A look at the major activity in structured finance over the past seven days
Pipeline
Additions to the pipeline last week were focused on CMBS and CLOs. In ABS, the €440m E-Carat Compartment No.6 was announced, while Sallie Mae began remarketing the US$1bn SLM 2004-10.
The CMBS joining the pipeline comprised the US$399.5m Annaly 2014-FL1, US$620m DBCCRE 2014-ARCP and US$1.1bn GSMS 2014-GC18. The newly-announced CLOs, meanwhile, consisted of US$411.95m Ares XXIX CLO, €924.7m Atlantes SME No.3, €300m Carlyle Global Market Strategies Euro CLO 2014-1, Harvest VIII and US$518.88m CIFC Funding 2014.
Pricings
The number of deals pricing during the week also picked up. As well as seven ABS deals, one ILS, three RMBS, one CMBS and three CLOs were issued.
The ABS prints comprised: US$1.25bn Capital Auto Receivables Asset Trust 2014-1; US$1.75bn Chase Issuance Trust 2014-1; US$850m Citi Credit Card Issuance Trust 2014-A1; US$800m Discover Card Execution Note Trust 2014-1; US$267.75m DT Auto Owner Trust 2014-1; US$1.577bn Ford Credit Auto Owner Trust 2014-A; and US$994m SLM 2014-1. The ILS new issue was US$200m Vitality Re V Series 2014.
The RMBS pricings were US$750m CAS 2014-C01, US$600m HLSS Servicer Advance Receivables Trust 2014-T1 and US$200m HLSS Servicer Advance Receivables Trust 2014-T2, while the CMBS print was US$535m JPMCC 2014-FBLU. Finally, the US$417m ACIS CLO 2014-3, €413.5m Jubilee CLO XI and US$517m Oaktree CLO 2014-1 rounded out issuance.
Markets
The European RMBS secondary market continued to be supported by strong market technicals last week, according to Bank of America Merrill Lynch analysts. They note: "In core markets, Dutch RMBS started to outperform, as the sector is catching up with UK RMBS. As a result, Dutch RMBS now trade inside UK prime non-master trust RMBS, in contrast to November-December when they were in line with each other. Storm 4.5-year paper is at low-70s versus low-80s in December."
Granite bonds have been grinding tighter, supported by the positive UK housing market. UK non-conforming RMBS spreads continue to contract, with seniors holding steady and mezzanine bonds tightening.
The European CLO secondary market has rallied strongly, as SCI reported on 17 January. Hedge funds have been active in mezz and both bid and offer levels have come in sharply.
The US CLO secondary market, meanwhile, has also been well bid. Wells Fargo CLO analysts note that the credit curve has flattened in 2014.
They add: "Double-A spreads have pushed slightly wider; we believe this may be due to the fact that the triple-A/double-A spread gap had tightened inside of 40bp in late 2013, much lower than the 2013 average gap of 55bp-60bp. Also, the buyer base of double-A is similar to the triple-A buyer base, so the Volcker uncertainty will also affect double-A spreads."
US CMBS secondary spreads tightened slightly last week. Barclays Capital CMBS analysts note that 2007 dupers were unchanged at swaps plus 106bp, while AJs tightened 3bp to swaps plus 849bp.
They add: "The credit curve steepened slightly in the new issue space, with the duper tranche tightening to swaps plus 81bp, while the triple-B minus tranche widened 3bp, to swaps plus 353bp."
US ABS BWIC volume started the week slowly before rising markedly, as SCI reported on 15 January. Auto loan tranches dominated supply on Tuesday, with SCI's PriceABS data showing that offering levels were down slightly.
Deal news
• Results from the US$2.57bn CWCapital CMBS auction are beginning to trickle out. Over 700 potential buyers signed confidentiality agreements in mid-October after the liquidation was announced, with 153 of them eventually lodging bids.
• JC Penney is set to close 33 underperforming stores beginning this year. Nine US CMBS loans have exposure to these properties, the largest of which is the US$115m Centre at Salisbury, securitised in JPMCC 2006-LDP7.
• The Dutch State Treasury Agency completed its second IABF sale on 16 January, with BWIC execution appearing solid. The auction comprised 360 individual securities totalling approximately US$4.27bn current face.
• Punch's restructuring proposal includes a number of modifications from the details outlined in December, including increased PIK coupons on junior notes. The proposal for Punch A is said to represent a transfer of upside in the recovery of the Punch group from the junior bondholders to Punch equity, as a result of the principal write-off in the class B, C and D bonds.
• Fannie Mae's US$750m CAS 2014-C01 transaction is broadly similar to the CAS 2013-C01 issue, but there are some notable differences. Weighted average voluntary prepayments are 41bp lower and cumulative defaults are 3bp higher than in the 2013-C01 transaction.
• FeatherStone Investment Group says it has designed a new class of security that will allow qualified institutional buyers to participate in the equity-like returns of single-family rental securitisations without a long-term capital commitment to the sector. Dubbed a residual tracking tranche (RTT), it is anticipated to have a three- to five-year maturity based on the longest issued debt tranche within a securitisation.
• The issuer and portfolio manager for Harvest CLO V intend to amend the provisions of the portfolio management agreement to replace Paul Carman as a key person with Peter Goody. The trustee has already concurred that the proposed amendments are not materially prejudicial to the interests of any noteholders.
• Hatfield Philips International has agreed the sale of the Margaux portfolio, securitised in the Titan Europe 2006-2 CMBS, for a purchase price of €268m (see SCI's CMBS loan events database). IN-WEST Partners managed the purchase and also co-invested alongside the purchasing institutional investors.
• Sallie Mae has closed a new US$8bn ABCP facility that matures in January 2016. The facility replaces a US$5.5bn conduit that is set to expire in January 2015, with the remainder available for federally guaranteed loan acquisition or refinancing.
Regulatory update
• The US Fed, the FDIC, the OCC, the CFTC and the SEC have approved an interim final rule to permit banking entities to retain interests in certain Trups CDOs under the Volcker rule. The move comes after the American Bankers Association agreed to delay advancing a lawsuit on the issue until 17 January.
• The Loan Syndications and Trading Association, SFIG and SIFMA have submitted a further letter to the US regulatory agencies regarding risk retention as it pertains to CLOs. The associations propose an approach that would create a definition of a 'qualified CLO'.
• The Financial Services Roundtable, the Loan Syndications and Trading Association, SFIG and SIFMA have submitted a letter to the regulatory agencies regarding the definition of 'ownership interest' under the Volcker Rule as it pertains to CLOs. Specifically, the associations request that regulators provide confirmation in a FAQ or other guidance that CLO debt securities that have a contingent right to remove a manager for cause or to vote for a replacement do not constitute an ownership interest.
• The Basel Committee's oversight body, the Group of Governors and Heads of Supervision (GHOS), has endorsed a number of important steps in the completion of the Basel 3 agenda. Although the move entails a dilution of some of the proposed rules, the debate on appropriate capital levels on a risk-weighted and a non-risk based approach is expected to continue.
• The implementation of the US Treasury Market Practices Group's margin practices appears to have met its near-term goal of covering a significant amount of agency MBS trading volumes. However, the broad-based implementation of the guidelines could have an unexpected impact on the structure of counterparty relationships across the Street, as the costs associated with striking a margin agreement with a new counterparty starts to outweigh the incremental liquidity that party might provide.
• The People's Bank of China and the China Banking Regulatory Commission last month jointly updated the 5% risk retention rule on Chinese securitisations. The update expands the types of notes that are part of a securitised transaction that originators must retain beyond just the equity tranches to include potentially 5% or more of all tranches.
• An agreement in principle has been reached by the European Parliament and the European Council on MiFID 2 rules. The rules are designed to close the loopholes in the existing legislation and include proposals to regulate high-frequency trading.
Deals added to the SCI New Issuance database last week:
American Credit Acceptance Receivables Trust 2014-1; COMM 2014-CCRE14; Dryden XXII Senior Loan Fund; FREMF 2014-K714; Santander Drive Auto Receivables Trust 2014-1
Deals added to the SCI CMBS Loan Events database last week:
BACM 2005-3; BACM 2006-4; BACM 2006-5; BACM 2007-3; BACM 2007-4; BACM 2007-4, BACM 2007-5, BACM 2008-1 & MLMT 2008-C1; BSCMS 2004-PWR3; BSCMS 2006-PW11; BSCMS 2007-PW15; CGCMT 2004-C2; CGCMT 2006-C4; COMM 2001-C1; COMM 2005-FL10; CSRELT 2006-A; DECO 2006-C3; DECO 2007-E7; DECO 2013-CSPK; DECO 6-UK2; DECO 7-E2; ECLIP 2005-4; ECLIP 2007-2; EPICP BROD; EPICP MLDN; EURO 25; FOX 1; GCCFC 2004-GG1; GMACC 2004-C2; GSMS 2006-GG6; GSMS 2007-GG10; JPMCC 2006-LDP7; JPMCC 2006-LDP9; MLCFC 2007-8; MLMT 2005-CIP1; MSC 2005-IQ10; MSC 2007-IQ14; MSC 2007-IQ15; MSC 2007-IQ16; OPERA CMH; THEAT 2007-1 & THEAT 2007-2; TITN 2006-5; TITN 2007-1; TITN 2007-2; TMAN 6; WBCMT 2005-C21; WBCMT 2006-C28; WFRBS 2011-C4; WINDM VIII; WINDM X; WINDM XIV
Top stories to come in SCI:
Corporate trust roundtable