A look at the major activity in structured finance over the past seven days
Pipeline
Several deals were added to the pipeline last week, many of them ABS. Alongside the half-dozen new ABS entrants, there were also two RMBS and two CLOs.
The ABS comprise: €695.6m FCT Ginkgo Compartment Loans 2013-1; US$1.28bn HART 2013-C; US$350m HSART 2013-T6; A$278m Impala Trust 2013-1; US$1.4bn M&T Bank Auto Loans 2013-1; and US$783m World Omni Lease Securitization 2013-A.
The RMBS joining the pipeline were RUB4.4bn Otkritie 1 and Paragon Mortgages 18, while the CLOs were US$514.4m Apidos CLO XV and US$465m West CLO 2013-1.
Pricings
It was a quieter week for issuance. There were two ABS prints, two RMBS and one catastrophe bond.
The ABS pricings comprised €480m-equivalent Bilkreddit 4 and €481m Driver France FCT Compartiment 2013-1. The RMBS prints were A$650m Progress 2013-1 Trust and A$1.25bn PUMA Series 2013-1. Finally, the US$180m Atlas IX series 2013-1 ILS rounded the new issuance out.
Markets
US CLO secondary trading activity was light last week, with BWIC volume totalling less than US$200m. "Although only two line items came from equity tranches, they contributed to the highest total BWIC volume. One of these equity tranches was reported to not have traded, in addition to several other double-B tranches," note Bank of America Merrill Lynch strategists.
SCI's PriceABS data also noted several US CDO tranches out for the bid on Thursday, with very low price talk (SCI 6 September). Most of the names were from CDOs issued in around 2006, with the ACCDO 2011A SUB tranche a notable exception.
US CMBS spread weakness continued, report Barclays Capital CMBS analysts. Generic 2007 dupers finished the week at plus 125bp, which is about 5bp off the prior week's levels. 2007 AMs gave up about 15bp.
US non-agency RMBS secondary supply was low following Labor Day, but picked up on Wednesday, as SCI reported on 5 September. BWIC volume in the mid-week session was over US$650m, including tranches from vintages from the late 1990s, such as IMCHE 98-1 A5 and MLNHE 1999-1.
European RMBS activity early in the week was focused on peripheral names, as SCI reported on 3 September. A plethora of Spanish and Italian names were out for the bid on Monday and PriceABS lists a number of covers from the session, such as the TDAI 2 C tranche, which was talked and covered in the low-60s.
Deal news
• A number of OneWest-serviced RMBS that were transferred to Ocwen recognised forbearance losses last month (SCI 5 July). For instance, ALBT 2007-OA1 recognised US$5.4m in past forbearance losses - amounting to 6% of unpaid principal balance - with the A2 bond being written down by US$5.8m.
• Arsenal Football Club's record signing of Mesut Ozil for £42.5m could be a concern for Arsenal Securities bondholders if it is followed by more significant transfers in the January transfer window. Increased wage pressures at the club raise the risk of the wage-to-revenue ratio rising above 70% - a level at which Fitch is expected to consider downgrading the bond from triple-B.
• NAIC appears to have abandoned its proposal to alter the process used to derive ratings for RMBS and CMBS positions held by insurance companies, which would have reduced NAIC breakpoints for most bonds taking losses or interest shortfalls (SCI 17 April). The organisation is now said to be examining the accounting and reporting framework for Freddie Mac's recent STACR deal to determine whether it should be classified and modelled as an RMBS.
• UCI has launched a tender offer for nine bonds across six of its RMBS. The bank is offering to buy back up to €200m of paper from UCI 10, 11, 12, 14, 15 and 17.
• Auctions have been scheduled for two ABS CDOs on 23 September. Collateral from the Libertas Preferred Funding I and Kleros Preferred Funding deals will only be sold if the proceeds equal their senior redemption amounts.
• GSO Capital Partners has announced the final closing of its second capital solutions fund, GSO Capital Solutions Fund II, with total commitments of US$5bn. This represents an increase of over 50% from GSO's first capital solutions fund raised three years ago (SCI 14 July 2010).
Regulatory update
• The re-proposed US risk retention rule (SCI 29 August) favours larger CLO managers and could result in a two-tiered loan market. Issuance is also expected to drop after the regulation takes effect, potentially raising borrowing costs for below-investment grade corporates.
• China's State Council has announced several measures that could signal an intensifying commitment to developing its securitisation market. The measures include steps to boost market liquidity, broaden the investor base and enhance regulatory and risk controls.
• The Basel Committee and IOSCO have released the final framework for margin requirements for non-centrally cleared derivatives. Under the standards, all financial firms and systemically important non-financial entities that engage in non-centrally cleared derivatives will have to exchange initial and variation margin commensurate with the counterparty risks arising from such transactions.
• The North Las Vegas city council has rejected a plan promoted by Mortgage Resolution Partners (MRP) to use eminent domain to seize underwater mortgages from securitisation trusts. The vote to oppose the plan was unanimous.
• SFIG has filed an amicus curiae brief in support of Wells Fargo's motion for a preliminary injunction against the City of Richmond, California and Mortgage Resolution Partners (SCI 13 August). The case - which attempts to halt the city's proposed use of eminent domain to seize mortgage loans from private label securitisation trusts - is currently proceeding in the US District Court, Northern District of California, San Francisco Division.
• ESMA has published its advice to the European Commission on the equivalence of regulatory regimes for OTC derivatives clearing, central counterparties and trade repositories (TR) of non-EU countries with EMIR. The authority considers third-country regimes equivalent where the legal provisions and the level of supervision and enforcement is similar to that of EMIR.
• The EBA has launched a consultation on draft regulatory technical standards (RTS) setting out criteria for identifying the geographical location of all relevant credit exposures - namely credit risk, trading book and securitisation exposures. These RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the EU.
• The Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) have published their conclusions on a joint supplemental consultation regarding the proposed scope of activities to be regulated under the new OTC derivatives regime and regulatory oversight of systemically important participants. They report that market feedback has been broadly positive.
• A federal court in New York has dismissed a Bank of America lawsuit against Bear Stearns Asset Management, JPMorgan and former Bear Stearns managers. The suit was in connection with a May 2007 CDO-squared transaction.
• The NCUA has filed suit in a federal court in Kansas against Morgan Stanley and other firms, alleging legal violations in the sale of more than US$566m of RMBS to the US Central and WesCorp corporate credit unions.
Deals added to the SCI database last week:
AA Bond Co; ACAS CLO 2013-2; Battalion CLO IV; CNH Equipment Trust 2013-C; GT Loan Financing I; IDOL Trust series 2013-2 RMBS; John Deere Owner Trust 2013-B; Large Corporate; Lighthouse Trade Finance Issuer I; Madison Park Funding XI
Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-1, BACM 2006-2 & COMM 2006-C7; BACM 2006-4; CMLT 2008-LS1; COMM 2006-FL12 & CSMC 2006-TF2A; CSFB 2007-TFL1; DECO 2007-E5; DECO 2007-E7; DLJCM 1998-CG1; EMC VI; EPC 3; EPIC DRUM; EPOP ARL2, OPERA CMH & OPERA METC; GSMS 2011-GC5; JPMCC 2002-C2; JPMCC 2006-CB14; LBUBS 2005-C7; MLCFC 2006-4; MSC 2005-T17; OPERA CMH; OPERA GER2; QUOKK 2006-1; THEAT 2007-1; THEAT 2007-2; TITN 2007-CT1X; TMAN 4; TMAN 6; WBCMT 2005-C17; WBCMT 2006-C29; WINDM X; WINDM XIV
Top stories to come in SCI:
European ABS supply/demand trends
Innovation in the ILS sector