A look at the major activity in structured finance over the past seven days
Pipeline
Three CMBS remained in the pipeline at the end of last week. The transactions comprised: US$1.79bn JPMBB 2013-C14, US$1.1bn WFRBS 2013-C15 and US$150m Wireless Capital Partners.
Pricings
A diverse range of deals priced last week, as investor focus remained on the new issue ABS market. In fact, US benchmark issues were consistently oversubscribed.
Among the upsized transactions was US$1bn CarMax Auto Owner Trust 2013-3, which was joined by US$196.64m American Credit Acceptance Receivables Trust 2013-2 in the auto ABS sector. Two credit card ABS also priced: US$875m Citibank Credit Card Issuance Trust 2013-A3 and US$925m Citibank Credit Card Issuance Trust 2013-A4.
Included in the more esoteric prints were the US$250m Hilton Grand Vacations Trust 2013-A and US$250m MVW Owner Trust 2013-1 timeshare deals. These were joined by a tax lien transaction (US$91.37m NYCTL 2013-A Trust) and a catastrophe bond (US$200m Northshore Re Series 2013-1).
In addition, a pair of servicer advance transactions was issued last week - US$200m HLSS Servicer Advance Receivables Trust Series 2013-T4 and US$200m HLSS Servicer Advance Receivables Trust Series 2013-T5. RMBS issuance comprised two retained deals: €864m Courtine RMBS 2013-I and £163m Thrones 2013-1.
Two CMBS also printed during the week: US$1bn COMM 2013-CCRE10 and US$856m MSBAM 2013-C11. Finally, the US$416.9m CIFC Funding 2013-III CLO rounded out the pricings.
Markets
Activity in the US non-agency RMBS market remained fairly elevated last week. BWIC volume fell to approximately US$3bn on the week from the more typical US$5bn-US$6bn, according to RMBS analysts at Wells Fargo.
"Insurance companies and money managers continued to be active, while hedge funds seemed more ambivalent, not selling and only adding selectively. Overall, prices finished unchanged to marginally lower on the week, following Thursday's rate sell-off," they note.
Meanwhile, US CMBS spreads tightened across the board, as positive economic news boosted the market. In legacy CMBS, 2007 last cashflow dupers tightened by 8bp to swaps plus 107bp, while 2007 AMs compressed by 15bp to plus 215bp and 2007 AJs rallied by 65bp to plus 875bp.
"Legacy spreads have improved since reaching their widest levels in late June, compressing 18bp in 2007 LCF and 255bp in 2007 AJ," CMBS analysts at Barclays Capital observe. "However, they are still only halfway towards recovering their lost basis points from the tights in May. We continue to like 2007 LCF, which we feel has room to tighten."
US CLO trading remained quiet last week, with under US$200m of BWIC volume coming to the secondary market. Bank of America Merrill Lynch CLO analysts note that the majority of BWIC items came from junior classes at or below triple-B, with the largest portion being equity tranches, contributing to almost half of the total volume by dollar amount. Around half of line items were reported to not have traded.
CLO 1.0 spreads concluded the week at 120bp, 160bp, 240bp, 315bp and 550bp across the capital stack. Triple-B and double-B spreads firmed up by 10bp and 25bp, while triple-A to triple-B spreads remained unchanged. Compared to end-May, double-B spreads have retraced most of their widening from 535bp to 600bp, while triple-As remain 30bp wider than their tights of 90bp.
Finally, lower trading volumes were also observed in European secondary ABS. Spreads closed broadly unchanged on the week, with a mild tightening bias in benchmark UK and Dutch RMBS seniors.
Deal news
• Freddie Mac has upsized and priced its inaugural risk-sharing transaction (SCI 17 July). The structure was welcomed for protecting taxpayers from certain risks by transferring them to the private market, as well as for providing the GSEs with a way to achieve risk-based pricing of the guarantee fee.
• National Mortgage Insurance Corporation has agreed to insure approximately US$5bn in residential mortgages in its first risk transfer transaction with Fannie Mae, with an expected effective date in 3Q13. The transaction is contingent on National MI receiving regulatory approval of the pool policy of insurance by the District of Columbia Department of Insurance, Securities and Banking.
• Given the difficulty of replacing counterparties and expense of posting collateral for cashflow securitisations, high volumes of swap-related rating agency confirmations look set to continue, potentially eroding investor protections in their wake. At the same time, investor acceptance of AA/A rated senior paper is growing, together with appetite for deals without embedded derivatives risk.
• The pick-up in CLO issuance has accelerated structural innovation on either side of the Atlantic. At the same time, regulatory pressures continue to shape the market.
• Ocwen's acquisition of the servicing portfolio of GMAC Mortgage is said to be credit negative for related fast-pay subprime RMBS bonds due to Ocwen's policy of lower advances and its greater focus on modifications, as opposed to liquidations. Bonds will receive less up-front cash if the advancing rate on the GMACM portfolio falls from its current level of about 65% to around 10%, the rate at which Ocwen advances.
• Generic CMBS 3.0 XA tranche prices have widened by 75bp from their early-May tights of swaps plus 110bp, underperforming corresponding 10-year dupers that have sold off by only about 25bp. A number of emergent trends that could cause tiering between some individual XA tranches are consequently worth paying close attention to.
• CREFC Europe has released Watchlist Criteria for Europe, which forms part of the European Investor Reporting Package (E-IRP). The Watchlist Criteria aims to help improve clarity in the identification of loans to be placed on the Watchlist by allowing the application of pre-determined standards, the association says.
• Fitch has introduced property price indexation to its Australian RMBS criteria, assessing indexed property values for over 818,000 loans in 131 rated public securitisations. This has resulted in an improved weighted average loan-to-value (WALTV) ratio of 57.4%, compared with 63.3% prior to indexation.
Regulatory update
• ICE Clear Europe is set to introduce client clearing for European credit default swaps after receiving regulatory approval in the UK and US. The service is expected to launch on 7 October and will be available for 43 European index and 121 corporate single name CDS instruments. Twelve clearing members will participate in the pre-launch testing.
• Ex-Goldman Sachs executive Fabrice Tourre has been found liable in the US District Court for the Southern District of New York for misleading investors in the Abacus 2007-AC1 CDO. The jury found against him on six of the seven claims brought by the SEC in April 2010 (SCI passim).
• MF Global Capital has become the latest firm to file an antitrust suit alleging that swap dealers conspired to control the credit derivatives market (SCI passim). The complaint - filed in Illinois Northern District Court - names Bank of America, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, ISDA, Markit, Morgan Stanley, RBS and UBS as defendants.
• IOSCO has published its final report on supervisory colleges for credit rating agencies, which recommends establishing supervisory colleges for internationally active credit rating agencies (CRAs) and provides preliminary guidelines on how to constitute and operate them. The recommendations are aimed at improving the integrity of CRAs, the organisation says.
Deals added to the SCI database last week:
American Express Credit Account Master Trust Series 2013-1; CR Volterra 2; CSMC Trust 2013-6; Dignity Finance (third tap); Dutch Mortgage Portfolio Loans XI; Emerson Park CLO; Ford Credit Auto Owner Trust 2013-C; GE Equipment Small Ticket 2013-1; Globaldrive (Italy) IV; JGWPT XXVIII series 2013-2; JP Morgan Mortgage Trust 2013-3; Master Credit Card Trust II Series 2013-3; Mercedes-Benz Auto Receivables Trust 2013-1; MetroCat Re series 2013-1; Nissan Auto Receivables 2013-B Owner Trust; North End CLO; Ocean Trails CLO IV; OHA Loan Funding 2013-2; Ohio Phase-In-Recovery Funding; Rural Hipotecario XVI; Sequoia Mortgage Trust 2013-10; Series 2013-1 REDS Trust; Sonic Capital series 2013-1; STACR 2013-DN1; STORE Master Funding series 2013-2; Trinity Rail Leasing Series 2013-1; VCL Master Compartment 1 series 2013-1.
Deals added to the SCI CMBS Loan Events database last week:
BSCMS 2007-BBA8; CD 2007-CD4; COMM 2006-FL12 & CSMC 2006-TF2A; DECO 2006-E4; DECO 2007-E5; DECO 7-E2; DECO 9-E3; ECLIP 2006-1; EMC IV; EMC VI; EURO 23; FLTST 3; GCCFC 2006-GG7; JPMCC 2005-CB11; JPMCC 2013-JWRZ; LBUBS 2005-C7; MLCFC 2007-9; MSC 2006-HQ10; MSC 2006-IQ12; OPERA CMH; THEAT 2007-1 & THEAT 2007-2; TITN 2005-CT2; TITN 2006-2; TITN 2006-CT1; TITN 2007-2; TITN 2007-CT1; TMAN 6; TMAN 7; Various; WFRBS 2011-C3 & WFRBS 2011-C4; WFRBS 2012-C6; WINDM VII; WINDM VIII; WINDM X; WINDM XIV.