A look at the major activity in structured finance over the past seven days
Pipeline
Many deals joined the pipeline last week only to price soon afterwards. By the end of Friday, only two new ABS, one RMBS, one CMBS and two CLOs remained.
The ABS were Eagle Credit Card Trust Series 2013-1 and €732m Red & Black Auto Germany 2, while the RMBS was US$500m Springleaf Mortgage Loan Trust 2013-3. The CMBS was US$675m Madison Avenue Trust 2013-650M and the CLOs were US$141m CIFC Funding 2014-I and €340m Grosvenor Place CLO 2013-1.
Pricings
After easing off in the previous week, last week saw the pace of new issuance pick back up. As well as eight ABS prints, six RMBS, one CMBS and six CLOs priced.
The ABS new issues comprised: US$181m Direct Capital Funding V Series 2013-2; US$500m Dryrock Issuance Trust Series 2013-1; £392m E-CARAT 2; €2bn FADE Series 18; C$704.33m Ford Auto Securitization Trust Series 2013-R4; US$330m Grain Spectrum Funding Series 2013-1; C$500m Hollis Receivables Term Trust II 2013-1; and €515m Kimi 2013-1.
The six RMBS prints consisted of: £1.138bn Brass No.3; €4.85bn Dolphin Master Issuer Series 2013-2; A$290m Pinnacle Series Trust 2013-T1; US$507.8m PMT Loan Trust 2013-J1; A$750m Series 2013-2 WST Trust; and A$1.25bn SMHL Series Securitisation Fund 2013-1. As for CMBS, the US$1.2bn COMM 2013-CCRE11 priced.
Finally, the CLO prints were: US$413m BlueMountain CLO 2013-3; US$411m Cent CLO 19; US$414m Galaxy XVI; US$360m Ivy Hill Middle Market Credit Fund VII; US$519m OHA Credit Partners IX; and US$315m Saratoga Investment Corp CLO 2013-1.
Markets
US ABS spreads last week tightened by 2bp-5bp for all consumer sectors except credit cards, according to Wells Fargo ABS analysts. "Consumer ABS spreads remain stuck in a trading range that has prevailed since about mid-June," they say.
Credit card floaters were 2bp-3bp wider, while fixed-rate credit card bonds were unchanged. Investor demand appears strongest for auto paper.
The US CLO secondary market kept up pace with the week before, with close to US$600m of BWIC volume. Bank of America Merrill Lynch securitised products strategists report that the bulk of the activity was concentrated in 1.0 deals, with about 40% of the volume coming from senior triple-A tranches.
US agency RMBS tightened further last week, with lower coupons particularly continuing to outperform Treasury hedges, according to Barclays Capital RMBS analysts. "FN 3.5s-4.5s were up by 4-6 ticks, while 5s increased by almost 9 ticks," they note.
The US non-agency RMBS witnessed solid secondary activity, as SCI reported on 3 October. SCI's PriceABS data recorded a number of tranches from Wednesday's session, with subprime paper attracting price talk in the 60s and 70s.
The US CMBS market was quiet last week, not least because of the partial government shut-down. Spreads were flat and secondary cash volume remained under US$2bn, say Deutsche Bank CRE analysts.
"BWIC volumes subsided from the elevated levels of [the previous week] to US$1.5bn, a third of which came from a Freddie multi-family directed list and overall trading volumes totaled US$6.4bn," they note.
The European CMBS market was also quiet and dominated by talk, as SCI reported on 4 October. One trader reports positive market sentiment, but no significant pick-up in activity predicted until the US debt ceiling is resolved.
He says: "BWICs are still trading at good levels, but they have continued to be driven by the dealers. Clients tend to know which names they are interested in and which they are not, and we have not been seeing a rush from people looking to get involved."
Deal news
• The percentage of US CMBS conduit loans paying off on their balloon date reached 74.5% by balance in September, which is the highest reading since December 2008, says Trepp. It is more than two points higher than the 72.1% reading for August and well above the 12-month moving average of 63.9%.
• EMEA CMBS servicers are set for a busy month, according to Fitch. Of the 37 loans which the agency rates that are maturing in this quarter, 36 fall due in October.
• Another auction has been scheduled for Trainer Wortham First Republic CBO IV, which was previously on the block in July (SCI 3 July). The next auction will take place on 23 October, when the collateral will only be sold if the sale proceeds are greater than or equal to the auction call redemption amount.
• An auction has been slated for Longport Funding II on 21 October. The trustee shall sell the collateral debt securities only if the sale would result in proceeds sufficient to meet the auction call redemption amount.
Regulatory update
• The Reserve Bank of Australia (RBA) has released for consultation draft reporting templates for CMBS and ABS to be eligible for repo. The Australian Securitisation Forum notes that the new information requirements reflect the RBA's desire for more comprehensive information about the securities.
• The working group led by Georges Duponcheele has published two research papers dealing with key aspects of its proposed arbitrage-free approach (AFA) to securitisation capital. They cover the applicability of the AFA and the impact of maturity effects.
• A Federal Court in New York has ruled that the FDIC can proceed with its claims against several major banks in connection with US$388m of RMBS purchased by the now-defunct Colonial Bank (SCI 15 August 2012).
• Changes to credit card and unsecured credit rules in Singapore finalised last month are set to improve the credit quality of securitisation receivables. The changes are expected to improve underwriting standards and the overall quality of obligors, providing securitisation transactions with greater protection against the default of weaker obligors.
• ESMA has published final guidelines on reporting obligations for alternative investment fund managers (AIFMs). Under the guidelines, hedge funds, private equity and real estate funds must regularly report certain information to national supervisors.
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Risk retention ramifications for US CLOs