A look at the major activity in structured finance over the past seven days
Pipeline
The number of deals joining the pipeline slowed a little last week, although there was still a good variety. Three new ABS were announced along with an ILS, two RMBS and two CMBS.
The ABS were C$704m Ford Auto Securitization Trust series 2013-R4, RUB10bn HC Finance and Hollis Receivables Term Trust II 2013-1. The ILS was €200m Calypso Capital II.
The RMBS were Brass No.3 and Genesis Trust II Series 2013-1, while the CMBS were US$1.2bn COMM 2013-CCRE11 and US$575m JPMCC 2013-INN.
Pricings
The pace of issuance also eased off last week. As well as seven ABS there was one RMBS (€1.37bn Castilho Mortgages), one CMBS (US$1bn COMM 2013-LC13) and one CLO (US$592.174m Ableco Capital).
The ABS were: US$350m Ally Master Owner Trust Series 2013-3; US$775m Chase Issuance Trust 2013-7; US$205m CPS Auto Receivables Trust 2013-C; US$636.2m Emerald Aviation Finance Series 2013-1; US$399m Nelnet Student Loan Trust 2013-5; A$500m SMART ABS Series 2013-3; and €133m VCL Master Compartment 1 Series 2013-2.
Markets
Secondary market activity was slow but steady last week for European ABS and RMBS, as SCI reported on Friday (SCI 27 September). The absence of strong positive or negative drivers has contributed to a calm market, with SCI's PriceABS data showing auto paper out for the bid in the middle of the week.
The mortgage basis continued to tighten for US agency RMBS in the fallout from the Fed's decision not to taper, according to Barclays Capital analysts. Rates also rallied, with 10-years moving 35bp below the 3.0% high reached three weeks ago.
"Mortgages outperformed versus Treasury-hedged, with the middle of the stack faring best. FN 4s outperformed by eight ticks while 3s and 3.5s were up by four and six ticks, respectively. 15-year collateral also tightened, with a down-in-coupon bias," the analysts comment.
Bonds in the US non-agency RMBS market also traded well, according to Bank of America Merrill Lynch securitised products strategists. Trading volumes dipped as odd-lot and smaller sized bid-lists predominated. "One of the more notable lists consisted of 29 line items of higher dollar priced bonds with a current face of US$150m which traded on Wednesday," the analysts comment.
The US CLO market witnessed good variety, as SCI reported (SCI 26 September). Wednesday's session mainly comprised paper from 2006 and 2007, but PriceABS also recorded tranches from vintages as distant as 2003 and 2013.
Deal news
• Performance has been weak for European CMBS loans secured by German retail properties. A Barclays Capital analysis of 69 securitised loans predicts total principal losses of €1.4bn for the affected deals, with an average loss severity of 26%.
• Greystone has closed a CMBS transaction for US$38.75m on behalf of a suburban Cleveland-based multifamily property owner. The loan has a 10-year term, with only three years of interest at a rate of 2.35% over ten-year swaps.
• Declaration Management & Research is set to transfer the asset management responsibilities for the Independence II CDO to Cairn Capital. The replacement is expected to become effective on 30 September.
• The September session of the US$8.5bn Countrywide settlement hearing has ended, without a conclusion. The objectors' one remaining witness - Georgetown law professor Adam Levitin - is now scheduled to provide his testimony on 14-15 November, after which both sides will offer their closing arguments.
• Jefferies has acted as sole arranger and joint lead manager of a €400m structured financing for the Export-Import Bank of Hungary. Dubbed MAEXIM Secured Funding, the transaction represents the first time the World Bank's Multilateral Investment Guarantee Agency (MIGA) has guaranteed a bond with non-honouring of sovereign financial obligation coverage.
• Iron Hound Management Co has completed over US$400m in CMBS loan modifications and refinancing on two New York-based properties, following its recent expansion into loan debt and equity placements. The transactions involved are COMM 2006-C8, GCCFC 2007-GG11 and CGCMT 2008-C7 (see SCI's loan events database).
• A modification template has been released for the US$284m GSA Portfolio loan, securitised in JPMCC 2007-LD11. The loan transferred to special servicing in May 2012 after failing to pay off at its scheduled maturity date (see SCI's CMBS loan events database).
• US$480m of US CMBS assets are slated for sale on Auction.com next month. The assets include two properties behind the US$123m Southern California Portfolio loan, securitised in GCCFC 2007-GG9.
Regulatory update
• Speculation is growing that the Australian Prudential Regulation Authority (APRA) might allow securitisation through master trusts. Such a move could transform the Australian RMBS market and open up new asset classes.
• The US District Court for the Southern District of New York has allowed the US Department of Justice to proceed with its civil mortgage fraud lawsuit against Wells Fargo in connection with the bank's participation in the FHA's Direct Endorsement Lender Program. DOJ filed its complaint in October 2012, accusing Wells Fargo of falsely certifying to the US Department of Housing and Urban Development that more than 100,000 loans were eligible for FHA insurance when in fact the bank was engaging in reckless origination and underwriting of the loans.
• Proposed changes to retention rules could reduce issuers' advance rates in securitisation and limit their options to sell the equity stake or move down the risk spectrum in student loan ABS deals, Fitch suggests. State issuers would be exempted from the rules, however.
• The US Fed has issued two interim final rules that clarify how companies should incorporate the Basel 3 regulatory capital reforms into their capital and business projections during the next cycle of capital plan submissions and stress tests. The horizon for the next capital planning and stress-testing cycle runs from 4Q13 to 4Q15, thereby overlapping with the implementation of Basel 3.
• The NCUA has filed lawsuits against Morgan Stanley and eight other institutions over the sale of nearly US$2.4bn in RMBS to Southwest and Members United corporate credit unions. As with similar suits filed by the agency (SCI passim), it alleges that the securities were faulty and led to the two credit unions collapsing.
• ISDA and Markit have launched the ISDA Cross-Border Swaps Representation Letter on ISDA Amend. The document allows market participants to provide counterparties with the representations for US person status needed to determine whether compliance with various swap regulations is required by the CFTC's Interpretive Guidance.
• US District Judge Charles Breyer last week dismissed the preliminary injunction lawsuit that Wells Fargo and Deutsche Bank filed against Richmond, California, having previously ruled that it was "not ripe" (SCI 13 September). The judge reportedly decided to dismiss the suit altogether rather than pause court proceedings because the trustees' claims depend on "future events that may never occur".
• The ECB is to introduce loan-level reporting requirements for credit card ABS, when these are used as collateral in the Eurosystem's monetary policy operations. The provision of loan-level information for these instruments will be mandatory from 1 April 2014, with a nine-month phasing-in period.
Deals added to the SCI database last week:
American Express Issuance Trust II Series 2013-2; Apidos CLO XV; Boca Hotel Portfolio Trust 2013-BOCA; BXG Receivables Note Trust 2013-A; Carlyle Global Market Strategies Euro CLO 2013-2; CGCMT 2013-GC15; Citibank Credit Card Issuance Trust 2013-A7; Citibank Credit Card Issuance Trust 2013-A8; Citibank Credit Card Issuance Trust 2013-A9; Dong Fang Container Finance (SPV) series 2013-1; DT Auto Owner Trust 2013-2 ; FREMF 2013-K32; GE Equipment Midticket series 2013-1; Golden Credit Card Trust series 2013-2; Kingsland VI; LEAF Receivables Funding 9 series 2013-1 ; Northwoods Capital X; OCP CLO 2013-4; SCG 2013-CWP Hotel Issuer ; SLM Private Education Loan Trust 2013-C; Symphony CLO XII ; VCL 18; VFC 2013-1; Westlake Automobile Receivables Trust 2013-1; WFRBS 2013-C16; WhiteHorse VII
Deals added to the SCI CMBS Loan Events database last week:
BACM 07-2, BSCMS 07-PW16, MSC 07-IQ14 & 07-HQ12, WBCMT 07-C31 & 07-C32; BAMLL 2012-CLRN; BSCMS 07-PW17, BSCMS 07-PW18 & MLMT 07-C1; BSCMS 2005-PWR9; CD 2006-CD2; COMM 2006-C7; CSFB 2003-C4; CSMC 2006-C4; CSMC 2006-C5; DECO 2005-C1; DECO 2007-E5; ECLIP 2006-1; ECLIP 2007-2; GCCFC 2007-GG9; JPMCC 2005-LDP1; JPMCC 2005-LDP4; JPMCC 2007-CB19; JPMCC 2007-LD11; JPMCC 2008-C2; LBUBS 2004-C7; LBUBS 2007-C1; LBUBS 2007-C6; LBUBS 2007-C7; MALLF 1; MLCFC 2006-2; MLMT 2005-MKB2; MSC 2005-IQ9; MSC 2007-IQ16; OPERA GER3; TITN 2007-2; TMAN 5; WINDM VIII
Top stories to come in SCI:
Risk retention ramifications for US CLOs
Consequences of the Fed's 'no taper' announcement