A look at the major activity in structured finance over the past seven days
Pipeline
Conferences in Europe and the US limited pipeline activity last week, although seven CLOs were announced. Two ABS, an ILS, two RMBS and three CMBS were also added to the pipeline.
The newly-announced ABS were A$242.24m Flexi ABS Trust 2014-1 and Hollis II 2014-1. The ILS was Queen Street X.
Berica ABS 3 and the A$490-equivalent Firstmac Mortgage Funding Trust No.4 Series 1A-2014 were the only RMBS to enter the pipeline. Meanwhile, the CMBS comprised US$440m BAMLL 2014-IP, US$343m CG-CCRE 2014-FL1 and US$1.24bn FREMF 2014-K38.
The CLOs consisted of: US$410.3m AMMC CLO XIV; US$514m Apidos CLO XVIII; US$415.4m Cutwater 2014-I; Jubilee CLO 2014-XIV; €300m Mercator CLO IV; US$550m Neuberger Berman CLO XVII; and US$462m West CLO 2014-1.
Pricings
There were considerably fewer deals leaving the pipeline than there had been in the week before. Last week saw nine ABS print, as well as one CMBS and five CLOs.
The ABS pricings comprised: US$1.4bn Ally Auto Receivables Trust 2014-A; US$726.9m GEET 2014-1; €752m Golden Bar series 2014-1; US$350m Hilton Grand Vacations Trust 2014-A; US$603m Nelnet Student Loan Trust 2014-5; US$850m Nissan Auto Lease Trust 2014-A; US$1.25bn Santander Drive Auto Receivables Trust 2014-3; and US$1.035bn Toyota Auto Receivables 2014-B Owner Trust. The £500m Thames Water Utilities Cayman Finance whole business securitisation also printed.
The CMBS new issue was US$878m JPMCC 2014-C20, while the CLO prints consisted of US$618m A Voce CLO 2014-1, US$1.5bn ALM XIV, US$145m Cerberus AUS Levered II, US$723m CIFC Funding 2014-III and €525m Harvest CLO IX.
Markets
The US RMBS market was the most active last week. Two large non-agency lists of around US$1bn each circulated, as SCI reported on 11 June.
The first list contained 24 line items, with a significant amount of subprime paper. Before those lists came out, Tuesday's session brought BWIC volume of close to US$500m, with SCI's PriceABS data showing a mixed bag of bonds out for the bid and supply focused on pre-crisis vintages.
Meanwhile, the low yield environment is pushing up demand for US CMBS bonds with any credit spread on offer, say Barclays Capital CMBS analysts. They add: "This has manifested most clearly in the new issue CMBS space, where triple-Bs are regularly oversubscribed four to six times, while the top of the capital structure attracts significantly less interest from buyers."
Wells Fargo structured product analysts note that US ABS secondary spreads were mainly unchanged last week, with three-year triple-A fixed credit card, one-year triple-A prime auto and 10-year triple-A RRB spreads each tighter by just 1bp. Triple-B prime auto spreads were 2bp tighter.
The US CLO market was also quiet, according to Bank of America Merrill Lynch, with BWIC volumes totalling US$380m. "A number of line items did not trade as sellers' reserve levels were not met. For those that did, levels remained mostly unchanged from a week ago," observe CLO analysts at the bank.
Deal news
• American Bancorp was last month forced into involuntary bankruptcy, marking the first case where Trups CDO holders worked together to enforce their creditor rights. As other bank Trups issuers reach the end of the deferral window for non-payment of interest, further cases of this type are expected to emerge.
• The portfolio underlying the FOX 1 CMBS has been purchased by Kennedy Wilson Europe Real Estate for £296m, which is £48m more than its most recent valuation. The property recovery estimate in September had been £235m (SCI 5 September 2013).
• Deutsche Bank is in the market with a €355m CMBS, dubbed DECO 2014 - Gondola, which is backed by three loans secured on 18 properties across three portfolios in Italy. The portfolios were indirectly acquired by Blackstone in three separate transactions between December 2013 and February 2014.
• The Bryant Park Hotel has been liquidated for US$65m via a fair value purchase option. The property is backed by a US$85m loan securitised in JPMCC 2007-CB18, which was transferred to special servicing in October 2011 due to litigation regarding cash management issues.
• Mount Street has responded to Hatfield Philips International's comments regarding Windermere X (SCI 4 June). The firm says that HPI made "a number of inaccurate statements" that it feels "duty bound" to correct, so that bondholders can make a fully informed decision about the proposed transfer of special servicing.
• The Australian Office of Financial Management (AOFM) has sold four of the RMBS bonds it holds, with a total amortised face value of A$341m. The agency says it is disclosing the details of the transactions in the interests of secondary market transparency.
• GLI Finance says that it transferred two of its CLO investments to Fair Oaks Income Fund (FOIF) for US$20.4m in cash and 34,298,425 in FOIF shares at the issue price of US$1, subject to a two-year lock-in agreement. The move follows FOIF's share placement - which raised US$114.5m - and admission to trading on the LSE Specialist Fund Market last week (see also SCI 19 May).
• Principal losses have been applied to the class E and F notes of Windermere VII after the liquidation of the RedLeaf I loan. S&P has subsequently downgraded those notes to single-D.
• Dock Street Capital Management has replaced Cira SCM as collateral manager to Libertas Preferred Funding II. Moody's has determined that the move will not result in the withdrawal, reduction or other adverse action with respect to any current ratings on the transaction.
• An auction will be conducted for Bluegrass ABS CDO II on 27 June. The collateral shall only be sold if the proceeds, together with the balance of all eligible investments and cash in the accounts, are at least equal to the redemption amount.
Regulatory update
• The EBA is working with other regulators to find the best way to create a definition and appropriate prudential treatment to support high quality securitisation issuance, according to Adam Farkas, executive director at the authority. In the second keynote address at IMN's Global ABS conference, he also called for the industry's cooperation to prevent past abuses from reoccurring and maintain the current positive regulatory momentum.
• The Association for Financial Markets in Europe (AFME) has joined policymakers in calling for the revival of European securitisation to unlock long-term financing and fuel growth. It has released a report, entitled 'High-quality securitisation for Europe', which proposes a five-step action plan to save the market.
• The FHFA has released a request for input on GSE guarantee fee policy and implementation. Among the areas the agency is seeking comments on are: alternatives to risk-based pricing; the effect of increasing g-fees based on credit scores/LTVs; g-fee levels that would improve private-label RMBS economics; and the effect on loan originations, should g-fees increase.