A look at the major activity in structured finance over the past seven days
Pipeline
More deals joined the pipeline last week, with each of the asset classes represented. Four new ABS were announced, as well as one ILS, one RMBS, one CMBS and three CLOs.
The ABS entrants comprise: €20m Auto ABS German Lease Master; US$100m China Funding Investment 2013-1; US$169.5m Fan Engine Securitization series 2013-1; and US$334.7m Tobacco Settlement Authority series 2013. The ILS was US$175m Galileo Re series 2013-1 and the RMBS was €1.09bn Lunet RMBS 2013-I.
The £500m Telereal Secured Finance accounted for the CMBS. Meanwhile, the CLOs were US$400m Carlyle Global Market Strategies CLO 2013-4, US$500m CIFC Funding 2013-IV and US$612.1m Octagon XVIII.
Pricings
It was a slightly more unusual week for new issuance, as outside of ABS there was only a single RMBS print. As for the ABS, five US and three European deals priced.
The US ABS prints consisted of: US$291.4m CarFinance Capital Auto Trust 2013-2; US$632m Chrysler Capital Auto Receivables Trust 2013-1; US$300m First National Master Note Trust 2013-2; US$228.52m Flagship Credit Auto Trust 2013-2; and US$250m NAVMT 2013-2.
The European ABS pricings comprised: €550m FTA Santander Consumer Spain Auto 2013-1; €1bn Red & Black Auto Germany 2; and €1.8bn Sunrise 09. Finally, the RMBS new issue was A$350m Pepper Residential Securities Trust No.11.
Markets
The secondary European CLO market was last week focused largely on a bid-list from a continental bad bank, which brought a quantity of double-A rated second-pay paper to the market. The list included Alpstar and Harvest tranches (SCI 18 October).
SCI's PriceABS data shows covers for both ALPST 2X A2 and HARVT II-X B from Wednesday's session, with one trader calculating DMs on the tranches to be under 200. Another significant list is due out today (21 October).
The periphery continued to outperform in European RMBS, meanwhile, with a number of Greek tranches out for the bid early on (SCI 15 October). Price talk continued to trend upwards, as exemplified by bonds such as ESTIA 2 A, which was talked as high as 78-79.
The last-minute resolution ahead of the debt ceiling deadline gave US agency RMBS a boost, according to Barclays Capital RMBS analysts. They say: "MBS did well - tightening about seven ticks on Wednesday and Thursday versus the Treasury curve - as volatility fell, rates rallied to push 10-year yields back below 2.60% and investor sentiment improved. This consolidated up-in-coupon gains from earlier in the week, while lower coupons were able to offset some of their underperformance heading into the debt limit deal."
US non-agency RMBS BWIC volume recovered from the Monday holiday and slow start on Tuesday to reach US$560m on Wednesday (SCI 17 October). ARM and subprime bonds were in focus, with bid-side levels firming up across the ARM sector.
Secondary US CLO activity slowed down during the week, with only around US$250m of BWIC volume, according to Bank of America Merrill Lynch securitised products strategists. The majority of activity took place on Thursday and Friday.
"Close to three-quarters of [last] week's line items came from CLO 2.0 deals, a third of which were triple-A 2.0 tranches and a half of which were equity tranches. Overall, about 37% of [the] week's BWIC volumes were reported to not have traded," they note.
Deal news
• The main obstacle to a restructuring of the Theatre (Hospitals) No. 1 and No. 2 CMBS appears to have been removed. A short-term extension to 15 January 2014 has been agreed to by 50.1% of the class A noteholders in both transactions, to enable ongoing discussions in connection with a long-term solution.
• An event of default has been declared for Victoria Funding (EMC III), in what is believed to be the first instance of balance sheet insolvency for a European CMBS. The move could set a precedent that expedites the resolution of a number of other transactions.
• The controlling party of Titan Europe 2007-2 has replaced Capita Asset Services with Mount Street Loan Solutions as special servicer for seven loans, representing 18.5% of the pool. Capita remains special servicer for the other loans backing the CMBS.
• Indicative information on geography, property type and outstanding loan balance has been disclosed by CBRE in connection with CWCapital Asset Management's forthcoming CRE liquidation (SCI 14 October). The largest exposure is potentially to GSMS 2007-GG10, with US$1.1bn in UPB.
• An auction has been scheduled to occur on 23 October for Birch Real Estate CDO I. The collateral will be sold only if the proceeds are greater than or equal to the auction call redemption amount.
Regulatory update
• Seventeen SEFs were granted CFTC registration by the 2 October go-live date. Liquidity is eventually expected to aggregate around a handful of these platforms, while the others carve out niches in specialist product areas. Given that each SEF has its own detailed rules, pricing structures and application procedures, end-users are being urged to do their homework before signing up.
• A new rule amendment being considered by the FASB, if adopted, is set to change the accounting treatment for TBA dollar rolls. The move could reduce the attractiveness of dollar rolls for some investors and thus lower liquidity in the market.
• In preparation for next week's European Council meeting, the EU Economic and Financial Affairs Council of Ministers (ECOFIN) has considered parameters for the design of SME risk-sharing instruments to be co-financed by the European Commission and the EIB (SCI 28 June). Preparations are being made for the new instruments to be operational by January, at the start of the 2014-2020 programming period for the EU's structural funds initiative.
• The CPSS and IOSCO have published for public comment a consultative document on public quantitative disclosure standards for central counterparties. The document is designed to complement the disclosure framework released by the two organisations last year (SCI 14 December 2012).
• The Russian Ministry of Economic Development recently proposed several amendments to certain articles of the Federal Law 'On Mortgages', as well as the National Tax Code. The proposed amendments are said to be credit positive for future Russian RMBS issuance, as they will reduce interest rates on mortgage loans, improve mortgage loan affordability and increase the frequency with which participants use mortgage insurance products.
• The South African government last month approved the removal of adverse credit information from the public records of borrowers with cured arrears. The move is said to be credit negative for South African RMBS and ABS transactions because it will reduce the amount of information available to originators to assess the creditworthiness of new borrowers and may impede responsible lending and borrowing practices.
• The US CFTC has issued an order against JPMorgan Chase, bringing and settling charges for employing a manipulative device in connection with its trading of certain CDS. JPMorgan admits the CFTC's finding and will pay a US$100m civil monetary penalty.
• DB Structured Products will pay the state of Nevada US$11.5m as part of an agreement to resolve an investigation into its role in purchasing and securitising subprime and Alt-A mortgage loans. DB has also committed to changes in its securitisation practice.
Deals added to the SCI New Issuance database last week:
Ares XXVIII CLO; Calypso Capital II series 2013-1; CAS 2013-C01; German Residential Funding 2013-2; JGWPT XXX series 2013-3; JPMCC 2013-INN; MAD 2013-650M; MSBAM 2013-C12; Pinnacle Series Trust 2013-T1; PMT Loan Trust 2013-J1; West CLO 2013-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-3; BACM 2007-1; BACM 2007-5; BLONN 2006-1; BSCMS 2005-PWR7; BSCMS 2005-T20; BSCMS 2006-PW14; ECLIP 2006-3; EMC 3; EPICP BROD; EPOP ARL2; EURO 25; GCCFC 2006-GG7; GCCFC 2007-GG11; GSMS 2005-GG4; Land Securities Capital Markets; LBCMT 2007-C3; LORDS 2; MLCFC 2006-1; Quality Parking 2007; REC 6; THEAT 2007-1; THEAT 2007-2; TITN 2007-2; WBCMT 2005-C19; WBCMT 2005-C20; WBCMT 2007-C31
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