A look at the major activity in structured finance over the past seven days
Pipeline
Several deals joined the pipeline last week as the market prepared for the US Independence Day holiday. The new entrants included four ABS, three ILS, two RMBS, three CMBS and one CLO.
The newly-announced ABS comprised: €800m Bavarian Sky German Auto Loan 2, E-Carat Compartment 7, NZ$150m MTF Valiant Trust 2014 and US$250m Sierra Timeshare 2014-2. The ILS consisted of US$28m Dodeka IV, US$31.825m Market Re Series 2014-2 and US$44.035m Oak Leaf Re Series 2014-1.
£350m Paragon Mortgages No.20 and £240m Precise Mortgage Funding 2014-1 accounted for the RMBS, while the CMBS were C$312m IMSCI Series 2014-5, €198.222m MODA 2014 and US$386.342m VFC Series 2014-2. Finally, the CLO was US$1.036bn Madison Park Funding XIV.
Pricings
As with the week before, last week saw many deals price. The new issuance included six ABS, one ILS, two RMBS, three CMBS and eight CLOs.
The ABS prints comprised: US$640m CIT Aviation Finance III; US$450m Drug Royalty II 2014-1; US$206.3m Edsouth Indenture No.7 Series 2014-3; US$400m Ford Credit Floorplan Master Owner Trust A Series 2014-3; US$1.124bn MBART 2014-1; and €372.3m Monviso 2014.
The ILS pricing was US$30m CCRIF 2014-1 and the RMBS were A$1bn PUMA Series 2014-2 and €101m Rural Hipotecario XXVII. US$550m COMM 2014-SAVA, US$1.264bn JPMBB 2014-C21 and US$635m JPMCC 2014-INN accounted for the CMBS new issues.
Finally, the CLO prints were: US$552.5m Adams Mill CLO; US$415.25m Avery Point V CLO; €1.795bn BPL Mortgages VII; US$521m CVP Cascade 2014-2; US$380m Refinanced Dryden Senior Loan Fund XXIII; US$512m Eaton Vance CLO 2014-1; US$459.75m JFIN CLO 2014-II; and US$414m WhiteHorse IX.
Deal news
• The Hertz Corporation has delayed filing its 1Q14 10-Q financial statement, triggering a potential lease event of default within its US rental car ABS structures that could cause an amortisation event for each series of notes secured by the lease. After applicable grace periods expire and absent a cure, a vote by more than 50% of class A noteholders of a series is required to declare an amortisation event.
• Munich Re has withdrawn its latest catastrophe bond issuance - Queen Street X - due to weak demand. Pushback on the deal's pricing is said to be a sign that investors may be approaching a limit on acceptable catastrophe risks.
• GC Securities has placed the first catastrophe bond directly issued by the World Bank, via member institution the IBRD. The US$30m CCRIF catastrophe-linked capital at risk notes provide three years of annual aggregate protection for hurricane and earthquakes affecting 16 Caribbean countries participating in the Caribbean Catastrophe Risk Insurance Facility (CCRIF), representing the first time that the initiative has tapped the cat bond market.
• MSAC 2006-HE3 and SVHE 2006-WF1 bondholders last month received significant pay-outs related to subsequent recoveries. The trustee for both RMBS is Deutsche Bank and the pay-outs are believed to be due to individual rep and warranty-related settlements with one of the originators or related pay-outs at the loan level.
• US$477m in US CMBS loan allocated balance is slated for sale on Auction.com in July and early August. Unlike previous auctions, most deals have only 1-2 loans up for bid. The largest loan up for sale is the US$67m HSA Memphis Industrial Portfolio securitised in MLCFC 2007-5.
• Canary Wharf Group, the sponsor of the Canary Wharf Finance II CMBS, has sold its interest in the 10 Upper Bank Street property. The building was recently re-valued at £780m, up from an estimated £685m in June 2013.
• Dock Street Capital Management has replaced Strategos Capital Management as collateral manager on the Kleros Preferred Funding II ABS CDO.
• Auctions have been scheduled for: N-Star Real Estate CDO III on 9 July; Longport Funding II CDO on 21 July; and Trainer Wortham First Republic CBO IV on 23 July.
Regulatory update
• US Treasury Secretary Jacob Lew has outlined plans to expand access to credit by boosting the private-label securities market. A new financing partnership between the Treasury and HUD will also support the FHA's multifamily mortgage risk-sharing programme.
• The ECB's TLTRO operation entitles banks to initially borrow up to €400bn for four years at a fixed rate of 25bp. The availability of this low-cost funding could increases the likelihood of originators exercising clean-up calls in European ABS and RMBS deals.
• The Basel Committee and IOSCO are co-leading a task force that will undertake a wide-ranging survey of global securitisation markets. To gain a better understanding of market participants' views, the cross-sectoral Task Force on Securitisation Markets has set up an online survey, which should be completed by 25 July.
• Prime Collateralised Securities (PCS) has introduced the first substantial revision of its criteria in relation to high quality securitisations. The move is designed to raise the standard enshrined in the label, with a few criteria being softened or removed when they proved not to add anything to the quality represented by the label or when the market could demonstrate that very high quality securitisations were being issued without these requirements.
• The EBA has published its technical advice to the European Commission on the use of a prudential filter for gains and losses arising from banks' own credit risk of derivatives. The authority considers as appropriate not to deviate from the current prudential approach applied at the international level under the Basel 3 rules.
• AIMA has launched OTC derivatives clearing guidelines for asset managers. The guide to sound practices provides guidance on the new regulatory framework in the US and EU, which affects most OTC derivatives transactions cleared globally.