A look at the major activity in structured finance over the past seven days
Pipeline
All securitised asset classes were well represented in the pipeline last week. The new entrants included the first-ever single-family rental securitisation (US$500m Invitation Homes 2013-SFR1) and Freddie Mac's second risk transfer deal (US$245m STACR 2013-DN2). Rounding out the RMBS announced transactions was US$941.1m Citigroup Mortgage Loan Trust 2013-J1.
The CMBS joining the pipeline comprised: US$345m BAMLL 2013-DSNY, US$1.1bn GSMS 2013-GCJ16, US$1.14bn JPMCC 2013-C16 and £185m Unite (USAF) II. In ABS, two auto deals (US$900m AmeriCredit Auto 2013-5 and £378.7m Turbo Finance 4), a credit card deal (€560m Master Credit Cards PASS Compartment France) and one student loan deal (US$746.8m SLMA 2013-6) were announced.
Finally, three CLOs began marketing: €310.75m Avoca Capital CLO X, €180m Euro Galaxy III and US$400m Keuka Park CLO.
Pricings
New issuance was also varied last week. However, ABS was the dominant asset class once again.
Among the auto ABS to price during the week were €736m Auto ABS2 FCT Compartiment 2013-A, US$750m BMW Vehicle Owner Trust 2013-A, US$1bn CarMax Auto Owner Trust 2013-4 and US$688.31m Porsche Innovative Lease Owner Trust 2013-1. Credit card issuance comprised US$700m CCCIT 2013-10 and US$700m CCCIT 2013-11, while an equipment deal (US$92.37m Navitas Equipment Receivables Series 2013-1) and a timeshare deal (US$300m Sierra Timeshare 2013-3 Receivables Funding) also printed.
RMBS pricings consisted of A$322m ConQuest 2013-1 Trust, €1.09bn Lunet RMBS 2013-I, £399m RMS 27 and NZ$67.8m Sapphire V NZ Series 2013-1 Trust. In addition, the €361.55m Grosvenor Place 2013-1, US$516m Benefit Street Partners III and US$410m Flatiron CLO 2013-1 CLOs printed.
Finally, the CMBS new issues comprised US$1.54bn FREMF 2013-KF02 and US$900m WFRBS 2013-C17, with the US$279.25m Global Container Assets 2013 rounding out issuance.
Markets
US non-agency RMBS secondary trading volumes were modest last week, with US$5.4bn in non-investment grade bonds, US$800m in investment grade bonds and US$2.2bn in derivatives trading through Thursday, according to Bank of America Merrill Lynch estimates. Washington Mutual shelves continued to appear on many BWICs and have seen increased turnover - at a sizable premium - since reports of settlements began to surface the previous week.
However, the most substantial price movement last week was seen on GSE risk-sharing transactions. Through Tuesday, Fannie Mae's Connecticut Avenue deal had tightened by 53bp on the M1 tranche and by 120bp on the M2. Similar trends were seen on Freddie Mac's STACR deal as well.
US consumer ABS secondary spreads also tightened last week, by 1bp-10bp. Wells Fargo analysts note that triple-A spreads tightened by 1bp-4bp across various sectors, while spreads on subordinated bonds were 3bp-10bp tighter.
Supply has been light, with roughly US$400m in BWIC activity recorded during the week, compared to average weekly volumes of US$800m for the prior three months. SCI's PriceABS data shows that auto names, credit card bonds and even whole business tranches were well represented.
Meanwhile, the rally in US CMBS continued last week, even as some signs of near-term exhaustion appeared and the possibility of a December taper by the Fed regained some supporter. Most of the spread tightening emerged in the 2.0 and 3.0 markets, with the credit curve on the latter sector continuing to flatten.
"The market in our view remains poised to continue the spread tightening trend over the remainder of the year, but will be challenged in the near term primarily by an increased amount of new issues," Deutsche Bank strategists observe.
Deal news
• The much-anticipated debut single-family rental (SFR) securitisation has hit the market, with the senior tranche carrying triple-A ratings from three rating agencies. The US$479.14m Invitation Homes 2013-SFR1 is secured by the income streams and values from 3,207 leased properties owned by Blackstone subsidiary Invitation Homes.
• The interest shortfall experienced by the Titan Europe 2006-3 class A notes has resulted in a note event of default (see SCI's CMBS loan events database). Class A notes have not previously experienced an interest shortfall in such a large European CMBS.
• Freddie Mac has begun securitising performing HAMP modified mortgage loans held in its mortgage-related investments portfolio under the Modified Fixed Rate PC and Modified Step Rate PC monikers. To be eligible for securitisation, modified loans must be current for at least six consecutive months at issuance of the related PC.
• European CLO 1.0 bonds are generically priced to a 20% CPR scenario, but significant return upside could emerge from higher realised repayment rates. Deleveraging in the sector is anticipated to run well into 2014 and continue to enhance returns for senior and senior mezzanine tranches.
• Three common attributes have been identified among the 67 loans included in the upcoming CWCapital Asset Management auction (SCI 16 October), which could serve as a road map for special servicer behaviour going forward. The loans are primarily REO, securitised in deals with higher losses and of a larger size.
• Rate reduction bonds (RRBs) continue to offer spreads that are comparatively wide for the credit risk they represent. Volumes have declined recently, but the sector still provides a natural home for total return accounts.
• The sale of three assets from the LCP Proudreed CMBS portfolio will result in a £9.17m partial prepayment of the transaction at the November IPD (see SCI's loan events database). This is the latest development in a series of recent actions that suggest the borrower is preparing to refinance the larger of the two loans backing the deal - LCP Real Estate - at its August 2014 maturity.
• Natixis Asset Management is set to propose its appointment as successor collateral manager for Vallauris II CLO. The move follows notice given by the current manager - Natixis - that, in accordance with a letter of resignation dated 24 October, it intends to resign in accordance with clause 9.1 of the collateral management agreement.
• ISDA's EMEA Determinations Committee has ruled that certain Assicurazioni Generali Solvency 2 bonds can be used as reference obligations for the group's sub CDS, thereby solving a deliverable problem at the group. Previous legal guidance indicated that Solvency 2 bonds were not deliverable into sub CDS due to the contingent nature of their maturity date.
• An auction has been scheduled for the Libertas Preferred Funding I CDO on 20 November. The collateral shall only be sold if the proceeds are greater than or equal to the total senior redemption amount.
Regulatory update
• LSTA has urged federal regulators to recognise a category of higher quality leveraged loans that would not attract risk retention, based on the low loss experience on these loans, the robust underwriting process undertaken by CLO managers for the loans they select and the fact that virtually all CLO managers are registered advisors subject to strict federal securities laws. In addition, the association suggests the agencies permit third-party investors to be the sponsor, assuming they hold a significant portion of the CLO's equity and have an active role in the development of the CLO's asset selection criteria.
• CRE Finance Council and SIFMA have submitted comments to federal regulators in response to the re-proposed rulemaking on credit risk retention. The associations express support for many of the changes that have been made to the proposed rules, but believe that further refinement of the rules is required.
• Representative Mel Watt's nomination as FHFA director suffered a setback last week as a motion to bring his nomination to a vote was defeated. Watt is not out of the running completely and several possible outcomes remain.
• ICAP is said to have asked the CFTC to issue formal guidance on Footnote 513 of its swap rules. Some dealers have interpreted the rule to mean that swaps with foreign clients are exempt from the rules, providing the deals are booked through a US bank's overseas affiliates.
Deals added to the SCI database last week:
abc SME Lease Germany Compartment 1; AFG 2013-2 Trust; Ally Auto Receivables Trust 2013-2; Carlyle Global Market Strategies CLO 2013-4; CIFC Funding 2013-IV; COMM 2013-CCRE12; Credico Finance 14; Credit Acceptance Auto Loan Trust 2013-2; Crown Point CLO II; Discover Card Execution Note Trust 2013-5; Discover Card Execution Note Trust 2013-6; Ford Credit Auto Lease Trust 2013-B; Fortress Credit BSL 2013-2; FREMF 2013-K33; FREMF 2013-KGRP; Galileo Re Series 2013-1; GE Equipment Transportation series 2013-2; Golub Capital Partners CLO 17; Honda Auto Receivables Owner Trust 2013-4; JPMBB 2013-C15; KVK CLO 2013-2; Nissan Auto Lease Trust 2013-B; SC Germany Vehicles 2013-1; Silverleaf Finance XVII series 2013-A; THL Credit Wind River 2013-2; World Omni Auto Receivables Trust 2013-B
Deals added to the SCI CMBS Loan Events database last week:
BACM 2004-1; BACM 2007-1 & JPMCC 2007-LDPX; BACM 2007-1, JPMCC 2007-LDPX & GECMC 2007-C1; BSCMS 2007-PWR16; COMM 2013-WWP; DECO 2006-E4; DECO 2007-E6; DECO 2007-E7; DECO 8-C2; DECO 9-E3; EMC IV; EMC VI; GCCFC 2005-GG3; GCCFC 2007-GG9; JPMCC 2005-LDP4; JPMCC 2006-FL2; LBUBS 2004-C4, COMM 2004-LB3 & GSMS 2004-GG2; MLMT 2005-MCP1; TAURS 2006-2; TITN 2006-3; TITN 2007-CT1; TMAN 5; WBCMT 2007-C34; WINDM VIII
Top stories to come in SCI:
European CMBS issuance trends
Single-family rental developments