A look at the major activity in structured finance over the past seven days
Pipeline
Deals entered and left the pipeline in quick succession last week, with many new arrivals printing before the weekend. Several transactions remained as well, including five new ABS, two RMBS, five CMBS and three CLOs.
The ABS comprised: US$200m Dong Fang Container Finance series 2013-1; US$231.9m DriveTime 2013-2; US$446.85m GEEMT 2013-1; US$325m Leaf Commercial Capital 2013-1; and €750m VCL 18. The RMBS were Bluestep Mortgage Securities No.2 and US$308.6m Shellpoint Asset Funding Trust 2013-2.
The CMBS consisted of: US$425m Boca Hotel Portfolio Trust Series 2013-BOCA; US$985m CGCMT 2013-GC15; C$400m SCG 2013-CWP Hotel Issuer; US$185.5m VFC 2013-1; and US$1bn WFRBS 2013-C16.
Finally, the CLOs entering the pipeline were: St Paul's CLO III; US$832m Symphony CLO XII; and US$407m WhiteHorse VII.
Pricings
More transactions priced last week than have been seen in a long time. The prints included 13 ABS, three RMBS, four CLOs and a CMBS.
Seven of the ABS new issues were auto deals: US$550m Avis Budget Series 2013-2; US$500m Exeter Automobile Receivables Trust series 2013-2; US$1.3bn Ford Credit Floorplan Master Owner Trust A 2013-5; US$1.28bn Hyundai Auto Receivables Trust 2013-C; US$1.4bn M&T Bank Prime Auto Loans 2013-1; US$712m Toyota Auto Receivables 2013-B Owner Trust; and US$783m World Omni Lease Securitization 2013-A.
The other six ABS comprised: US$700m Citibank Credit Card Issuance Trust 2013-A6; €696m FCT Ginkgo Compartment Consumer Loans 2013-1; US$350m HLSS Servicer Advance Receivables Trust 2013-T6; A$278m Impala Trust 2013-1; US$996m SLM Student Loan Trust 2013-5; and US$300.9m Textainer Marine Containers III series 2013-1.
The RMBS prints were: RUB4.4bn Otkritie 1; £238m Paragon Mortgages 18; and €753m STORM 2013-IV. In the CMBS sector, the US$1.51bn FREMF 2013-K32 priced.
As for the CLOs, US$650m Acis 2013-2, US$517m Dryden XXX Senior Loan Fund, US$345m Garrison Funding 2013-2 and US$407m Neuberger Berman CLO XV all printed.
Markets
The US ABS secondary market took a slight dip early on but picked up in mid-week, as SCI reported on 12 September. Wednesday's session included a US$110m dealer floorplan bid-list as auto names led the pick-up in activity.
SCI's PriceABS data also shows a number of utility ABS names from the session, including a number of AEP Texas Central Transition Funding and CenterPoint Energy tranches. DESF 2001-1 A6 was also out and talked at plus 30, while a pair of ONCOR tranches were talked at plus 20 and plus 23.
US RMBS started the week particularly strongly, with US$1.3bn in BWIC volume recorded on Monday (SCI 10 September). More than US$800m of that was non-agency supply, with adjustable-rate bonds dominating, including tranches such as SAMI 2006-AR5 4A1 - which was talked in the mid-50s a year after having been in the high-40s - out for the bid.
Barclays Capital analysts note that US CMBS spreads were relatively unchanged last week. Generic 2007 dupers finished the week at swaps plus 120bp, while AJs were down by about half a point.
Close to US$500m of BWIC volume was recorded for the US CLO market, with pre-crisis triple-A and equity tranches prevalent, according to Bank of America Merrill Lynch strategists. Only a small number of tranches were reported to have not traded and CLO 1.0 spreads concluded the week unchanged.
Meanwhile, the European RMBS market saw some peripheral tightening. JPMorgan RMBS analysts note that there was tightening "in the more 'interesting' parts of the market this week, with peripheral spreads grinding inwards across the subset". Italian and Spanish seniors tightened by 10bp to 290bp and 320bp respectively.
Finally, the European CLO market surged towards the end of the week, with Thursday's session proving a busy one. One trader reports that a significant list towards the end of last week and another one planned for today grabbed investor attention (SCI 17 September).
From the Thursday list, the trader points to bonds such as the ZOO IV-X A1B tranche, which was covered in the low-80s. "We were looking at that ZOO tranche in June in the low/mid-70s, with the mid-70s really as an absolute maximum. The DM then was around 700 and now it is more like 400, maybe even less," says the trader.
Deal news
• The Federal Home Loan Bank of Chicago plans to issue securities guaranteed by Ginnie Mae and backed by mortgages originated by member financial institutions. The new conduit product - dubbed MPF Government MBS - is designed to provide mortgage lenders with a new option when creating mortgage products for their home-buying customers.
• The Bush Terminal loan - securitised in GCCFC 2007-GG11 and CGCMT 2008-C7 - has been modified again, after superstorm Sandy devastated the buildings. The loan received a US$190m/US$110m A/B split modification in April 2012 (see SCI's CMBS loan events database).
• Tropic CDO I - a 2003-vintage deal that declared an EOD in January - last month became the first bank Trups CDO to complete a liquidation, underlining recent price rises in the sector. A slew of further Trups CDO liquidations are unlikely, however, given insufficient market value coverage for the notes and the presence of large out-of-the-money interest rate swaps.
• An insolvency event has been declared for Alburn Real Estate Capital (REC 6), after the directors of the issuer determined "it is more likely than not" that the CMBS will be unable to pay its debts as they fall due. A number of other European CMBS deals are now expected to follow suit, with the aim of switching the waterfall to protect class A noteholders.
• Punch Taverns has disclosed that it is continuing its engagement with stakeholders, which now includes the ABI special committee of noteholders and its advisers. This suggests that class A bondholders could be actively involved and thus restructuring negotiations are likely being held on a more constructive basis (SCI passim).
• GCO Education Loan Funding Master Trust II has executed a fifth supplemental indenture, which will permit the series 2006-2 reset rate notes to be remarketed on the initial reset date (10 September) in US dollars in a principal amount not to exceed US$249.51m, with an interest rate not to exceed 65bp over one-month Libor. The notes are currently denominated in Canadian dollars and indexed to CDOR.
Regulatory update
• The concept of a unified conventional TBA deliverable for the GSEs has gained traction recently. Such a move could mark a first step towards unifying the GSEs themselves, which is one of many GSE reform options under discussion.
• Richmond, California city council voted 4-3 on 11 September to continue exploring Mortgage Resolution Partners' (MRP) proposal to use the City's power of eminent domain to seize underwater mortgages (SCI passim). SIFMA responded by stating it continues to believe that the move is unconstitutional and "would do much more harm than good" in the local Richmond community and across the country.
• Wells Fargo and Deutsche Bank's lawsuit, on behalf of bondholders affected by Richmond's eminent domain proposal, was heard in Federal Court on 12 September (SCI 13 August). US District Judge Charles Breyer stated that the request to block the plan was "not ripe".
• The re-proposed US risk retention rules (SCI 29 August) have been welcomed by CMBS market participants for eliminating the premium capture cash reserve account (PCCRA) provision. How risk retention for large loan and single-borrower deals should be satisfied remains unclear, however.
• The Russian government is reviewing a proposed legislative change that would allow banks to securitise a broad range of assets, including SME loans, consumer loans, credit cards and auto loans. The move is viewed as being credit positive for Russian originators.
• The ECB has enhanced the loan-level reporting requirements for RMBS and SME ABS that are used as collateral in Eurosystem monetary policy operations but are unable to satisfy the previously announced implementation timeline. The enhancements aim to ensure a smooth transition to full compliance while ensuring a level playing field between RMBS and SME ABS at different stages of the compliance process.
• The French government is proposing to create a National Credit Registry (NCR) that captures individual consumer loan indebtedness. The creation of such a registry is said to be credit positive for most French auto ABS, consumer ABS and RMBS, as it will improve the ability of lenders to assess borrower affordability.
• A number of CDO issuers - including Phoenix Light SF, Blue Heron Funding and Kleros Preferred Funding V - have filed a lawsuit in New York state court against Credit Suisse in connection with the purchase of over US$362m in RMBS. According to the complaint, the bank made numerous misrepresentations and omissions regarding the quality of loans underlying the RMBS.
• Barclays Bank will pay US$36.1m to settle allegations that it financed, purchased and securitised residential loans that were presumptively unfair under Massachusetts law. Similar actions against Morgan Stanley, Goldman Sachs and RBS have already achieved over US$214m in settlements.
• ISDA has published a DFP2 to EMIR Top Up Agreement, which seeks to allow for EMIR-compliant documentation for parties that have adhered to the Dodd-Frank March Protocol (DFP2) and do not wish to adhere to the EMIR Protocol in addition to this. The document extends DFP2 to cover EMIR compliance 'add-ons'. The association has provided an explanatory memo to assist in the consideration of the Agreement.
• The 2013 ISDA Arbitration Guide has been released, providing the first comprehensive set of ISDA model arbitration provisions for use worldwide. The document offers guidance on the use of an arbitration clause with the 1992 and 2002 versions of the ISDA Master Agreement and includes a range of model arbitration clauses covering a number of institutions and seats of arbitration around the globe.
Deals added to the SCI database last week:
Agate Bay Mortgage Trust 2013-1; Atlas IX Capital series 2013-1; BBCMS 2013-TYSN; Bilkreditt 4; COMM 2013-300P; CSMC Trust 2013-7; DBRR 2013-EZ3; Driver France FCT Compartiment 2013-1; Flexi ABS Trust 2013-2; InSite Wireless Group 2013-1; JPMCC 2013-ALC; Monnet Finance (private placement); Nakama Re series 2013-1; Newcastle Permanent Funding Trust No. 1 series 2013-1R; Progress 2013-1 Trust ; PUMA Series 2013-1; Sequoia Mortgage Trust 2013-11; VOLT 2013-NPL1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2003-1; BACM 2006-2; BACM 2007-2; BACM 2008-1; BSCMS 2006-PW13; CD 2007-CD4; CGCMT 2005-C3; COMM 2003-LNB1; CSFB 2004-C5; DECO 2007-E5; EPC 3; FLTST 3; GCCFC 2007-GG11 & CGCMT 2008-C7; GCCFC 2007-GG9; GMACC 2004-C2; GSMS 2007-GG10; JPMCC 2007-CB20; MLCFC 2007-8; REC 6; TAURS 2006-1; TITN 2007-1; WBCMT 2006-C24; WFRBS 2011-C3
Top stories to come in SCI:
European ABS supply/demand trends
Innovation in the ILS sector