A look at the major activity in structured finance over the past seven days
Pipeline
Last week a variety of new deals joined the pipeline. There were six ABS added, along with two RMBS, four CMBS and two CLOs.
The ABS were: US$95.5m California County Tobacco Securitization Agency (Kern) 2014; US$120.18m Elara HGV Timeshare Issuer 2014-A; €516.3m Globaldrive Auto Receivables 2014-B; US$216.468m NCF Dealer Floorplan Master Trust Series 2014-1; €714.3m Private Driver 2014-4; and Trafigura Securitisation Finance. The RMBS were US$611m STACR 2014-DN4 and US$429m STACR 2014-HQ3.
The four CMBS were US$1.2bn COMM 2014-CCRE20, US$1.15bn FREMF 2014-K503, US$126.4m RAIT 2014-FL3 and US$335m TMSQ 2014-1500. The CLOs were Avoca CLO XIII and Cairn CLO IV.
Pricings
A considerable number of deals printed. The week's issuance consisted of 11 ABS, two RMBS, two CMBS and six CLOs.
The ABS were: €500m A-BEST 10; US$1.107bn Ally Auto Receivables Trust 2014-SN2; US$999m CNH Equipment Trust 2014-C; £581m Dignity Finance; US$552.63m GE Dealer Floorplan Master Note Trust Series 2014-2; US$129.145m HERO Funding Trust 2014-2; US$664m NAVSL 2014-A; US$173m NEQ 2014-1; US$376m PFS Financing Corp Series 2014-B; US$150.82m Silverleaf Finance CVIII Series 2014-A; and US$1bn Volkswagen Auto Loan Enhanced Trust Series 2014-2.
€500m Dolphin Master Issuer Series 2014-3 and £2.7bn Slate No.1 accounted for the RMBS, while the CMBS were US$475m CARS Series 2014-1 and US$842m CGCMT 2014-GC25. Lastly, the CLOs were: US$510m ACIS CLO 2014-5; US$513m Apidos CLO XIX; €410m Babson Euro 2014-2; US$414m HarbourView CLO VII; US$513m Limerock CLO III; and US$406m MCF CLO IV.
Markets
US ABS spreads continued to soften last week, say JPMorgan ABS analysts. "In the primary market, more concessions were required on certain tranches to get transactions to the finish line. In secondary, trading can be characterised as sloppy with low volume, getting less focus from investors otherwise occupied by the new issue market," they say.
US non-agency RMBS was very busy in the middle of the week, although increase bid-list volume also brought an increase in the proportion of DNTs, as SCI reported on Thursday (SCI 16 October). Among the DNTs, SCI's PriceABS data captured both a US$17.521m piece of the BALTA 2005-7 1M1 tranche and a US$17.515m piece of the BSABS 2006-HE8 2M1 tranche.
The US CMBS market sold off sharply on a spread basis last week, say Barclays Capital analysts. "CMBS spreads widened across the board, particularly on Wednesday and Thursday as a big flight to safety led to much lower rates. At the top of the capital structure, 2014 super senior LCF bonds widened 10bp, to swaps plus 93bp, while lower in the capital stack, triple-B minus tranches widened 30bp, to swaps plus 350bp," they add.
"In sympathy with the broader market sell-off and volatility, higher-beta legacy and 2.0 US CLOs traded wider," say Bank of America Merrill Lynch analysts. BWIC volumes last week totalled US$622m, compared to US$492 the week before and US$1.6bn the week before that.
Deal news
• Fitch, Moody's and S&P last week published their new ratings for the restructured Punch A and Punch B whole business securitisations. Barclays Capital European ABS analysts believe that Fitch and S&P's ratings will have disappointed bondholders, given how low they are relative to Moody's ratings.
• JPMorgan is in the market with Slate No.1, a UK RMBS backed by a £2.38bn multi-originator purchased portfolio of prime residential mortgages. The assets were purchased from UK Asset Resolution by the deal's sponsor Consilium Airton (CAL), a wholly owned subsidiary incorporated for this transaction by Commercial First Group.
• Colony Financial is prepping a non-agency multi-borrower multifamily CMBS, which is believed to be the first of its kind. Dubbed Colony Multifamily Mortgage Trust Series 2014-1, the US$320.81m transaction is collateralised by 301 fixed-rate loans secured by 307 properties.
• Dutch RMBS issuers - including Arena NHG 2014-I (SCI 20 August) - have begun replacing traditional swaps with other forms of structural protections, such as higher credit enhancement levels. Moody's notes in its latest Credit Insight publication that this development is credit positive since the issued notes can achieve equivalent protection against credit risk while being less reliant on the credit strength of the swap counterparty.
• Clinton Group has assigned its rights and obligations as collateral manager for Shinnecock CLO 2006-1 to Crescent Capital Group. Under the terms of the assignment, Crescent agrees to assume all the responsibilities, duties and obligations of the collateral manager under the applicable terms of the indenture.
• Two recent European loan restructurings have demonstrated how the CLO vote can create strong one-way flows. Citi credit strategists suggest that the different treatment of Autobar and PHS by CLO managers underlines the influence swap mechanics can have on sentiment.
• Fitch Solutions' latest case study snapshot reveals that five-year CDS on Nabor Industries widened by 95% over the past month to trade at their widest levels since early last year. As a consequence, after pricing historically at triple-B levels, credit protection on Nabors' debt is now pricing below investment grade.
• A change at the top has sent CDS spreads for Advance Micro Devices (AMD) to their widest level since early in the year, according to the Fitch Solutions' latest CDS case study snapshot. Five-year CDS on AMD widened by 15% in the last two trading days of last week to the widest levels observed since February.
Regulatory update
• As well as the release of the delegated acts under the Solvency 2 directive, the European Commission (EC) has updated its required liquidity coverage ratio (LCR) and its definition of high quality liquid assets (HQLA). All told, the treatment of securitisation has improved considerably, but remains less favourable than covered bonds.
• The US Fed has scheduled an open meeting on 22 October to vote on the adoption of a final credit risk retention rule under Section 941 of the Dodd-Frank Act. Section 941 requires the US SEC, FDIC, Federal Reserve, OCC, FHFA and HUD to jointly implement rules requiring an economic interest to be retained in a material portion of the credit risk for any asset that is securitised.
• The EBA has launched a public consultation on its discussion paper on simple, standard and transparent securitisations. The move is in response to the European Commission's call for advice on identifying a prudentially sound securitisation market and its regulatory treatment.
• Eighteen major global banks have agreed to sign a new ISDA Resolution Stay Protocol, which has been developed in coordination with the Financial Stability Board to support cross-border resolution and reduce systemic risk. The move represents a major step in strengthening systemic stability and reducing the risk that banks are considered 'too big to fail', the association says.
• Implementation of the ISDA 2014 Credit Derivatives Definitions appears to have gone smoothly last week, despite the last-minute addition of Caesars to the excluded reference entity list (SCI 15 September). The new documentation has significantly improved the outcomes for credit protection buyers.
• New regulations in the local Brazilian ABS market address some of the structural issues exposed by recent bank failures, Fitch says. However, the agency suggests that the new regulations fail to comprehensively address certain structural concerns that it has outlined over the past several years.
Upcoming SCI events
• 29 October, New York - SCI's 7th Annual Securitisation Pricing, Trading & Risk Seminar
Click here for more details
Deals added to the SCI New Issuance database last week:
Babson Euro CLO 2014-2; Cars Alliance Auto Loans France V 2014-1; Dignity Finance (tap); Ginkgo Compartment Sales Finance 2014-1; JPMBB 2014-C24; Master Credit Cards Pass Compartment France series 2014-1; New Residential Mortgage Loan Trust 2014-2; Penarth Master Issuer series 2014-2; Pepper Residential Securities Trust No.13; Saecure 15; Vela RMBS ; Westfield Stratford City Finance
Deals added to the SCI CMBS Loan Events database last week:
BACM 2006-3; BACM 2007-3; BRUNT 2007-1; BSCMS 2005-PW10; BSCMS 2007-PW15; CD 2007-CD5; COMM 2008-LS1; COMM 2014-UBS2; GSMS 2006-GG8; GSMS 2007-GG10; GSMS 2012-GC6; JPMCC 2004-CB8; JPMCC 2004-LN2; JPMCC 2007-CB20; JPMCC 2007-LD11; JPMCC 2007-LD12; JPMCC 2010-CNTR; LBUBS 2005-C7; MESDG CHAR; MLCFC 2007-5; MLMT 2005-CIP1; MLMT 2005-MCP1; MSC 2006-HQ9; MSC 2007-HQ11; MSC 2007-HQ13; THEAT 2007-1; THEAT 2007-2; TITN 2006-5; TMAN 7; WBCMT 2005-C20 & WBCMT 2005-C21; WBCMT 2007-C33; WINDM VIII; WINDM XI