp tighter, to plus 230bp, while 2007 AJ spreads were flat.

US CLO secondary supply was fairly light last week, with BWIC volumes reaching only US$330m, which is about the same as for the previous week. Offered bonds were evenly distributed across the capital stack from triple-A down to double-B and equity.

Despite a third of line items by balance not having traded, the overall tone has improved compared to a few weeks ago when spreads widened across fixed income markets, Bank of America Merrill Lynch analysts note. "Bids came in for longer-duration 2.0s contrary to previous weeks and 1.0 mezzanine levels firmed up marginally over the week. CLO 1.0 spreads concluded the week overall unchanged at 120, 160, 240, 325 and 575bp."

A few European ABS BWICs continue to circulate, but flows are beginning to slow ahead of the summer holidays, with spreads overall closing the week unchanged. Talisman paper has been particularly prevalent in the CMBS secondary market, as SCI reported on 26 July. SCI's PriceABS data shows that TMAN 7 A was talked around 98 and covered at 98.06 on Thursday, while TMAN 6 A was out for the bid in every session last week.

Deal news
• Rising interest rates in the wake of the Fed's tapering proposal have profoundly affected cross-asset relative value. While investors may consequently choose to move down the capital structure within CLOs, interest in CMBS is also expected to increase.
• Brazilian ABS issuance volume plummeted to its lowest level since 2004 last year and is yet to return. New rules passed by regulator Comissão de Valores Mobilários are being blamed for the sector's decline, but a series of bank scandals have also deterred investors from entering the market.
• Two proposals have been put forward to Eurosail-UK 2007-5NP noteholders. One is a replacement hedging agreement with Goldman Sachs, while the other is a restructuring, involving a redenomination of the euro tranches into sterling and a write-down of the tranches.
• LBUBS 2007-C2 is tipped for stable performance in the near-term, following Orix Capital Markets' mass liquidation of 21 distressed loans totalling US$773m backing the CMBS (SCI 18 July). US$311m in losses were realised in the July 2013 remittance period as a result of the liquidations.
• BBVA, Cajamar and NCG Banco have eliminated the interest floor clauses in more than 500,000 Spanish mortgages, after they were declared as unfair in a recent Tribunal Supremo ruling. This change - which will lead to a decrease in interest collections, but will not affect cashflows - is credit neutral for the interest-hedged deals originated by the banks. Conversely, it is credit negative for BBVA RMBS 11 - the only unhedged transaction - although it should not trigger any rating action in the deal.
• Cerberus Capital Management affiliates have acquired two portfolios of German real estate properties: the Phoenix portfolio of nine shopping centres formerly owned by Wells Fargo; and the Monsoon portfolio of ten retail properties, which secures the Countrywide Kaufland loan securitised in EPIC Drummond (see SCI's CMBS loan events database).
• Due to a potential conflict of interest relating to its role as securities administrator on Natixis 2007-HE2 and as an originator of loans sold into RMBS mortgage trusts, Wells Fargo is assigning its duties to pursue repurchase obligations to Computershare Trust Company. Under the deal's governing document, Computershare is identified as the separate securities administrator.
• New legislation in New York and Hawaii is expected to spur new issuance of bonds backed by utility cost recovery charges (UCRC). Pending legislation to reorganise the Long Island Power Authority (LIPA) sets a legal framework and standards for the issuance of UCRC bonds to refinance LIPA's outstanding debt at lower interest rates, while a similar securitisation law went into effect in Hawaii on 27 June to help finance the state's clean energy infrastructure.
• Towers Watson Capital Markets has arranged an inaugural private placement catastrophe bond - the US$60m Sullivan Re 2013-1 - for the New Jersey Manufacturers Insurance Group. With a three-year maturity, the transaction contains a single layer of the cedant's risk management programme and will provide per-occurrence indemnity-based reinsurance coverage for the firm's New Jersey and Pennsylvania marketing territories.
• The junior-most outstanding class A tranches in six National Collegiate Student Loan Trust securitisations are expected to incur losses due to low parity ratios and low excess spread. Three other transactions are already lacking the collateral base necessary to repay the junior-most class A notes.
• Funeral services provider Dignity has tapped its Dignity Finance whole business securitisation. At the same time, the transaction's security group will acquire a new Dignity entity.

Regulatory update
• The Basel Committee sought and received feedback on a consultative paper launched late last year (SCI 19 December 2012). Market participants voiced concerns over the proposals and they are now expected to be amended in advance of a second consultation later this year.
• FINRA has begun disseminating via TRACE information for specified pool transactions in agency pass-through MBS and SBA-backed securities. This represents approximately 3,500 trades, totalling US$18bn in par value, on an average daily basis.
• The US Internal Revenue Service's decision to delay FATCA implementation -scheduled to begin on 1 January 2014 - by six months is credit positive for CLOs with offshore issuers. The move is expected to save the administrative burden and expense of FATCA compliance during that time, extend applicability of FATCA's grandfathering exclusion and increase the potential for achieving other avenues of FATCA relief prior to implementation.
• The Basel Committee has issued for consultation liquidity coverage ratio disclosure standards, following the publication of the LCR standard at the beginning of the year (SCI 7 January). The aim is to balance the benefits of promoting market discipline against the challenges associated with disclosure of liquidity positions under certain circumstances, including the potential for undesirable dynamics during periods of stress.
• The EBA has launched a quantitative impact study (QIS) to assess the capital impact of its proposals for the calculation of additional value adjustments (AVAs). The move follows the publication of its consultation paper on draft RTS on prudent valuation (SCI 11 July).
• Moody's has published a request for comment on the impact of legislative amendments on Russian onshore MBS. In particular, the amendments - which came into effect in January 2013 - have reduced the risk of issuer liquidation upon recording a negative asset ratio by prohibiting voluntary issuer self-liquidation.

Deals added to the SCI database last week:
Ares Enhanced Loan Investment Strategy IR; Ares European CLO VI; Berica PMI; Cadogan Square CLO V; CGBAM 2013-BREH; Chase Issuance Trust 2013-6; Discover Card Execution Note Trust 2013-4; Double Diamond Funding IV series 2013-1; FREMF 2013-K29; Golub Capital Partners CLO 16; GSMS 2013-GC13; Honda Auto Receivables 2013-3 Owner Trust; NRP Mortgage Trust 2013-1; Pennsylvania Higher Education Assistance Agency Student Loan Trust 2013-2; Portavia Trust No.2 series 2013-IR; Retail Automotive CP Germany 2013; Rural Hipotecario XIV; Rural Hipotecario XV; Sierra Timeshare 2013-2 Receivables Funding; Springleaf Mortgage Loan Trust 2013-2; St Paul's CLO II; Telos CLO 2013-4; Tobacco Settlement Financing Corp (State of Louisiana) 2013A; Volkswagen Auto Lease Trust 2013-A; WFCM 2013-LC12

Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-4 & BACM 2005-5; BACM 2007-1; BACM 2007-1 & JPMCC 2007-LDPX; Capmark VII - CRE; CSMC 2006-C5; CSMC 2007-C1; DBUBS 2011-LC2; DECO 2006-C3; DECO 2006-E4; DECO 2007-E5; EMC VI; EPICP BROD; EURO 24; EURO 25; EURO 26; FLTST 2; GRND 1; INFIN SOPR; JPMCC 2007-LDPX; LBFRC 2006-LLF C5; LBUBS 2001-C3; LBUBS 2005-C5; LBUBS 2007-C2; MALLF 1; MLMT 2007-C1; MSC 2006-IQ11; OPERA CMH; PROMI 2; PROUL 1; REC 5; RIVOL 2006-1; TITN 2007-2; TITN 2007-3; TITN 2007-CT1; TMAN 4; TMAN 5; TMAN 7; WBCMT 2003-C7 & WBCMT 2003-C8; WBCMT 2007-C32; WINDM XIV

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