A look at the major activity in structured finance over the past seven days
Pipeline
The pace of deals joining the pipeline continued to quicken last week. At the close of Friday, four new ABS, one CMBS and five CLOs had been added.
The newly-announced ABS comprised: US$1bn Fifth Third Auto Trust 2014-1, US$231m JGWPT 2014-1, Manchester Airport Group Funding and US$1bn Nissan Auto Receivables 2014-1 Owner Trust. The CMBS entrant was US$1bn COMM 2014-CCRE15.
As for the CLOs, those consisted of: US$416.75m Halcyon Loan Advisors Funding 2014-1; US$400m JFIN 2014-1; US$375.7m OFSI Fund VI; €726.7m Quadrivio SME 2014; and St Paul's CLO IV.
Pricings
A number of deals priced during the week. All told, six ABS, two RMBS, two CMBS and three CLOs printed.
The ABS new issues were: US$622m Avis Budget Series 2014-1; US$1.75bn Bank of America Credit Card Trust 2014-A1; US$950m Capital One Multi-asset Execution Trust 2014-A1; US$935m CarMax Auto Owner Trust 2014-1; US$500m PFS Financing Corp Series 2014-A; and US$1.5bn VWALT 2014-A.
The RMBS prints comprised A$1.4bn PUMA 2014-1 and US$1bn STACR 2014-DN1, while the CMBS were US$1.255bn FREMF 2014-K36 and US$1.26bn WFRBS 2014-LC14. Lastly, US$623m CIFC 2014, US$413m ING IM CLO 2014-1 and US$746m Madison Park Funding XIII priced.
Markets
A slowdown in European CMBS supply sparked the return of OWICs last week, as SCI reported on 7 February. When BWICs have circulated, they have been well received and traded at good levels, according to one trader.
"There was a guy who put out an OWIC and we heard he had a couple of bonds that he got offers on. I am really not sure that is the way to go though, because once people know the demand is there, they will trade up," says the trader.
Meanwhile, the US CMBS market remained busy, as SCI reported on 6 February. BWIC volume reached around US$450m on Wednesday, with SCI's PriceABS data capturing price talk or cover prices on 70 unique tranches.
US non-agency RMBS BWIC volume was also strong (SCI 4 February). In the agency RMBS market, the 10-year ultimately finished a few basis points higher week-over-week, according to Wells Fargo structured product analysts.
They add: "MBS volume was on the lighter side to start out, but eventually ramped up heading into the jobs report and mortgages largely outperformed hedges for the week. The latest speeds hit on Thursday and CPRs were significantly lower percentage-wise month over month, dropping 20% in conventional 30-years."
US ABS BWIC supply was largely driven by auto names early on in the week, although aircraft, credit card, equipment and student loan tranches were also circulating (SCI 5 February). The AESOP 2011-2A A bond was out for the bid on Tuesday, for instance, when it was covered at 37.
In the US CLO market, strong trading levels were seen for 1.0 triple-As and 2.0 equities, but interest in longer-duration mezzanine tranches appears to have weakened. "An increased number of line items ended up not trading as sellers' reserve levels were not met. Overall, triple-A spreads moved in by 5bp, while 2.0 spreads moved out by 5bp at the double-A level and by 10bp from triple-B down to single-B," note Bank of America Merrill Lynch securitised products strategists.
Deal news
• In a move that surprised the market, Aircastle is set to prepay the senior notes of the ACST 2006-1 aircraft ABS on 18 February. The ACST 2007-1 G1 securities rallied as a result, rising from the low- to mid-90s to the mid- to high-90s.
• Freddie Mac has priced its first risk-sharing transaction of the year. The US$1.1bn STACR 2014-DN1 notes transfer more risk by selling higher into the capital structure compared to the 2013 transactions.
• Fir Tree Partners has amended certain terms of its cash tender offer for six RMBS that are subject to the proposed US$4.5bn JPMorgan settlement (SCI 23 January). Importantly, the offer now includes on a trust-by-trust basis a minimum aggregate principal balance of securities required to be tendered.
• Noteholders of another UK RMBS - ESAIL 2007-PR1 - have directed the trustee to execute the sale if remaining Lehman claims via an auction. The auction was completed on 28 January and the issuer agreed to transfer all of its rights related to the remaining claims for US$22.68m.
Regulatory update
• The US House Committee on Financial Services held a hearing last week on the potential ramifications of the Volcker Rule for the US economy and capital markets. Much of the discussion centred on CLOs and a working group has been formed to examine the impact of the rule on the sector.
• The International Valuation Standards Council (IVSC) is establishing a cross-industry taskforce to develop principles of best practice for the valuation of financial instruments. The move has been welcomed as a step towards increasing transparency and reducing variation in values.
• The US SEC has decided to delay the vote on Regulation AB 2, which had been planned for its 5 February open meeting. It is expected to be a temporary postponement and a separate notice will be issued when the item is rescheduled for Commission consideration.
• While the US$8.5bn rep and warranty settlement between Bank of America and Bank of New York on 530 Countrywide RMBS trusts has been approved by Justice Barbara Kapnick, releases on certain modification related claims have been excluded as Bank of New York was found to have acted unreasonably in its role as trustee. The ruling could delay cashflow payments to bondholders.
• The Canadian Securities Administrators (CSA) has published for comment proposed amendments relating to the short-term debt prospectus exemption in its 'National Instrument 45-106 Prospectus and Registration Exemptions' rule. The proposals include: a new prospectus exemption designed to address the prospectus-exempt distribution of short-term securitised products, primarily ABCP; and amendments to the short-term debt prospectus exemption to address the prospectus-exempt distribution of short-term debt, typically corporate CP.
• Morgan Stanley has agreed to settle RMBS claims brought by the FHFA for US$1.25bn. The company will also record an addition to legal reserves of US$150m, reducing income by US$97m after tax.
• The recently expired tax relief provided by the Mortgage Forgiveness Debt Relief Act may lead to modestly negative pressure on liquidation timelines and recoveries for legacy US RMBS if it is not renewed. The tax relief expired on 1 January, creating larger tax burdens for underwater borrowers who receive some form of mortgage debt forgiveness.
Deals added to the SCI New Issuance database last week:
Ally Master Owner Trust Series 2014-1; ALM V Refinancing 2014-1; Annaly 2014-FL1; Atlantes SME No. 3; COMM 2014-TWC; DBCCRE 2014-ARCP; E-CARAT Compartment 6; Edsouth Indenture No. 5 Series 2014-1; EMH Treasury; Exeter Automobile Receivables Trust 2014-1; Hyundai Auto Receivables Trust 2014-A; ICG US CLO 2014-1; JPMCC 2014-FBLU; Kigoi 2013; LCM XV ; MSBAM 2014-C14; Nelnet Student Loan Trust 2014-1; PUMA series 2014-1; STACR 2014-DN1; VCL 19
Deals added to the SCI CMBS Loan Events database last week:
BACM 2007-5; CD 2007-CD4; CGCMT 2008-C7; COMM 2005-C6; COMM 2005-FL10; COMM 2013-CCRE10; CSFB 2004-C1; CSFB 2004-C3; CWCI 2006-C1; DECO 2006-C3; DECO 2007-E5; ECLIP 2006-1; ECLIP 2006-3; EPICP CULZ; EXCAL 2008-1; GSMS 2005-GG4; GSMS 2007-GG10; JPMCC 2005-CB11; JPMCC 2005-LDP2; JPMCC 2005-LDP5; JPMCC 2007-LD11; JPMCC 2007-LDPX; LBCMT 2007-C3; LBUBS 2006-C4; LBUBS 2006-C6; LBUBS 2007-C7; MLCFC 2006-1; MLCFC 2006-4; MLMT 2004-BPC1; MSC 2006-HQ9; MSC 2007-IQ16; OPERA CMH; TAURS 2006-1; TITN 2007-1; TITN 2007-3; TITN 2007-CT1; TMAN 5; WBCMT 2003-C7; WBCMT 2006-C28; WBCMT 2007-C32; WBCMT 2007-C33; WINDM X; WINDM XII; WINDM XIV
Top stories to come in SCI:
Corporate trust roundtable