A look at the major activity in structured finance over the past seven days
Pipeline
Three new transactions remained in the pipeline at the end of last week: a US$200.5m auto ABS, Credit Acceptance Auto Loan Trust series 2011-1; a US$50m whole business securitisation, NuCO2 Funding series 2011-1; and a ZAR1.19bn tap of South African RMBS Thekwini Fund 9.
Pricings
Auto ABS prints dominated new issue activity last week, with the US$350m Chesapeake Funding 2011-2, US$99.94m CPS Auto Receivables Trust 2011-B, US$970m Nissan Auto Lease Trust 2011-B, US$879m Toyota Auto Receivables Owner Trust 2011-B and US$625m Volkswagen Credit Auto Master Owner Trust 2011-1 all pricing in the US. Two European auto transactions priced as well: €844m VCL 14 and €600m SC Germany Auto 2011-1.
Other deals to hit the market included: US$1.72bn GS MST 2011-GC5; US$352m Apidos CLO VIII; US$397m State Board of Regents of the State of Utah series 2011-1; €1.1bn Gracechurch Card Funding 2011-4; €1.1bn B-Arena Compartment 2; and A$1.5bn-equivalent National RMBS Trust series 2011-2.
Markets
US ABS investors felt the effects of equity and rate volatility, as well as European economic and sovereign risks last week as secondary liquidity diminished and tiering grew even more pronounced, according to ABS analysts at JPMorgan. "Investors continue to prefer short, plain vanilla benchmark ABS for their safe-haven status, while demanding more spread concessions for everything else," they add. On the week, prime auto loan ABS spreads held up the best, while private student loan ABS spreads underperformed the most.
At the same time, the primary US ABS market saw US$3.3bn of supply in the week, US$2.5bn of which came from autos. Year-to-date supply currently stands at US$95.9bn, compared to US$82.9bn for the same period last year, the JPM analysts say.
Meanwhile, JPM CDO analysts say that year-to-date global CLO supply reached US$10.6bn last week and is now in their forecast US$10bn-US$15bn range for 2011. The CLO market's achievement has not come without cost, with pricing wider to levels not seen since the start of the year.
As with ABS, US CMBS secondary market trading continues to follow broader macro sentiment to a large extent. "Volatility is keeping some investors on the sidelines for now, two-way flows are becoming increasingly muted and most players are marginally better sellers. Real money players were fairly active this week, but fast money accounts are on the sidelines for the time being (except for some moderate activity in synthetics)," say Citi securitised product analysts.
However, they note that in contrast to August trading, there was no sense of panic in the CMBS market last week, despite a number of major developments on the macro front and another surge in broader market volatility. CMBS credit spreads only widened modestly, while dupers and DUS held up well. So, the Citi analysts say: "From this perspective, CMBS market sentiment is holding up somewhat better than other sectors."
Deal news
• The Oberpollinger property backing Fleet Street Finance 2 has been sold for €194m, with proceeds to be used to prepay the loan on the October IPD. As funds continue to be applied sequentially, the sale will benefit the class A notes. According to European securitisation analysts at RBS, it had been expected that - for meaningful sales to occur - the market would take time to get comfortable with the covenant of the restructured Karstadt operator.
• P&G SGR has announced the results of its tender offer for the Zoo ABS 4 CDO. It accepted a notional amount of €15.86m at a price of 70 for the A1B bonds.
• Dock Street Capital Management has been retained to act as liquidation agent for Highridge ABS CDO I. The property will be sold to the best qualified bidder in two public sales scheduled for 28 September.
• Citi has commenced a cash tender offer to purchase outstanding Skytop CLO income notes. For each US$1,000 unpaid principal amount of income notes validly tendered, the bank will pay US$400. The offer is scheduled to expire on 14 October.
Regulatory update
• The US SEC is set to propose a rule intended to prohibit certain material conflicts of interest between those who package and sell ABS and those who invest in them. The proposal, which the Commission says is not intended to prohibit traditional securitisation practices, implements Section 621 of the Dodd-Frank Act.
• Fitch believes that an increase in covered bond and structured finance issuance volumes is likely to be one of the consequences of the removal of implicit state-support for large UK banks. The creation of ring-fenced and non ring-fenced banks in the UK will likely see ring-fenced banks using structured finance debt to partly fund their assets and using covered bonds and structured finance in non-ring-fenced banks to lower their borrowing costs.
Deals added to the SCI database last week:
Ally Master Owner Trust 2011-4
BMW Vehicle Owner Trust 2011-A
CarMax Auto Owner Trust 2011-2
CNH Equipment Trust 2011-B
Discover Card Master Trust 2011-A3
Entergy Louisiana Investment Recovery Funding I
GE Capital Credit Card Master Note Trust 2011-3
Holmes Master Issuer 2011-3
JPMCC 2011-C5
Morgan Stanley Capital I Trust 2011-C3
Top stories to come in SCI:
CRE portfolio sales
Prospects for Trups CDOs
ABS recruitment trends
Collateral management as a new investment discipline
Alternative ways of addressing contingent capital needs