A look at the major activity in structured finance over the past seven days
Pipeline
A steady flow of new deals joined the pipeline last week. As well as three ABS and two ILS, three RMBS and three CMBS were announced.
The ABS were: US$1.008bn Ally Auto Receivables Trust 2014-SN1; E-Carat 3; and US$678m VFET 2014-1. The ILS consisted of US$225m East Lane Re VI series 2014-1 and US$125m Gator Re 2014-1.
The newly-announced RMBS comprised US$379m Citigroup Mortgage Loan Trust 2014-A, US$11.766bn OASIS 2014-1 and A$500m TORRENS Series 2014-1 Trust. The CMBS, meanwhile, were US$120m COMM 2014-UBS2, US$306.3m GSMS 2014-NEW and a £110m second tap issuance of Trafford Centre Finance.
Pricings
It was a slightly quieter week for completed issuance than the one before. Three ABS priced, as well as an ILS, one RMBS, two CMBS and three CLOs.
The ABS prints were US$423.55m GreatAmerica Leasing Receivables Funding Series 2014-1, US$1.5bn Honda Auto Receivables 2014-1 Owner Trust and US$291m TAL Advantage V series 2014-1. The ILS was US$100m Queen Street IX.
The RMBS new issue was €1.075bn STORM 2014-I, while the CMBS were US$186.8m CSMC Trust 2014-SURF and US$957.6m JPMBB 2014-C18. Finally, US$518m Anchorage Capital CLO 3, US$522m JFIN 2014-1 and US$513m Venture XVI priced.
Markets
European CLO investors are becoming increasingly competitive in their search for yield, as SCI reported on 19 February. One trader reports that equity pieces are being particularly well bid.
The trader adds: "Investors are paying more attention to underlying assets and taking a much more detailed view as far as how the deal will perform. It is competitive, so they will run very low defaults for quality portfolios to see if they can reach those offer levels."
Last week was fairly quiet for the US CLO market, according to analysts at Bank of America Merrill Lynch. They note: "Overall, US 1.0 spreads are now 10bp tighter at the triple-A and double-A level, while CLO 2.0 spreads are 5bp-20bp wider in the mezzanine tranches compared to two weeks ago."
US ABS secondary supply was concentrated in auto loan bonds later in the week (SCI 21 February). SCI's PriceABS data shows that Thursday's bid-lists also included some utility bond and student loan paper.
In the US RMBS market an increase in non-agency BWIC activity was seen in the middle of the week, with almost US$900m of paper circulating during Wednesday's session. Subprime paper was prevalent, with supply concentrated in the 2005-2007 vintages.
US CMBS new issue spreads have been drifting wider, which is in sharp contrast to the legacy sector, where Barclays Capital analysts report that money-good AJs and wider-trading AMs continue to be well bid. They add: "Spreads on these tranches compressed by another 15bp-25bp this week and are now trading 50bp-125bp tighter than the beginning of the year."
Deal news
• The February remittance for the MLCFC 2007-5 CMBS recorded US$192m of liquidations across 10 properties listed in the CWCapital bulk sale. The dispositions resulted in US$103.7m of realised losses, implying a 54% severity.
• Remittances were also reported for three other US CMBS with exposure to the CWCapital bulk sale - BACM 2007-1, JPMCC 2007-LDP11 and WBCMT 2006-C28. LDP11 appears to have bucked the trend for net sales proceeds to exceed recent appraisal values.
• Mixed loan-level developments for the pan-European CMBS Cornerstone Titan 2007-1 suggest that principal losses could reach the class B notes. The A2 class has become the most senior tranche, increasing the risk of a note EOD and further complicating class B losses.
• Intu Properties has tapped its Trafford Centre Finance CMBS, with the launch of £110m additional class A, B and D notes. The proceeds will be used to provide funds for the firm's pipeline of active management projects and major extensions.
• Dock Street Capital Management has been appointed successor collateral manager to Libertas Preferred Funding I, following the resignation of Cira SCM (SCI 4 November 2013). Moody's has confirmed that the move will not affect its rating on the CDO.
• Investec Bank has issued key person replacement notices for the Gresham Capital CLO I, II, III, IV and V deals. James Cuby, Steve Torr and Richard Swift join Henrik Malmer as the key persons on the five transactions.
• French retailer Vivarte has suspended payments on €2.8bn of buyout debt while it negotiates a restructuring. The move could cause some European CLOs to fail their coverage tests, resulting in a diversion of cashflows from junior to senior tranches.
Regulatory update
• The Lehman bankruptcy court in December applied the US Bankruptcy Code's safe harbour for swaps in determining that the provisions of a swap agreement Lehman was a party to with the Michigan State Housing Development Authority (MSHDA), which addressed the calculation of settlement amounts upon termination of the swap, when liquidation provisions fall within the safe harbour. This decision is in contrast to prior decisions of the court, which had denied the applicability of the safe harbour to issues arising with other Lehman swap counterparties, and is said to be a credit positive development for securitisations when they rely on swaps.
• SFIG says it has filed a letter with the US SEC recommending revisions to the loan-level disclosure schedule proposed under Regulation AB 2. The association's RMBS Loan-Level Disclosure Subcommittee held a series of meetings from late-2013 through January 2014 to discuss improvements to Schedule L, with the goal of proposing enhancements that could be adopted by the SEC in the final rule.
• ESMA has published its Annual Report 2013 on credit rating agencies (CRAs) in the EU. The report also outlines the authority's supervisory work plan for this year.
Deals added to the SCI New Issuance database last week:
Arqiva Financing series 2014-1; Arrowpoint CLO 2014-2; CNH Equipment Trust 2014-A; COMM 2014-CCRE15; Enterprise Fleet Financing Series 2014-1; Fifth Third Auto Trust 2014-1; Ford Credit Floorplan Master Owner Trust A series 2014-1; Ford Credit Floorplan Master Owner Trust A series 2014-2; Halcyon Loan Advisors Funding 2014-1; Heathrow Funding; JGWPT XXXI series 2014-1; Manchester Airport Group Funding; Medallion Trust Series 2014-1; Neuberger Berman CLO XVI; Nissan Auto Receivables 2014-A Owner Trust; OFSI Fund VI; Quadrivio SME 2014; Scot Roads Partnership Finance; Tennenbaum Senior Loan SPV; World Financial Network Credit Card Master Note Trust Series 2014-A.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-6; BACM 2007-1; BSCMS 2006-T24; BUMF 3; CGCMT 2005-C3; COMM 2004-LNB4; COMM 2005-C6; CSMC 2007-C4; CWCI 2007-C2; DECO 2006-E4; DECO 8-C2; ECLIP 2006-3; EMC VI; EPICP BROD; EURO 28; FLTST 3; FOX 1; GCCFC 2003-C2; GSMS 2005-GG4; JPMCC 2005-LDP5; JPMCC 2006-CB17; JPMCC 2007-LD11; LBUBS 2008-C1; MLCFC 2007-5; MLCFC 2007-8; MSC 2004-HQ4; REC 6; TITN 2006-3; TMAN 7; WBCMT 2006-C28; WINDM VII.
Top stories to come in SCI:
ILS outlook