A look at the major activity in structured finance over the past seven days
Pipeline
Bank of America and Morgan Stanley have begun marketing their US$1.49bn Morgan Stanley Capital I Trust 2011-C3. The deal is first of an expected US$8bn US CMBS new issue pipeline through October, across seven deals, according to Citi securitised products analysts. MSC 2011-C3 includes a 30% super-senior block and a naturally rated AJ class with 19.125% subordination.
S&P estimates that as many as 13 CLOs are also slated to hit the market in the coming months. Meanwhile, a FFELP student loan ABS originated by the Utah Board of Regents entered the pipeline last week and Kensington is reportedly prepping a £200m UK non-conforming RMBS.
Pricings
Four US auto ABS transactions printed last week: the US$1bn Huntington Auto Trust 2011-1, the US$1.26bn Ally Auto Trust 2011-4, the US$900m AmeriCredit Auto Receivables Trust 2011-4 and US$900m Santander Drive Auto 2011-3.
Secondary market
Last week's new issue US ABS pricings were consistent with the spread tiering observed in August, with senior and benchmark spreads holding roughly firm, and subordinate and off-the-run spreads wider than levels at the start of summer, according to JPMorgan analysts. However, they add that despite the spread concessions, the transactions were upsized to reflect strong demand from a broad investor base - front-end triple-A tranches in particular were most heavily oversubscribed.
There was decent investor interest in the secondary market as well. Auto ABS remained somewhat better bid in secondary than in new issue. Supply in secondary remains a limiting factor; in particular, plain vanilla FFELP ABS paper has been increasingly difficult to source.
Meanwhile, in the US CLO market post the pricing of Golub Capital's deal the week before last, YTD issuance volume stands at US$8.7bn. In CLO secondary, BWIC volume for September so far is up to about US$788m.
Deal news
• The English High Court ruled last week that a sequential pay trigger in Fleet Street Finance 3 hasn't been breached. The dispute about whether a trigger was breached resulted in repayment proceeds of the GSW and other loans being partially withheld. The Saxony loan is now deemed not to be in material senior default and withheld principal proceeds are expected to be paid on the October IPD, according to CMBS analysts at Barclays Capital.
• TIAA-CREF has reportedly acquired the 1616 N. Fort Myer Drive property from Beacon Capital Partners for US$145.5m, representing the sixth property sale from the modified Beacon-Seattle portfolio. CMBS analysts at Barclays Capital expect some interest shortfall reimbursements and principal pay-downs to consequently hit the six affected CMBS in the coming remittance periods.
• Credit watch resolutions linked to S&P's 2010 counterparty criteria dominated the agency's European structured finance rating actions in 2Q11. The agency took 937 rating actions in the quarter, comprising 812 downgrades and 125 upgrades, compared with 240 downgrades and 72 upgrades in the previous quarter.
• Codean has released its annual update on the maturity profile of leveraged loans underlying CLO deals. A comparison between this year's and last year's maturity profiles illustrates that refinancing efforts already made have resulted in a significant reduction in the value of loans due in 2012-2014 and a corresponding increase in the volume of collateral maturing in 2016, 2017 and later.
• In what has been described as an unprecedented move for the agency, Fitch has upgraded a tappable transaction, raising both the class A and B notes of Dignity Finance a single notch to A plus and triple-B plus respectively. The upgrades are mainly driven by the deal's strong performance to date, the agency says.
• Fitch is proposing to revise its mortgage loss criteria for South Africa. The agency has maintained South African RMBS notes on rating watch negative while it solicits feedback from market participants on the new criteria.