A look at the major activity in structured finance over the past seven days
Pipeline
The pipeline was busy with deals passing through last week. Three new ABS, three RMBS and two CLOs remained in the pipe by Friday.
The ABS were VCL Master Residual Value Compartment 1 Series 2014-1, VCL Master Residual Value Compartment 1 Series 2014-2 and VCL Master Residual Value Compartment 1 Series 2014-3. The RMBS being marketed were US$373m JPMMT 2014-1, A$500m PUMA 2014-1 and US$1bn STACR 2014-DN1, while the CLOs were US$616.2m GoldenTree VIII and US$403.4m Golub Capital Partners CLO 18.
Pricings
Many transactions were issued last week, several of which had spent little time in the pipeline. Among the prints were eight ABS, an RMBS, two CMBS and three CLOs.
The ABS pricings comprised: US$1bn Ally Master Owner Trust Series 2014-1; £164m Arqiva Financing 2014-1; US$201m Edsouth Indenture No.5 Series 2014-1; US$650m Exeter Automobile Receivables Trust 2014-1; US$1.34bn Hyundai Auto Receivables Trust 2014-A; €690m Kigoi 2013; US$458.5m Nelnet Student Loan Trust 2014-1; and €720m VCL 19.
The RMBS print was £200m EMH Treasury 2014 and the CMBS were US$675m COMM 2014-TWC and US$1.299bn MSBAM 2014-C14. Finally, US$273m ALM V Refinancing 2014-1, US$644m ICG US CLO 2014-1 and US$624m LCM XV rounded the issuance out.
Markets
US ABS BWIC volume reached a monthly high towards the end of January (SCI 28 January). Bid-list volume approached US$500m to start the week, with auto and student loan names driving supply.
Meanwhile, the US agency RMBS market moved wider as the Fed announced it would further reduce its asset purchases. "The week diverged for bonds, as the front half saw a higher and steeper curve, but things reversed with a back half rally and benchmark rates eventually moved net lower as overseas negatives overwhelmed markets with a risk-off tone. MBS spreads were incrementally wider as the Fed tapers further, and we continue to be negative/underweight the basis over the medium term," note Wells Fargo RMBS analysts.
As for US non-agency RMBS, secondary volumes were significantly boosted by a US$1.15bn GSE list on Thursday. "We look for trading activity to remain elevated next week as the Dutch State Treasury Agency looks to sell the remaining securities from its ING portfolio. The US$2.2bn list will contain 234 line items, equally split between fixed and hybrid bonds," Bank of America Merrill Lynch RMBS analysts observe.
US CMBS secondary activity also picked up last week as the market returned to business after the ABS Vegas conference. BWIC volume climbed early in the week, with SCI's PriceABS data displaying a range of vintages out for the bid during Tuesday's session (SCI 29 January).
Both the US and European CLO markets were also busy last week, as SCI reported on 30 January. Wednesday's session was particularly busy, with PriceABS capturing cover prices for US tranches such as ACIS 2013-1A SUB and European ones such as ACAEC 2007-1X D.
Finally, JPMorgan European asset-backed analysts note that the European RMBS market witnessed a slight change in investor behaviour, as there was more focus on Italian risk in the secondary market. "On the week, we move Italian RMBS seniors/juniors in by 5/10bp respectively," they report.
Deal news
• Starwood Capital has confirmed its successful bid for a pool of REO assets in the CWCapital Asset Management CMBS auction (SCI 16 January). These loans are securitised in GSMS 2007-GG10 (with a US$185m exposure), MLCFC 2007-5 (US$106m), WBCMT 2006-C28 (US$22m) and BACM 2007-1 (US$5.5m).
• Last month saw a first for European CMBS, when Hatfield Philips International was replaced with Mount Street as the primary servicer on all loans in Windermere XIV (see SCI's CMBS loan events database). The move is expected to spark increasing investor activism across the sector.
• The Dutch State Treasury Agency has launched its third competitive auction for the securities underlying the ING Illiquid Assets Back-up Facility. The auction will be conducted by BlackRock Solutions and comprises US$2.06bn current face across 234 non-agency RMBS.
• The Chatham/Cerberus joint venture has put the 51-hotel, 6,847-room Innkeepers portfolio up for sale via Eastdil Secured. The asset is being offered unencumbered by management contracts and has a US$950m interest-only loan in place that is assumable, subject to certain conditions.
• Certain employees of RidgeWorth Capital Management are set to acquire the firm and its wholly-owned boutiques from SunTrust Banks, in partnership with Lightyear Capital affiliates. The transaction constitutes an assignment of the collateral management agreements for the Baker Street Funding CLO 2005-1, Baker Street CLO II, Mountain View Funding CLO 2006-1, Mountain View CLO II, Mountain View CLO III and Mountain View CLO 2013-1 deals managed by Seix.
• Following a failure to pay, credit events have been called for the EHE Pool 1A and 2B reference obligations, representing almost 70% of the pool backing the Infinity 2007-1 Soprano CMBS (see SCI's CMBS loan events database). A work-out of the transaction is now expected to be significantly delayed.
• Moody's says it views the risk and required capital reduction from Aetna's medical benefit claims transactions as "quite modest and temporary". The comment comes after the completion of its latest Vitality Re V catastrophe bond - the US$200m five-year series 2014-1.
• Auctions have been scheduled for the Crystal Cove CDO, Margate Funding I CDO and Libertas Preferred Funding I transaction on 14, 18 and 19 February respectively. The collateral shall only be sold if the proceeds are greater than or equal to a deal's total senior redemption amount.
Regulatory update
• The US SEC is to hold an open meeting on 5 February to discuss Regulation AB 2. Specifically, the Commission will consider whether to adopt rules revising the disclosure, reporting and offering process for ABS.
• The European Commission has proposed rules to prevent large banks from engaging in proprietary trading. The rules would also give supervisors the power to require those banks to separate certain potentially risky trading activities from their deposit-taking business if the pursuit of such activities compromises financial stability.
• Jefferies Group has agreed to pay US$25m to settle US criminal and civil probes into RMBS trading abuses. The firm was investigated after former trader Jesse Litvak was charged with RMBS fraud a year ago (SCI 29 January 2013).
• A California-based investment adviser has been sanctioned for engaging in cross trading of RMBS which favoured certain clients over others and for concealing investor losses which resulted from a coding error. Western Asset Management Company has agreed to pay more than US$21m to settle with the US SEC and with the US Department of Labor.
Deals added to the SCI New Issuance database last week:
GSMS 2014-GC18; Jubilee CLO 2014-XI; Skyline Re 2014-1; Vitality Re V series 2014.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-3; BACM 2007-1; CGCMT 2006-C5; CSFB 2005-C1; CSFB 2005-C2; CWCI 2007-C2; DECO 2007-E6; DECO 7-E2; DECO 8-C2; ECLIP 2006-2; ECLIP 2007-1; EMC VI; EPICP BROD; EPICP CULZ; EPICP VRET; FLTST 3; FOX 1; GSMS 2007-GG10; JPMCC 2007-LD11; JPMCC 2007-LDPX; JPMCC 2013-INN & JPMCC 2013-INMZ; LBUBS 2006-C6; MLCFC 2007-5; MLCFC 2007-7; TAURS 2006-1; TITN 2005-CT2; TITN 2006-5; TITN 2007-3; TITN 2007-CT1; TMAN 6; WBCMT 2005-C22; WBCMT 2006-C28; WINDM X; WINDM XI; WINDM XIV.
Top stories to come in SCI:
Corporate trust roundtable