A look at the major activity in structured finance over the past seven days
Pipeline
The pipeline has begun to grow again as new deals have already been announced to kick off 2014. Last week saw one ABS, one ILS, three RMBS and a CMBS added.
The ABS entrant was ¥25.2bn Driver Japan Three and the ILS was US$200m Vitality Re V Series 2014-1. The RMBS were US$705m CAS 2014-C01, US$300m HLSS Servicer Advance Receivables Trust 2013-T1 and US$200m HLSS Servicer Advance Receivables Trust 2013-T2, while the CMBS was US$535m JPMCC 2014-FBLU.
Pricings
A handful of deals also printed last week. New issuance comprised two ABS and two CMBS.
The ABS new issues were US$204.82m American Credit Acceptance Receivables Trust 2014-1 and US$1.066bn Santander Drive Auto Receivables Trust 2014-1, while the CMBS were US$1.38bn COMM 2014-CCRE14 and US$1.056bn FREMF 2013-K714.
Markets
The European CMBS secondary market has made a positive start to 2014 and spreads are expected to tighten in the coming weeks, as SCI reported on 9 January. "There is still some resistance from the larger asset managers to get involved in the market, but hedge funds as always are active in the yieldier paper and we are seeing small asset managers getting involved," says one trader.
Barclays Capital US CMBS analysts note that spreads have, as expected, tightened in that market in early January. However, the magnitude of spread tightening has been more limited than in previous years. Generic 2007 LCFs are 8bp tighter than last month at swaps plus 106bp, while AMs and AJs from the same vintage are tighter by 30bp-50bp.
The US non-agency RMBS market picked up quickly last week, as SCI reported on 8 January. "The non-agency market has jumped right back to full throttle mode in the first full week of the year," confirm Wells Fargo structured products analysts. Weekly trade volume was US$7.6bn and BWIC volume was around US$2.2bn.
Auto and credit card bonds dominated US ABS secondary supply early in the week (SCI 7 January), but as the week wore on volume was up and spreads narrowed across asset classes. JPMorgan analysts believe robust technicals and fundamentals mean there is room for further tightening.
Deal news
• Separate meetings for all classes of Eurosail-UK 2007-6NC noteholders have been convened on 10 February to consider an extraordinary resolution to approve the sale of the remaining Lehman claims, as well as a restructuring proposal. If successfully implemented, this will be the third restructuring of a UK Lehman RMBS to resolve 'broken swap' issues (SCI passim).
• The Dutch State Treasury Agency has announced its intention to continue a competitive auction process to sell the non-agency RMBS underlying the ING Illiquid Assets Back-up Facility (IABF). BlackRock Solutions will execute the sale of the securities via a competitive auction process through a number of selected broker-dealers.
• An Interactive Data analysis of last month's US$5.1bn IABF sale suggests that the DSTA divested itself of the riskier holdings first. The firm notes that while pre-BWIC dialogue and information-sharing on the sale appeared to be robust, post-trade market colour was limited.
• CMBX.7 is expected to launch on 27 January. While its exact composition is yet to be confirmed, the index is predicted to compare favourably to CMBX.6 in terms of credit enhancement and JC Penney exposure - although credit metrics may point to slipping underwriting standards.
• Cairn Capital North America has been retained to act as liquidation agent for Altius I Funding. The move comes after an EOD occurred last month, following a default in respect of the payment of interest due and payable on the transaction's class A and B notes.
Regulatory update
• SIFMA has submitted a comment letter to the SEC on FINRA's proposed rule change relating to TRACE reporting and dissemination of transactions in additional ABS (SCI 5 November 2013). The association requests that FINRA not implement this proposal and instead engage in further discussion with the industry as to how best to preserve ABS market liquidity and re-propose this proposal after such discussions.
• A unanimous ruling by a four-judge bench of the Supreme Court of the State of New York holds that the six-year statute of limitations on representation and warranty breaches applies to private label securitisations from the date of a deal's closing. If it stands, the move could reduce investor recourse for both legacy and new issue RMBS.
• As part of its efforts to improve transparency in the Indian securitisation market, the Securities and Exchange Board of India (SEBI) has issued a circular requiring reporting and clearing of trades to be implemented by 1 April. Reporting platforms will provide data to include issuer name, ISIN number, face value, maturity date, current coupon, last price reported, last amount reported and last yield reported. Exchanges shall also provide access to offering documents and disclosures.
• The swearing in of Mel Watt as FHFA director on 6 January marked the official end to the DeMarco era. While there is little context for Watt's views on specific issues at this stage, how he re-shapes the agency has significant implications for agency MBS (SCI passim), including increased policy uncertainty.
• JPMorgan last month filed suit in the US District Court of the District of Columbia against the FDIC in connection with the Washington Mutual estate. The bank is seeking to recover payments to the FHFA to repurchase loans sold to the GSEs by WaMu, as well as payments made to private investors under securities law claims on RMBS deals originated by WaMu.
• Smaller US residential mortgage servicers are expected to be challenged by the increased costs of new servicing requirements as they seek to opportunistically grow through strategic acquisitions. The new requirements, issued by the Consumer Financial Protection Bureau (CFPB), became effective on 10 January.
Deals added to the SCI New Issuance database last week:
Access To Loans For Learning Student Loan Corp series 2013-1; ALM X; Auto ABS Swiss Leases 2013; Bankia PYME I; CIT CLO 2013-1; Crusade ABS Series 2013-1 Trust; CVS Lease-Backed Pass-Through Series 2013 Trust; DivCore CLO 2013-1; Highbridge Loan Management 3-2014; IBL CQS 2013; JPMBB 2013-C17; KKR Financial CLO 2013-2; Loma Reinsurance series 2013-1; MidOcean Credit CLO II; Piazza Venezia; Queen City Re series 2013-1; RBS 2013-GSP Trust; Resource Capital Corp CRE Notes 2013; Selkirk No. 1; Selkirk No. 2; SoFi Professional Loan Program 2013-A; Spirit Master Funding VII series 2013-1; Spirit Master Funding VII series 2013-2; Svensk Autofinans WH 1; The Co-operative Bank RMBS Trust series 2013-1; Tradewynd Re series 2013-2; Turbine Engines Securitization series 2013-1; VenTerra Re series 2013-1; Windmill I Re series 2013-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2004-3; BACM 2005-3; BACM 2006-4; BBUBS 2012-TFT; BRUNT 2007-1; BSCMS 2007-PW16; CD 2006-CD2; CD 2007-CD4; COMM 2004-LB3A & GSMS 2004-GG2; CSFB 1999-C1; CSMC 2006-C4; CWCI 2007-C2; DECO 2005-C1; DECO 2006-E4; DECO 2007-C4; DECO 2007-E7; ECLIP 2006-4; EPC 3; EPICP BROD; FLTST 2; FOX 1; GCCFC 2004-GG1; JPMCC 2004-PNC1; JPMCC 2005-CB12; JPMCC 2005-CB13; JPMCC 2005-LDP5; JPMCC 2006-CB15; JPMCC 2006-LDP9; JPMCC 2007-LDPX; JPMCC 2012-CBX; LBUBS 2004-C4; LBUBS 2007-C6; LBUBS 2007-C7; MLCFC 2006-1; MLCFC 2006-4; MLMT 2006-C1; MSC 2006-IQ12; MSDWC 2003-TOP9; OPERA GER2; TITN 2006-1; TITN 2006-2; TITN 2006-3; TITN 2006-5; TITN 2007-1; TITN 2007-CT1; TMAN 6; TMAN 7; WBCMT 2004-C12; WBCMT 2005-C18; WBCMT 2006-C28 & CWCI 2006-C1; WBCMT 2006-C29; WBCMT 2007-C30; WBCMT 2007-C32; WBCMT 2007-C33; WINDM X; WINDM XIV; Wrightwood Capital Real Estate CDO 2005-1
Top stories to come in SCI:
Corporate trust roundtable