A look at the major activity in structured finance over the past seven days
Pipeline
Last week saw a healthy mix of deals added to the pipeline. Three new ABS, two ILS, an RMBS, two CMBS and two CLOs were announced.
The ABS comprised US$515.6m Castlelake Aircraft Securitization Trust 2014-1, Driver China One and US$241m TAL Advantage V series 2014-1. The ILS were US$200m Kizuna Re II and Queen Street IX.
The newly-announced RMBS was RUB2.5bn Mortgage Agent APB 2, while the CMBS were US$186.8m CSMC Trust 2014-SURF and US$957.6m JPMBB 2014-C18. Meanwhile, US$400m Mountain Hawk III and US$500m Venture XVI round out the transactions currently being marketed.
Pricings
It was also a busy week for issuance. There were nine ABS prints, as well as an RMBS, a CMBS, a whole business securitisation and four CLOs.
The ABS pricings comprised: US$1.023bn CNH Equipment Trust 2014-A; US$801.2m Enterprise Fleet Financing Series 2014-1; US$1.25bn Fifth Third Auto Trust 2014-1; US$1.15bn Ford Credit Floorplan Master Owner Trust 2014-1; US$418m Ford Credit Floorplan Master Owner Trust 2014-2; US$234m JGWPT 2014-1; US$1bn Nissan Auto Receivables 2014-1 Owner Trust; £175m Scot Roads Partnership Finance; and US$450m World Financial Network Credit Card Master Note Trust Series 2014-A.
The RMBS print was A$2.5bn Medallion Trust Series 2014-1, the CMBS was US$1bn COMM 2014-CCRE15 and the WBS was £450m Manchester Airport Group Funding. Finally, the CLO new issues consisted of: US$572m Neuberger Berman CLO XVI; US$400m OFSI Fund VI; €726.7m Quadrivio SME 2014; and US$278m Tennenbaum Senior Loan 2014-1.
Markets
The European ABS market last week witnessed the partial distribution of two previously retained Italian deals - Alba 5 and SIENA 2010-7, the former at a DM of 110bp. "After a two-week hiatus, ABS secondary spreads resumed their grind tighter, with the majority of asset classes closing the week inside [the previous] week's levels. Once again, the yieldier end of the range benefited from the largest contraction in spreads," note JPMorgan ABS analysts.
US ABS BWIC volume surged in midweek to US$241m after a quiet start, as SCI reported on 13 February. SCI's PriceABS data shows supply concentrated in credit card and auto bonds, with aircraft, container and equipment ABS rounding out supply for Wednesday's session.
The US non-agency RMBS secondary market saw BWIC supply of about US$1.5bn. Wells Fargo RMBS analysts note: "The non-agency market was quieter this week, with no new deals coming to market or no large bid-lists for the market to digest. Nevertheless, trading activity remained robust."
Meanwhile, US CMBS spreads recovered well from their January wides as concerns about contagion from emerging markets have dissipated, according to Barclays Capital analysts. They add: "New issue dupers, which had drifted as wide as swaps plus 95bp, have now compressed back to swaps plus 90bp. There has been strong demand lower down the capital structure: 3.0 triple-Bs have climbed back to swaps plus 370bp, about 20bp tighter than end of January."
Deal news
• The February remit for GSMS 2007-GG10 shows that 16 CMBS loans totalling US$592.6m were liquidated in the CWCapital auction at a weighted average loss severity of 51.3%. While this outcome is better than expected, the sale appears to have been barbelled, with some properties not commanding as high a price as the last appraisal value would suggest.
• BACM 2007-2 has become the first CMBS containing a pari passu part of the US$1.3bn Beacon Seattle & DC Portfolio loan to report a pay-down this month. The move follows the recent sale of the Plaza Center & US Bank Plaza buildings for US$186.5m (see SCI's CMBS loan events database).
• The February remit report for BACM 2008-1 shows that proceeds from the sale of a property identified as part of the CWCapital auction have been applied to the CMBS trust. Overall a total of US$76.2m of principal proceeds was received for the transaction, resulting in the full pay-off of the A2 class and a US$52.4m payment to the A3s, reducing the balance to US$22.6m.
• Restructurings are progressing, at different stages, for three UK Lehman RMBS: ESAIL 2007-PR1, ESAIL 2007-6NC and MARS 4. First, restructuring proposals have been implemented for ESAIL 2007-PR1 (SCI 5 February), with an aggregate amount of US$64.87m of proceeds converted into an amount of £39.78m.
• S&P has respectively lowered to double-C from double-B minus and single-B plus its ratings on the US$100m Queen Street II Capital and the US$150m Queen Street III Capital catastrophe bonds. At the same time, the agency removed the ratings from credit watch, where they were placed with negative implications in November (SCI 25 November 2013).
• A challenge brought by a junior noteholder in five Trups CDOs regarding the trustee's interpretation of the transactions' payment mechanics has been transferred from a Minneapolis district court to the US District Court for the Southern District of New York (SCI 16 December 2013). The action - involving Tropic CDO I, II, III and IV and Soloso CDO 2005-1 and 2007-1 - has also been consolidated into a single proceeding.
• Fir Tree Partners has terminated its cash tender offer for six RMBS (SCI passim). All of the trusts that were subject to the offer are involved in active litigations against JPMorgan for breaches of representations and warranties.
• An estimated US$465m of delinquent CMBS loans are due for sale via Auction.com next month. JPMCC 2007-LDPX (serviced by C-III) has the largest exposure to the sale, according to Barclays Capital figures, with US$136m of assets out for the bid.
• IIG Trade Finance has completed an innovative securitisation of non-bank Latin America-based trade finance loans. Dubbed Trade Finance Funding I, the US$220m CLO was structured, arranged and placed by Deutsche Bank and will be managed by The International Investment Group.
• An auction has been scheduled for RFC CDO II, an ABS CDO, on 3 March. The collateral shall only be sold if the proceeds are greater than or equal to the redemption amount.
Regulatory update
• Approval of the US$8.5bn Countrywide RMBS settlement (SCI 3 February) has been stayed by Justice Saliann Scarpulla of the New York State Supreme Court. On the appeal of objectors including AIG, 19 February has been set as the date for oral arguments on the issues raised by Judge Kapnick's decision.
• US CLO volume totalled US$2.5bn last month, markedly down from the US$9.8bn reached in January 2013. Uncertainty about the Volcker Rule has contributed to this reduction in issuance, but it has also impacted the structure of the deals that have launched.
• The CFTC and the European Commission say they have made "significant progress" towards harmonising a regulatory framework for CFTC-regulated swap execution facilities (SEFs) and EU-regulated multilateral trading facilities (MTFs), as contemplated under the Path Forward statement issued in July 2013. The Path Forward statement set out that the CFTC and EC would work together on extending appropriate time-limited transitional relief to certain MTFs, in the event that the CFTC's trade execution requirement was triggered before 15 March 2014.
• ESMA has published a consultation paper setting out the draft regulatory technical standards (RTS) required for the implementation of the CRA3 regulation. The draft RTS - which complements the existing regulatory framework for credit rating agencies (CRAs) - cover: disclosure requirements on structured finance instruments (SFIs); the European Rating Platform (ERP); and the periodic reporting on fees charged by CRAs.
• IOSCO has published a consultation report on its 'Code of Conduct Fundamentals for Credit Rating Agencies', which proposes significant revisions and updates to the current CRA code. The organisation proposes to revise the code to take into account the fact that CRAs are now supervised by regional and national authorities.
• TARP's biggest programme, the Capital Purchase Program (CPP), is winding down. Many of the banks left in it are smaller community institutions with typically narrow geographical footprints and franchise recognition that struggled to attract new capital through new issuance or generate interest from private investors at auction sales. Trups CDOs are exposed to those banks.
• MarketAxess estimates that less than 20% of CDS index volume is trading on SEFs, ahead of the 26 February 'made available to trade' (MAT) deadline. Together the eight products that fall within the CDS MAT determination represent 80% of overall volume in CDS index market.
Deals added to the SCI New Issuance database last week:
Avis Budget Rental Car Funding Series 2014-1; Bank of America Credit Card Trust 2014-1; Capital One Multi-asset Execution Trust 2014-1; CarMax Auto Owner Trust 2014-1; CIFC Funding 2014; CSMC Trust 2014-IVR1; Dryden 31 Senior Loan Fund; FREMF 2014-K36; ING IM CLO 2014-1; Madison Park Funding XIII ; PFS Financing Corp Series 2014-A; Southern Housing Group ; Volkswagen Auto Lease Trust 2014-A; WFRBS 2014-LC14
Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-4; BACM 2007-2; BACM 2008-1; BACM 2008-1, BACM 2007-4m BACM 2007-5 & MLMT 2008-C1; BSCMS 2007-PW15; CD 2007-CD4; CGCMT 2007-C6; COMM 2006-C7; COMM 2006-C8; COMM 2007-C9; DECO 2006-C3; DECO 2006-E4; DECO 2007-E5; ECLIP 2006-2; ECLIP 2006-3; EURO 23; EURO 25; EURO 28; FOX 1; GCCFC 2007-GG9; GECMC 2005-C4; GMACC 2006-C1; GSMS 2007-GG10; INFIN SOPR; JPMCC 2007-LD11; JPMCC 2007-LDPX; JPMCC 2008-C2; MLMT 2005-MCP1; REC 6; TITN 2005-CT1; TITN 2006-2; TITN 2007-1; TITN 2007-CT1; TMAN 7
Top stories to come in SCI:
ILS outlook