A look at the major activity in structured finance over the past seven days
Pipeline
Just nine new deals were added to the pipeline last week. These consisted of three ABS, an ILS, two RMBS, a CMBS and two CLOs.
The newly-announced ABS comprised US$1.03bn Ally Auto Receivables Trust 2014-1, US$488.3m Porsche Financial Auto Securitization Trust 2014-1 and US$503.1m Wheels SPV 2 Series 2014-1. The ILS was US$100m Aozora Re Series 2014-1, while the RMBS consisted of US$482.7m American Homes 4 Rent 2014-SFR1 and Chestnut Financing.
The single CMBS to begin marketing was US$257.5m CGBAM 2014-HD. It was joined by the Ares CLO VII and €500m FTA PYMES Santander 9 CLOs.
Pricings
Considerably more transactions priced last week. As well as eight ABS prints, one ILS and two RMBS, three CMBS and five CLOs were issued.
The ABS new issues were: US$1.25bn Bank of America Credit Card Trust 2014-A2; US$987m CarMax Auto Owner Trust 2014-2; US$265.38m CCG Receivables Trust 2014-1; US$500m Chase Issuance Trust 2014-5; US$1.04bn Ford 2014-REV1; US$1.325bn Hyundai Auto Receivables Trust 2014-B; €310m Pelican Finance No.1; and US$238m TAL Advantage V Series 2014-2.
The ILS print was US$600m Sanders Re Series 2014-1, while the RMBS were £242.5m Newstone Mortgage Securities No.1 and A$150m RedZed Trust Series 2014-1. Meanwhile, the US$1.04bn Citigroup Commercial Mortgage Trust 2014-GC21, US$280m LSTAR Commercial Mortgage Trust 2014-2 and US$277.5m STORE Master Funding 2014-1 accounted for the CMBS pricings.
Finally, US$361m Ares XXX, €518m Avoca CLO XI, US$414m Hildene CLO II, US$818m Madison Park Funding 2014-12 and US$838m Symphony CLO XIV rounded out the issuance.
Markets
The European CLO market was fairly quiet last week as investors wait on the sidelines, as SCI reported on 9 May. CLO 2.0 equity paper - both secondary and new issue - is proving most popular with investors.
"A few concerns continue to hang over the market and that has slowed activity down. For me, the largest worry is the arbitrage, but a recent industry poll has put regulation as the greatest concern," reports one CLO trader.
The US CLO secondary market was also muted, according to Bank of America Merrill Lynch analysts. Around US$280m worth of line items were out for the bid, while "over 80% of [the] week's volumes came from 2.0 deals and close to half of these were triple-A tranches".
US ABS BWIC activity was higher, with around US$177m seen on Wednesday alone (SCI 8 May). That session was dominated by auto and student loan bonds, with SCI's PriceABS data picking up 15 unique US ABS tranches out for the bid - including the NCT 2006-A B tranche, which was covered in the high-80s.
In the US non-agency RMBS space, volume was fairly strong (SCI 7 May). Tuesday's session saw a number of adjustable rate and subprime bonds out for the bid, but was notable for having a complete lack of derivatives supply.
Finally, the US CMBS market continued to rally as another GSE multifamily-directed bid-list hit the market. Barclays Capital analysts note that the rally was particularly pronounced in the triple-B minus space.
"The rally came even as equity and credit markets were little changed week-over-week. In the new issue space, secondary trading in 2014 vintage new issue dupers tightened 2bp, to swaps plus 85bp, while lower in the capital stack, the 2014 vintage triple-B minus tightened 15bp to swaps plus 315bp. Legacy credit also tightened, with 2007 AJs tightening about 20bp, while legacy dupers were unchanged," they observe.
Deal news
• S&P has withdrawn its preliminary ratings on the US$184.9m Bayview Opportunity Master Fund IIIa Trust 2014-9RPL re-performing RMBS, after the issuer stated that it intends to delay the offering beyond the expected close of 12 May. The agency had previously requested additional information pertaining to property valuations and loss severity experience, following the publication of the deal's presale report.
• The outlook for the Stuyvesant Town-Peter Cooper Village loan, securitised in five US CMBS, has improved. Losses are no longer expected and the property could be sold later this year.
• Citi and Bank of America Merrill Lynch have closed the largest-ever catastrophe bond - the US$1.5bn Everglades Re series 2014-1 - for Citizens Property Insurance Corp. The three-year notes cover losses in Florida from hurricanes on an annual aggregate basis.
• Container ABS investors face a tight technical environment, driven by a slower primary market and a pick-up in redemptions. Container lessors have called 10 deals since end-3Q13, including four year-to-date. Textainer is the latest lessor to follow the trend, announcing last week that it will redeem three deals - widely expected to be its 2005, 2011 and 2012 transactions.
• Jardine Lloyd Thompson Capital Markets has closed a US$10m private placement catastrophe bond, Market Re 2014-1. The Market Re vehicle has been established with the aim of making the capital markets more accessible to issuers seeking to issue smaller-sized ILS transactions.
• Dock Street Capital Management has been appointed as successor collateral manager for the Duke Funding High Grade III CDO. Dock Street replaces Cairn Financial Products, effective as of 19 May.
• The single-B rating on the US$140m MultiCat Mexico series 2012-1 class A notes has been affirmed. The move comes after Swiss Re submitted an event notice to the calculation agent, AIR Worldwide Corp, following the 18 April earthquake in the state of Guerrero.
Regulatory update
• The Consumer Financial Protection Bureau (CFPB) is proposing several changes to the qualified mortgage (QM) rule, which it is hoped will allow more loans to meet the definition. Specifically, the proposals provide more flexibility for loans to meet QM status, despite its cap on points and fees and its restrictions on debt-to-income ratios.
• EIOPA has updated its technical specifications for the Solvency II preparatory phase. The proposal includes lower capital charges for Type 1 securitisations.
• APRA's recently released discussion paper, 'Simplifying the prudential approach to securitisation' (SCI 29 April), may affect RMBS transaction structures and credit risk profiles in the future. In particular, the proposed APRA requirement for a two-class structure could leave the current triple-A rated AB note orphaned, requiring it to be either merged into the class A or class B notes.
• The Association of Institutional Investors has requested in a letter to the Senate Banking Committee that Congress establish clear fiduciary standards for trustees of non-agency RMBS. Additional trustee duties being lobbied for include ensuring that initial collateral conforms to representation and warranties, put-back rights under a securitisation's R&Ws are exercised properly and all loan documentation is properly executed and transferred.
• The US CFTC has issued a no-action letter, providing a phased compliance timeline for certain package transactions that include at least one interest rate or credit default swap that has been made available to trade. Beginning on 16 May, market participants executing swaps subject to the trade execution requirement that are part of a package transaction must be traded on a swap execution facility (SEF) or designated contract market (DCM).
• The European Commission has adopted a report addressed to the European Parliament and Council on the feasibility of a network of smaller credit rating agencies (CRAs) in the EU. The report assesses how the establishment of such a network could contribute to the strengthening of smaller CRAs, facilitating their growth to become more competitive market players.
Deals added to the SCI New Issuance database last week:
ACIS CLO 2014-4; BCC Funding VIII series 2014-1; Citibank Credit Card Issuance Trust 2014-4; Citrus Re; Citrus Re series 2014-2; Discover Card Execution Note Trust 2014-3; Everglades Re series 2014-1; Ford Auto Securitization Trust 2014-R2; Garanti DPR series 2014-A; GE Capital Credit Card Master Note Trust series 2014-VFN1; Guggenheim Private Debt Fund Note Issuer; Higher Education Funding I series 2014-1; Integrity Series 2014-1 Trust; JPMBB 2014-C19; Kilimanjaro Re Series 2014-1; Lion I Re; Manchester Airport Group Funding 2014-2; Nelnet Student Loan Trust 2014-3; OnDeck Asset Securitization Trust 2014-1; Palmer Square CLO 2014-1; Pepper Prime Private Placement 2014-1 Trust; PFS Tax Lien Trust 2014-1; Private Driver 2014-1; Private Driver 2014-2; Private Driver 2014-3; RAIT 2014-FL2; Rhode Island Student Loan Authority 2014; Silvermore CLO; SME Lion II; TRIP Rail Master Funding 2014-1; Venture XVII CLO; Volkswagen Auto Loan Enhanced Trust 2014-1; Voya CLO 2014-2.
Deals added to the SCI CMBS Loan Events database last week:
BACM 2004-6; BACM 2005-4; BSCMS 2007-PW15; CD 2006-CD2; CGCMT 2004-C1; CGCMT 2008-C7; COMM 2004-LB4A; COMM 2005-FL11 & GECMC 2005-C4; COMM 2007-C7; COMM 2007-C9; COMM 2014-TWC; CSFB 2004-C1; CSFB 2004-C5; CSFB 2005-C3; CSMC 2006-C5; CSMC 2007-C5; CWCI 2006-C1; DECO 2006-C3; DECO 2006-E4; DECO 2007-E5; DECO 2007-E6; DECO 2007-E7; DECO 7-E2; DECO 9-E3 & DECO 2006-E4; DLJCM 1998-CF2; ECLIP 2006-1; ECLIP 2006-2; EMC VI; FLTST 3; FOX 1; GCCFC 2003-C2; GCCFC 2005-GG5; GCCFC 2007-GG11; GCCFC 2007-GG9; GECMC 2005-C3; GECMC 2005-C4; INFIN SOPR; JPMCC 2002-C3; JPMCC 2004-LN2; JPMCC 2004-PNC1; JPMCC 2005-LDP2; JPMCC 2005-LDP4; JPMCC 2006-LDP; JPMCC 2006-LDP7; LBUBS 2007-C2; LBUBS 2007-C6; MLCFC 2006-4; MLMT 2005-CIP1; MSC 2004-HQ4; MSC 2007-IQ16; OPERA GER2; PROUL 1; SBCMT 2001-MM; TAURS 2006-1; TAURS 2007-1; TITN 2005-CT1; TITN 2006-5; TITN 2007-2; TITN 2007-3; TITN 2007-CT1; TMAN 6; TMAN 7; UBSBB 2012-C2; WBCMT 2003-C7; WBCMT 2004-C12; WBCMT 2004-C14; WBCMT 2006-C26; WINDM XIV.