A look at the major activity in structured finance over the past seven days
Pipeline
As market participants decamped to Las Vegas last week, only five new deals were added to the pipeline. The transactions consisted of two ABS, an RMBS and two CMBS.
The ABS entering the pipeline were the £164m whole-business Arqiva Financing 2014-1 and €720m auto lease VCL 19 deals. The RMBS was ZAR1.59bn Fox Street 2, while the CMBS were US$1.299bn MSBAM 2014-C14 and US$1.26bn WFRBS 2014-LC14.
Pricings
Similarly, there were just six prints from the week. One ABS, a CLO, an ILS and three CMBS priced.
The ABS new issue was €417.5m E-Carat Compartment No.6, while the CLO was €437.5m Atlantes SME No.3. The CMBS prints comprised US$399.5m Annaly 2014-FL1, US$620m DBCCRE 2014-ARCP and US$1.11bn GSMS 2014-GC18. The US$100m Skyline Re series 2014-1 catastrophe bond rounded issuance out.
Markets
The European RMBS secondary market "paused to catch its breath" last week, according to asset-backed analysts at JPMorgan. Spreads were unchanged after three weeks of relatively sharp tightening, with senior Spanish RMBS spreads remaining at 205bp, the tightest they have been since March 2008.
It was also a quiet week for the European CLO secondary market, with Bank of America Merrill Lynch securitisation analysts reporting that were very few BWICs were seen. "Activity was restricted by the shortened US work week and the IMN ABS Vegas conference," they note.
The US CMBS market, meanwhile, saw BWIC volume start slowly before picking up markedly in mid-week (SCI 23 January). Generic GG10 spreads were largely unchanged at swaps plus 165/163, while SCI's PriceABS data captured cover prices for tranches such as COMM 2006-FL12 C and WFCM 2013-BTC E.
US non-agency RMBS trading was fairly light, Barclays Capital RMBS analysts note. They add: "Cash bonds continued to rally in minimal trading as prices were up half a point across sectors, except for jumbo FRMs. Among ABX indices, 06-2 triple-A rose 0.4 points, but other ABX and PrimeX indices were unchanged. The GSE credit M2 bonds tightened 0bp-4bp, while the M1 bonds were unchanged."
As for US ABS, there was no primary activity after issuers priced deals last week in advance of the IMN conference. "Spreads were unchanged this week as trading activity was light. Last week on the back of strong new issue execution, three- to seven-year triple-A FFELP spreads tightened by 2bp-7bp," JPMorgan analysts observe.
Deal news
• The JPMCC 2011-C5 US$49.7m class A1 notes paid off this month after three loans - the US$26.43m Lehigh Valley Portfolio, US$6.45m Morningstar of Chapel Hill and US$3.55m Morningstar of Virginia Beach - prepaid with yield maintenance. The move is part of a growing trend of CMBS 2.0 loans prepaying with yield maintenance as both commercial real estate prices and Treasury rates rise.
• Seven loans backing the CWCI 2006-C1 deal - totalling US$219m in outstanding balance - have been liquidated, including a couple of properties that were part of the large CWCapital Auction.com sale in December. Unusually, the sales resulted in an equity class loss reimbursement pay-out, which appears not to have been reflected in the January settlements for the CMBX.3 index.
• Fir Tree Partners has commenced a cash tender offer through its affiliate FT RMBS in connection with six RMBS that are subject to the proposed US$4.5bn JPMorgan settlement. The transactions involved are SACO 2006-3, 2006-5, 2006-6 and 2007-2, as well as BSMF 2006-SL1 and JPMAC 2006-WMC4.
• Proceeds from the sale and liquidation of Altius I Funding will be distributed on 28 January. The trustee for the ABS CDO had been directed by at least two-thirds of the aggregate principal amount of the controlling class to sell the collateral, following the occurrence of an EOD (SCI 6 January).
• An auction is to be held for Trainer Wortham First Republic CBO III on 13 February. The collateral shall only be sold if the proceeds are greater than the auction call redemption amount.
Regulatory update
• CREFC Europe and INREV have submitted comments to EIOPA on its technical report on standard formula design and calibration for certain long-term investments (SCI 20 December 2013). The two organisations call for certain CMBS to qualify for 'Type A' capital treatment - by reference to objective, qualitative criteria - and not to condemn all CMBS to 'Type B' treatment.
• The continued normalisation taking place in the US housing market provides scope for mortgage credit to expand from its current tight levels. However, Dodd-Frank ATR/QM requirements pose challenges for credit to expand to pre-crisis levels.
• Three community banks have disclosed negative tax impacts following the finalisation of the Volcker Rule. Cortland Bancorp, for one, has adjusted the carrying values of nine Trups CDO securities that are disallowed under the Volcker Rule to fair value through a non-cash other than temporary impairment (OTTI) charge to earnings for 2013. As of 30 September, the company reported in its consolidated balance sheet that the bonds are now classified as available for sale.
Deals added to the SCI New Issuance database last week:
ACIS CLO 2014-3; Capital Auto Receivables Asset Trust 2014-1; CAS 2014-C01; Chase Issuance Trust 2014-1; Citibank Credit Card Issuance Trust 2014-A1; Discover Card Execution Note Trust 2014-1; DT Auto Owner Trust 2014-1; Ford Credit Auto Owner Trust 2014-A; HLSS Servicer Advance Receivables Trust series 2014-T1; HLSS Servicer Advance Receivables Trust series 2014-T2; Oaktree CLO 2014-1; SLM Student Loan Trust 2014-1
Deals added to the SCI CMBS Loan Events database last week:
BSCMS 2005-PW10; BSCMS 2007-PW15; BSCMS 2007-PWR16; CGCMT 2005-C3; CSFB 2005-C4; CSMC 2006-C5; CWCI 2006-C1; DECO 2005-C1; DECO 2006-E4; DECO 2007-E2; DECO 2007-E5; DECO 2007-E6; DECO 2007-E7; DECO 8-C2; DECO 9-E3; ECLIP 2005-4; ECLIP 2006-1; EPICP BROD; EPICP DRUM; EURO 27; EURO 28; FLTST 2; FLTST 3; GCCFC 2007-GG9; INFIN SOPR; JPMCC 2005-LDP3; JPMCC 2006-CB15; JPMCC 2010-C2; JPMCC 2011-C5; LBUBS 2005-C5; MSC 2011-C2; MSC 2011-C3; OPERA CMH; PROUL 1; TAURS 2006-1; THEAT 2007-1 & THEAT 2007-2; TITN 2007-2; TITN 2007-3; TITN 2007-CT1; TMAN 6; TMAN 7; WBCMT 2007-C34; WFRBS 2013-C14; WINDM VII; WINDM X; WINDM XI; WINDM XIV
Top stories to come in SCI:
Corporate trust roundtable