A look at the major activity in structured finance over the past seven days
Pipeline
The market finally took a breather last week as Thanksgiving arrived. The number of deals joining the pipeline was markedly lower, amounting to three ABS, one RMBS and one CLO.
The ABS entering the pipeline comprised Atlantes Finance 6, €268m Bee First Finance Compartment Edelweiss 2013-1 and €657m FCT Ginkgo Sales Finance 2013-1. The RMBS was A$250m RESIMAC Bastille Trust Series 2013-1NC.
The CLO was the only US deal announced last week. It is the latest offering from Sound Point Capital Management - US$395m Sound Point CLO IV.
Pricings
The number of last week's prints was about half of what had come in the week before. Issuance consisted of five ABS, three RMBS, three CLOs and four CMBS.
The ABS pricings comprised: €196.4m Auto ABS German Loans Master Series 2013-1; US$250m Bavarian Sky Korean Auto Receivables 1; €696.2m Cars Alliance Auto Loans Germany V Series 2013-1; C$465m CNH Capital Canada Receivables Trust 2013-2; and C$264.551m Glacier Credit Card Trust series 2013-1.
The RMBS prints consisted of US$290.91m CSMC Trust 2013-IVR5, €1.3bn IM BCG RMBS 2 FTA and A$150m Sapphire XII Series 2013-1. CLO issuance included US$390.5m Figueroa 2013-2, US$518m ING IM 2013-3 and US$713m Octagon XVIII.
Finally, the CMBS prints were: US$867m CGCMT 2013-GC17; US$1.53bn FREMF 2013-K35; €360m Gallerie 2013; and US$1bn MSBAM 2013-C13.
Markets
While Thanksgiving all but shut down secondary market activity on both sides of the Atlantic, European CLO triple-B paper received a boost last week, as SCI reported on 28 November. Single-A tightening over the last couple of weeks has seen attention shift down to the triple-B level, which one trader believes is a good option for trading gains.
European ABS and RMBS secondary spreads ended the week unchanged on the back of relatively thin flows, according to analysts at JPMorgan. They add: "€68bn of distributed paper has been issued so far in 2013, in line with last year at the same point in time: Australia and the Netherlands account for 26% and 22% of volumes respectively, while the largest asset class is RMBS at 54%, followed by Auto ABS at 24%."
European CMBS activity was also down, but those tranches that were available were generally well bid, report structured products strategists at Bank of America Merrill Lynch. Most notes were from first- or second-pays and were bid at prices in the 90s.
"In general paper continues to be well bid and spreads tightened further [last] week. However, we saw some weakening in the pricing of senior and second-pay notes rated below investment grade, which had been bid up recently to prices in the high-90s. The bid price of the DECO 10 class A2 notes, rated double-B minus by S&P, declined from 95.5 to 95.0 this week," they note.
US CMBS secondary spreads continued to tighten at the start of last week after a long period without changing, as SCI reported on 26 November. A mix of vintages were captured by SCI's PriceABS data during Monday's session, with tranches such as BACM 2007-2 AM and BACM 2008-1 AM covered at 124 and 170 respectively.
Deal news
• Eurosail-UK 2007-5NP bondholders last week duly passed the extraordinary resolutions relating to the proposed restructuring of the £662m RMBS and the issuer is set to implement the first stage of the process (SCI 6 November). The transaction is the second UK Lehman RMBS deal to be restructured to resolve 'broken swap' issues, but the first to have required bondholder meetings to vote on the proposals.
• Malaysia Building Society Berhad (MBSB) is in the market with the debut issuance under a new RM3bn structured covered sukuk commodity murabahah programme. Dubbed Tranche 1 Structured Covered Sukuk, the RM495m transaction is notable for being supported by a portfolio of securitised assets.
• Punch's latest financial results raise the probability of the group removing its support of its securitisations as another round of restructuring proposals begins next month. Without an agreement on the restructuring, a borrower event of default in Punch A and B would follow.
• Fitch last week reissued a presale report on MSBAM 2013-C13, following the removal of the Chicago Mixed Use Portfolio loan from the pool. The asset was previously the ninth largest loan backing the CMBS.
• S&P has placed its respective double-B minus and single-B plus ratings on the US$100m Queen Street II Capital and US$150m Queen Street III Capital ILS on credit watch with negative implications. The move follows principal losses caused by the liquidation of the MEAG Queen Street II and MEAG Queen Street III funds due to investment eligibility events.
• The recently priced US$614.5m Venture XV CLO is notable for the fact that the equity was preplaced. Lead manager and co-placement agent StormHarbour Securities also arranged a warehouse line (including warehouse equity) for the deal, thereby allowing the manager - MJX Asset Management - an extended period of time to ramp the portfolio.
• Auctions for three CDOs - Trainer Wortham First Republic CBO V, Kleros Preferred Funding and Libertas Preferred Funding I - have been scheduled for 19 December. This follows an auction scheduled for the Pinetree CDO on 18 December. The securities will only be sold if the proceeds are greater than or equal to the senior redemption amount.
Regulatory update
• Global regulatory initiatives are fostering bank disintermediation in the securitisation market. But creeping oversight of the shadow banking system could also further reduce the availability of credit.
• The Bank of England's Financial Policy Committee (FPC) signalled its support of the securitisation market in its latest Financial Stability Report. The committee says it intends to "assess and, where necessary, act to develop approaches to promote a better functioning securitisation market in the UK".
• Credit Suisse's former global head of structured credit, Kareem Serageldin, has been sentenced to 30 months in prison for his part in hiding more than US$100m in losses in an MBS trading book at the bank (SCI 20 February 2008). The bonds included subprime RMBS and CMBS.
• The CFTC has issued a time-limited no-action letter that provides relief to swap dealers (SDs) registered with the CFTC that are established under the laws of jurisdictions other than the US from certain transaction-level requirements under the Commodity Exchange Act. The no-action relief lasts until 14 January.
• The new ability-to-repay (ATR) rule and qualified mortgage standards under the US Truth in Lending Act could mean that tight access to mortgage credit will continue. Beginning with loan applications accepted on 10 January 2014, the rule will require loan originators to make a reasonable, good faith determination of a borrower's ability to repay a loan. It also creates liabilities for originators and assignees of any loans covered by the rule if the originator fails to originate loans meeting the ATR standards.
Deals added to the SCI New Issuance database last week:
ALM VIII; AMMC CLO XIII; Auto ABS DFP Master Compartment Germany 2013; Babson CLO 2013-II; Capital Auto Receivables Asset Trust 2013-4; Cavalry CLO III; CGCMT 2013-GC17; Driver UK Master - Compartment 2; Dryden 29 Euro CLO 2013; Education Loan Asset-Backed Trust I series 2013-1; Fastnet Securities 9; Ford Credit Auto Owner Trust 2013-D; FTA PYMES Santander 7; Gallatin CLO VI 2013-2; Gallerie 2013; Globaldrive Auto Receivables 2013-A; Gracechurch Card Programme Funding Series 2013-1; Gracechurch Card Programme Funding Series 2013-2; Gracechurch Card Programme Funding Series 2013-3; Hertz Fleet Lease Funding Series 2013-3; Hilton USA Trust 2013-HLT; HLSS Servicer Advance Receivables Trust series 2013-T7; Master Credit Cards Pass Compartment France; Mercedes-Benz Auto Lease Trust 2013-B; MSBAM 2013-C13; OZLM Funding V; Precise Mortgage Funding No. 1; Private Driver Espana 2013-1 FTA; PYMES Santander 6; Sapphire XII 2013-1 Trust; Venture XV CLO; Welk Resorts 2013-A; WFRBS 2013-UBS1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-1; BSCMS 2006-PW13; CSMC 2006-TF2A; DECO 2006-C3; DECO 2007-E7; DECO 7-E2; ECLIP 2006-1; ECLIP 2006-3; ECLIP 2007-2; GMAC 2004-C2; GSMS 2006-GG6; GSMS 2007-GG10; JPMCC 2006-CB16; LORDS 2; MSC 2007-HQ11; MSCI 2006-IQ12; TAURS 2007-1; TITN 2006-3; TITN 2007-3; TITN 2007-CT1; TMAN 6; WBCMT 2007-C30; WBCMT 2007-C31; WBCMT 2007-C33
Top stories to come in SCI:
European CMBS resolution expectations
Developments in solar ABS