A look at the major activity in structured finance over the past seven days
Pipeline
In a week in which many deals joined the pipeline and left soon after, CMBS accounted for the majority of those that remained. Three new ABS deals were also announced.
Two of those ABS (US$779m Capital Auto Receivables Asset Trust 2013-3 and US$1bn Fifth Third Auto Trust 2013-1) were auto transactions, while the other (US$563m Kentucky Higher Education Student Loan Corporation series 2013-2) was a FFELP student loan ABS.
The CMBS consisted of: US$325m BBCMS 2013-TYSN; US$1.57bn FREMF 2013-K31; US$1.2bn GSMS 2013-GCJ14; US$250m JPMCC 2013-ALC; US$91.8m JPMCC 2013-WT; and US$340m ORES Series 2013-LV2.
Pricings
There were considerably more ABS pricings, with a pair of RMBS and a CMBS also printing. In addition, eight CLOs were issued during the week.
Four of the ABS new issues were auto deals: US$877.67m AmeriCredit Automobile Receivables Trust 2013-4; US $367.3m CNH Wholesale Master Note Trust Series 2013-2; US$750m Enterprise Fleet Financing series 2013-2; and US$785.28m Hyundai Auto Lease Securitization Trust series 2013-B. The other ABS prints comprised: US$297.5m Cabela's Credit Card Master Note Trust series 2013-II; US$900m Citibank Credit Card Issuance Trust 2013-A5; US$732.29m MMAF Equipment Finance 2013-A; and US$747m SLM Student Loan Trust 2013-4.
The RMBS prints were A$500m-equivalent Pepper Prime 2013-1 Trust and €1.028bn Quadrivio RMBS 2013, while the CMBS was US$1.1bn WFRBS 2013-C15.
Much of the week's issuance was in the CLO space, with five US transactions and three European deals pricing. The US deals were: US$857m ALM VII(R); US$933m ALM VII(R)-2; US$414.05m Highbridge Loan Management 2013-2; US$414m Octagon XXII; and US$463.8m Palmer Square CLO 2013-2. Finally, the European CLOs comprised: €307m Harvest CLO VII; €372.42m Hayfin Ruby II; and €413.18m Herbert Park CLO 2013.
Markets
The US ABS secondary market was active last week, as SCI reported on Friday. Auto supply was particularly elevated towards the end of the week, while Thursday's session also saw a rare bond from a tobacco-related litigation fee securitisation out for the bid.
Much of the auto supply on Thursday came from a list of short WAL senior 2011-2012 vintage bonds. SCI's PriceABS data shows several tranches from that list, including ALLYA 2011-5 A3 and BMWLT 2012-1 A4. It also shows that the tobacco bond - LSMFT 2001-3A A - was talked in the low-100s.
It was also an active week for US RMBS, with non-agency trade volumes up to about US$7bn, according to Wells Fargo analysts. Price levels were up from half a point to a point and a half.
US CMBS spreads tightened and outperformed broader equity and credit markets. Generic 2007 dupers came in by 5bp to around swaps plus 102bp. "The basis in credit spreads between the 2007 and 2006 duper has compressed substantially and is now at about 20bp, close to its post-crisis tights," comment Barclays Capital CMBS analysts.
The US CLO secondary market, however, was quieter. Only around US$200m of BWIC volume was observed, with half of that concentrated in equity tranches. A healthy amount of the paper traded, but DNTs accounted for around 25% of supply.
Deal news
• All loans securitised in the Fleet Street Finance 3 CMBS are now in default, following the transfer into special servicing of the €49.4m Saxony loan. The deal is expected to suffer additional principal losses of €108m-€118m, with an increased proportion likely allocated to class B noteholders.
• Moody's discusses in its latest CLO Interest publication a number of novel features contained in KKR Financial CLO 2013-1 that are intended to comply with both current and forthcoming European risk-retention rules. The US deal is structured so that the originator of the assets retains the equity, which provides incentives for European investors to purchase the deal's notes.
• S&P has raised its rating on Munich Re's Queen Street V Re to double-B minus from single-B plus. The move follows the release of a reset report detailing the new attachment and exhaustion points for the catastrophe bond.
• Vertical Capital has replaced Strategos Capital Management as collateral manager on Kleros Preferred Funding. Moody's has confirmed that the move will not result in the withdrawal, reduction or other adverse action with respect to the ABS CDO's ratings.
Regulatory update
• Successful implementation of Richmond, California's eminent domain plan (SCI 31 July) and widespread adoption of similar exercises by other cities is said to be unlikely. Nevertheless, it has introduced more uncertainty to the non-agency RMBS market.
• The Loan Syndications and Trading Association has submitted a comment letter to the Fed, the OCC, the FDIC, the SEC, the FHA and the Department of Housing and Urban Development. The letter prominently features a new survey - polling 35 CLO managers that collectively manage US$228bn across 509 deals - conducted by the LSTA, which shows that new risk retention rules would dramatically shrink the CLO market.
• ISDA has released a new white paper entitled 'CCP Loss Allocation at the End of the Waterfall'. The move is in response to industry efforts to develop an effective recovery, continuity and resolution framework for central counterparties and reflects consensus views of the ISDA Risk and Margin Regulatory Implementation Committee.
• Even as the CFTC's swap execution facility (SEF) rules go into effect on 2 October, execution models are emerging that will help the buy-side preserve their existing workflow for swaps trading, according to TABB. The firm suggests that the CFTC's decision to reduce the RFQ requirement to two/three from five, in tandem with the voice trading provision, favours buy-side firms that want to keep trading swaps in size with a few trusted counterparties.
• The US SEC has charged UBS Securities with violating securities laws while structuring and marketing the ACA ABS 2007-2 CDO by failing to disclose that it retained millions of dollars in upfront cash it received in the course of acquiring collateral for the CDO. UBS agreed to pay nearly US$50m to settle the charges.
• The US SEC has charged Bank of America and two subsidiaries with defrauding investors in an RMBS by failing to disclose key risks and misrepresenting facts about the underlying mortgages (SCI 5 August). The SEC alleges that the bank failed to tell investors that more than 70% of the mortgages backing the offering - called BOAMS 2008-A - originated through the bank's wholesale channel of mortgage brokers unaffiliated with Bank of America entities.
• IntercontinentalExchange is set to launch a swap execution facility (SEF) - dubbed ICE Swap Trade - in 3Q13. So far, Citi, Morgan Stanley, SG and UBS have signed up to provide firm pricing for the platform.
Deals added to the SCI database last week:
American Credit Acceptance Receivables Trust 2013-2; CarMax Auto Owner Trust 2013-3; CIFC Funding 2013-III; Citibank Credit Card Issuance Trust 2013-A3; Citibank Credit Card Issuance Trust 2013-A4; COMM 2013-CCRE10; Courtine RMBS 2013-I; FREMF 2013-K30; Geldilux TS 2013; Hilton Grand Vacations Trust 2013-A; HLSS Servicer Advance Receivables Trust Series 2013-T4; HLSS Servicer Advance Receivables Trust Series 2013-T5; MSBAM 2013-C11; MVW Owner Trust 2013-1; Northshore Re series 2013-1; NYCTL 2013-A Trust; RAIT 2013-FL1; Sound Point CLO III; STWD 2013-FV1; Thrones 2013-1; Wireless Capital Partners series 2013-1; Wireless Capital Partners series 2013-2.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-5; BSCMS 2005-PWR8; BSCMS 2005-T20; COMM 2006-C7; CSMC 2007-C3; DECO 2007-E5; DECO 2007-E7; DECO 6-UK2; FLTST 3; GCCFC 2006-FL4A; GSMS 2005-GG4; JPMCC 2006-LDP8 & JPMCC 2006-LDP9; JPMCC 2006-LDP9; LBFRC 2007-LLF C5; MSC 2005-IQ9; TAURS 2006-2; TAURS 2007-1; TITN 2007-2; TITN 2007-3; TITN 2007-CT1; TMAN 5; TMAN 6; UBSC 2011-C1; UBSC 2012-C1; WBCMT 2006-C25; WBCMT 2006-C29; WBCMT 2007-C30; WINDM VIII; WINDM X; WINDM XII.