A look at the major activity in structured finance over the past seven days
Pipeline
The pipeline has not dried up just yet as new deals were still being announced last week. As well as one new ABS, two ILS, one RMBS, six CMBS and three CLOs were announced.
The ABS was A$500m Crusade ABS Series 2013-1 Trust, while the ILS were US$75m Queen City Re series 2013-1 and US$200m VenTerra Re series 2013-1. The RMBS was RUB4.4118bn TKB-1.
The CMBS were: US$1.1bn COMM 2013-CCRE13; US$297.15m CVS Lease-Backed Pass-Through Series 2013 Trust; US$1.1bn JPMBB 2013-C17; US$330m Spirit Master Funding VII Series 2013-1 and Series 2013-2; and US$1.04bn WFRBS 2013-C18. The CLOs were US$349m Allegro CLO I, Black Diamond CLO 2013-1 and US$400m Highbridge Loan Management 3-2014.
Pricings
In addition, a healthy level of completed issuance was observed last week. Alongside nine ABS prints, three RMBS, four CMBS and two CLOs also priced.
The ABS were: US$750m Chase Issuance Trust 2013-9; US$1.25bn Citibank Credit Card Issuance Trust 2013-A12; US$183m CPS Auto Receivables Trust 2013-D; €500m Elenia Finance; €657m FCT Ginkgo Sales Finance 2013-1; Y40bn KAL Japan ABS 10 Cayman; US$1.041bn Trade Maps 1 Series 2013-1; US$305m Turbine Engines Securitization 2013-1; and US$482.93m Utility Debt Securitization Authority Series 2013T. The RMBS prints were €4.35bn BBVA RMBS 12, €2.614bn Lowland Mortgage Backed Securities 3 and US$154.33m Nationstar Mortgage Loan Trust 2013-A.
The CMBS pricings comprised: US$1.2bn Aventura Mall Trust 2013-AVM; US$295m CGWF 2013-RKWH; US$230.09m Selkirk No.1 2013-1; and US$113m Selkirk No.2 2013-2. Finally, US$306m MCF CLO III and €306m North Westerly CLO IV were issued.
Markets
European ABS secondary activity was heavily dominated by auto tranches towards the end of the week, as SCI reported on 13 December. SCI's PriceABS data recorded a number of auto tranches covered at or around par during Thursday's session, as well as credit card names such as COUK 2004-1 A, which was covered at 99.971.
US ABS spreads are being driven more by broader market concerns, such as tapering, than sector-specific ones. "Secondary spreads on private student loans continue to move to tighter levels, although volumes remain relatively light," say analysts at Bank of America Merrill Lynch. "The demand for higher yielding assets in other credit-sensitive securitised products (e.g. non-agency RMBS and CMBS) should continue to spill over into the off-the-run ABS sectors."
It was a good week for US agency RMBS, according to analysts at Barclays Capital. They note: "Mortgages outperformed significantly this week, with a strong up-in-coupon bias following the strong payroll print. Rates did not move much after the payroll print and significant decline in unemployment rate, which indicated that the market still expects tapering to start in March 2014."
As for US non-agency RMBS, bid-list volume was boosted mid-week by the liquidation of the US$5.1bn ING list (SCI 12 December). Most of the supply consisted of block-sized senior option ARM bonds, although fixed-rate supply was also up.
Tightening was also seen in US CMBS early in the week (SCI 11 December). Tuesday's session contained a range of vintages, from 2004 to 2013, as Tuesday's BWIC volume came in at around US$200m.
In the US CLO market, meanwhile, there was an early boost as a BWIC with over 80 cash CLO/CDO items totalling over US$800m in original face value circulated (SCI 10 December). A lot of price talk was observed on the names, although trading was less frequent.
Deal news
• The US SEC has charged Merrill Lynch with making faulty disclosures about collateral selection for Octans I CDO and Norma CDO I. Merrill Lynch is also accused of maintaining inaccurate books and records for a third CDO and has agreed to pay US$131.8m to settle the charges.
• Residential Capital expects to exit bankruptcy by 24 December, having resolved bondholder objections to its reorganisation plan. RMBS holders will be paid US$672.3m in rep and warranty recoveries as part of the plan. The RMBS trustees need to appoint a financial adviser to allocate this money among the RFC and GMAC trusts, with the recoveries likely to flow to bondholders in 2014.
• The Langton Securities series 2010-1, 2010-2 and 2011-2 RMBS have been restructured. The restructuring involved extending the call dates and margin step-up dates on six rated notes (2010-1 A5 and A9, 2010-2 A3, and 2011-1 A1, A2 and A7) and two unrated notes (2010-1 Z1 and Z2). The margins paid on the cross-currency swaps for the two euro-denominated notes - 2010-2 A3 and 2011-1 A1 - have also been reduced slightly.
Regulatory update
• The US Fed, the FDIC, the OCC, the CFTC and the SEC have issued final rules to implement section 619 of the Dodd-Frank Act, known as the Volcker Rule. While changes from the original proposal have broadly been welcomed by the securitisation industry, some lingering concerns remain.
• The FHFA has directed Freddie Mac and Fannie Mae to raise guarantee fees as part of its ongoing drive to shrink the role of the GSEs in the market. The changes will move the effective annual g-fee for 30-year mortgages to around 62bp and decrease the likelihood of Mel Watt hiking fees when he takes over from Ed DeMarco as FHFA director.
• The US Fed has issued a final rule that makes technical changes to its market risk capital rule to align it with the Basel 3 revised capital framework adopted earlier this year. Technical changes to the rule reflect modifications by the OECD regarding country risk classifications.
• DBRS has issued a comment letter regarding the proposal to incorporate existing Rule 17g-7 under the Securities Exchange Act of 1934 into new rule 17g-7(a)(1)(ii)(N). Current Rule 17g-7 requires each NRSRO to include in any report accompanying an ABS credit rating a description of all the representations, warranties and enforcement mechanisms (RWEMs) available to investors, regardless of what those RWEMs relate to and how they differ from the RWEMs in issuances of similar securities.
• ISDA has proposed a standard initial margin model (SIMM) to facilitate the introduction of final BCBS-IOSCO guidelines in respect of margin requirements for non-centrally cleared derivatives. The association says that a common methodology would have several key benefits to the market, such as permitting timely and transparent dispute resolution and allowing consistent regulatory governance and oversight.
• The Volcker Rule's treatment of ABCP conduits is expected to motivate conduit sponsors to employ full unconditional liquidity coverage and remove an important regulatory risk from the sector. To be exempt from the covered fund definition under the rules, outstanding ABCP must be fully supported and liquidity commitments must be available to fund for the full face amount of all outstanding ABCP without exceptions for asset credit performance.
• Countrywide Financial Corporation has agreed to pay US$500m to investors who allege that they were misled by the company's sale of RMBS from 2005 to 2007. It is the largest RMBS class action settlement in history.
• PNC Bank has reached an agreement in principle with Freddie Mac to resolve substantially all indemnification and repurchase obligations related to loans sold between 2000 and 2008. PNC will pay the GSE US$89m - less credits of US$8m - to resolve existing and future repurchase obligations and to compensate Freddie Mac for losses.
• Newark City Council has formally voted to start legal research towards using eminent domain to seize underwater mortgages. Newark accounts for 268 first lien loans in RMBS trusts that are underwater but current, according to Barclays Capital figures.
Deals added to the SCI New Issuance database last week:
Apidos CLO XVI; Auto ABS German Loans Master; BlueMountain CLO 2013-4; Cars Alliance Auto Loans Germany V series 2013-1; Cathedral Lake CLO 2013 ; CNH Capital Canada Receivables Trust series 2013-2; Figueroa CLO 2013-2; IM BCG RMBS 2; ING IM CLO 2013-3; JFIN Revolver CLO; Nissan Auto Receivables 2013-C Owner Trust; Octagon Investment Partners XVIII; RESIMAC Bastille Trust series 2013-1NC; Richmond Park CLO ; Sound Point CLO IV; VNDO 2013-PENN
Deals added to the SCI CMBS Loan Events database last week:
BACM 2003-1; BACM 2004-2; BACM 2006-3; BACM 2006-6; BSCM 2006-PWR11; BSCMS 2006-T24; BSCMS 2007-PW15; COMM 2007-C9; CSFB 2001-CF2; CSMC 2006-C4; CSMC 2007-C1; DECO 2006-C3; DECO 2007-C4; ECLIP 2006-1; EURO 25; EURO 28; GCCFC 2005-GG3; GCCFC 2007-GG9; GECMC 2007-C1; GMACC 2004-C1; GSMS 2005-GG4; GSMS 2006-GG8; GSMS 2012-GC6; GSMS 2013-GC10; JPMCC 2005-LDP2; JPMCC 2006-LDP9; JPMCC 2007-CB18; JPMCC 2007-LD11; JPMCC 2008-C2; LBUBS 2004-C8; MLCFC 2007-8; MSC 2012-C4; OPERA GER3; OPERA METC; PROMI 2; SBM7 2000-C3; TITN 2006-3; TMAN 5; TMAN 7; WBCMT 2005-C20; WBCMT 2005-C20 & LBUBS 2005-C3; WFRBS 2012-C9
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