A look at the major activity in structured finance over the past seven days
Pipeline
Two ABS, one ILS, one RMBS and one CLO entered the pipeline last week and remained there by the weekend. Of these transactions, just two were US deals.
The ABS joining the pipeline were €500m Driver France FCT Compartiment 2013-1 and A$270m Flexi ABS Trust 2013-2, while the ILS was US$125m Atlas IX. The CLO was €300m North Westerly CLO IV, with the A$500m Progress 2013-1 Trust RMBS also marketing.
Pricings
It was not a particularly active week for new issuance, but there was some variety in the deals. The new prints consisted of one ABS, four RMBS, two CMBS and three CLOs.
The US$848m John Deere Owner Trust 2013-B was the single ABS to price, with the RMBS prints consisting of US$434.17m Agate Bay Mortgage Trust 2013-1, A$1bn IDOL 2013-2 Trust, US$346m Sequoia Mortgage Trust 2013-11 and US$157.2m VOLT 2013-NPL1.
The CMBS new issuance comprised US$485m COMM 2013-300P and US$177.5m InSite Wireless Group Series 2013-1. Finally, US$414m ACAS CLO 2013-2, US$417m Battalion CLO IV and US$376.5m Octagon Investment Partners XVII rounded the issuance out.
Markets
The European ABS market was quiet throughout August and that remained true last week. While BWIC supply was steady if unspectacular, the greater concern is that the traditional September up-tick in supply may not kick in as early as the market has grown used to, as SCI reported on 30 August.
"Traditionally everything picks back up after Labor Day. From my conversations with other dealers, I do not think that will happen this time," says one trader.
He adds: "There is not a lot of conviction that greater BWIC supply is coming imminently or that the primary market will take off. The consensus seems to be that European ABS trends are going to be driven much more by broader macro events, as indeed things increasingly seem to be these days."
US ABS volume was stronger, with auto bonds leading the way during a Wednesday session that topped US$300m in BWIC supply (SCI 29 August). SCI's PriceABS data shows names such as ALLYA 2010-4 A4, BAAT 2013-1 A3 and VALT 2011-1 A3 all out for the bid.
US RMBS non-agency supply was particularly high on Tuesday, as two CDO liquidations drove subprime volume (SCI 28 August). PriceABS shows a long list of subprime names from the session attracting price talk in the 70s, 80s and 90s.
Meanwhile, US CMBS spreads were flat to slightly wider last week. Barclays Capital analysts report that the widening was largely due to low volumes. Although four deals are due in September, they expect primary issuance to slow down in Q4.
2007 dupers widened by 5bp to plus 120bp and 2007 AMs also gave up about 5bp. AJs were flat on a lack of trading. CMBS 2.0 spreads held steady at the top of the capital stack, where dupers were at plus 103bp.
Finally, the US CLO market showed a bias towards 2006- and 2012-vintage paper early in the week, with talk largely concentrated in the 80s and 90s (SCI 27 August). C tranches were particularly prevalent, with talk at 97.38 for NAVIG 2006-1A C typical of the session.
Deal news
• As one of several Lehman Brothers UK non-conforming RMBS without a currency swap in place after Lehman's bankruptcy, the recent restructuring of MFD 2008-1 may give clues as to how similar deals will be restructured. The restructuring is said to be positive because it crystallises losses immediately, re-balances the deal and removes future FX risk.
• US$322m of distressed US CMBS loans are slated for sale via Auction.com in September, including the office property at 401 E. Ocean Boulevard, which backs a US$22m loan in LBUBS 2007-C1. The loan has been in REO since November and a December appraisal pegged the value of the property at US$17m.
• Punch Taverns' Punch A securitisation business profile has been revised down to weak by S&P, affecting the credit ratings on the class A1, A2, M1 and M2N notes. The B1, B2, B3, C and D1 notes have been affirmed and the outlook remains negative.
• DBRS has released an RFC on proposed changes to its methodology for rating and monitoring European SME CLOs. Comments are due by 30 September.
Regulatory update
• Six US federal agencies have issued a notice revising a risk retention rule proposed in 2011 as part of the Dodd-Frank Act. The rule would provide securitisation sponsors with several options to satisfy QRM requirements and is expected to reduce uncertainty for RMBS issuers and investors. It should also support stronger participation in jumbo loan activity by US banks.
• JPMorgan has been told to pay Leonard Blavatnik US$42.5m plus interest in a breach of contract lawsuit centred on RMBS investments. The decision was made by a New York state court after Blavatnik sued the bank for investing twice as much of his money in RMBS as his investment guidelines allowed.
• The Macroeconomic Assessment Group on Derivatives (MAGD) has published a report on the macroeconomic effects of OTC derivatives regulatory reform. The report finds that the net benefits of stricter OTC derivatives regulation outweigh the costs.