A look at the major activity in structured finance over the past seven days
Pipeline
Another US CMBS - the $619m COMM 2011-FL1 - entered the pipeline last week, together with a New Zealand auto lease ABS, the NZ$250.5m FP Ignition Trust 2011-1. Additionally, HSBC and Lloyds TSB are prepping UK credit card ABS (the latter via the Penarth Master Issuer vehicle), while Nationwide is rumoured to be working on a UK RMBS via its Silverstone programme.
Pricings
Last week saw two auto ABS transactions print: $200.5m Credit Acceptance Auto Loan Trust 2011-1 and $1bn Hyundai Auto Receivables Trust 2011-C. Also in the US, the $603.1m Panhandle-Plains Higher Education Authority 2011-2 and $504.99m GE Equipment Midticket 2011-1 deals priced. Meanwhile, in Europe Clydesdale Bank's £829m RMBS Lannraig Master Issuer series 2011-1 and the €1.72bn Mesena 2011-1 balance sheet CLO closed.
Markets
While mixed economic data and bearish headlines coming out of Europe brought increased volatility to the rates market, the ABS market held in fairly well last week, according to ABS analysts at JPMorgan. With the exception of non-prime auto ABS spreads, which tightened by 5bp, ABS spreads across the rest of the asset classes remained unchanged.
"Liquidity remained solid in benchmark asset classes, while off-the-run and riskier ABS continued to require concessions... Of note, UK RMBS shrugged off the poor economic data coming out of Europe and continued to be in demand in secondary, trading slightly better than levels seen in primary a couple of weeks ago," the JPM analysts add.
In the US CMBS market spread movement was similarly limited. Legacy dupers continued a slight drift wider, with demand almost exclusively coming from banks, while in the AM and best AJ sectors there was improved interest from money managers -albeit with negligible effect on spreads - according to CMBS strategists at Barclays Capital. However, they add: "Somewhat encouraging news in an otherwise challenging market is that quarter-end selling seems to be very limited or virtually non-existent this time, as the Street is still running its inventory at a low level and accounts have not been massively adding CMBS paper at the sector level lately."
In the synthetic CMBS market CMBX volumes were again low last week with most activity seemingly related to short covering, according to CRE debt analysts at Deutsche Bank. "We expect volumes will remain light and price action volatile," they add.
Nevertheless there are high hopes for a new entrant to the sector - TRX.II, which launches today. As Citi securitised product analysts observe, if successful the new indices should help alleviate CMBS warehousing risk by providing a better new-issuance hedging tool compared to existing alternatives.
Finally, the secondary CDO market was deluged with bid-lists during the latter half of the week. Seven BWICs consisting of 67 different items hit the market on Wednesday, comprising European and US CLO assets, as well as ABS CDO and Trups CDO collateral. Two CLO lists - comprising 10 items - did the rounds on Thursday.
Deal news
• Southern Cross, the borrower behind TITN 2007-1, announced that it has transferred 250 homes to new operators. Business purchase agreements have been entered for approximately 70% of the group's care homes, with further transfers to follow this month and next.
• CBRE has replaced Capita as special servicer on the Lloyds Chambers loan securitised in TITN 2006-CT1X.
• A key personnel event has been declared on the PULS CDO 2006-1 and PULS CDO 2007-1 SME CLOs. The clause was triggered by Manfred Gabriel ceasing to be a member of the board of the portfolio manager, Capital Securities Group, with effect from 23 September.
• Henderson Global Investors has been retained as liquidation agent for Avebury Finance CDO. The auction will be conducted in Dublin on 12 October.
• Nomura Corporate Research and Asset Management has sold another CLO - Clydesdale CLO 2006 - to Ares Management. The transaction has been renamed Ares XXI CLO.
• A majority of the controlling class of investors in Belle Haven ABS CDO 2006-1 is proposing to replace NIBC Credit Management with Cairn Capital as collateral manager.
• Fitch has placed 16 US student loan ABS trusts on rating watch negative. The impacted trusts contain more than 20% tax-exempt auction rate securities and have a pool factor greater than 10%.
Regulatory update
• The Basel Committee has agreed on a range of measures to finalise key elements of its policy agenda and to put in place a strong implementation assessment framework. Among the measures is a proposal to introduce capital requirements for banks' exposures to central counterparties.
• The FHFA's Joint Initiative on Mortgage Servicing Compensation is seeking public comment on two alternative mortgage servicing compensation structures. One proposal would establish a reserve account within the current servicing compensation structure; the other would create a new Fee for Service compensation structure.
• The Reserve Bank of India has released a draft of its Revised Guidelines on Securitisation Transactions for public comment. The revisions are mainly concerned with minimum holding period and minimum retention requirements for Indian banks.
• The McGraw-Hill Companies has received a Wells Notice from the US SEC stating that the Commission is considering whether to institute a civil injunctive action against S&P, alleging violations of federal securities laws with respect to its ratings for the Delphinus CDO 2007-1.
Deals added to the SCI database last week:
B-Arena Compartment 2
Chesapeake Funding 2011-2
CPS Auto Receivables Trust 2011-B
Gracechurch Card Funding 2011-4
GS Mortgage Securities Trust 2011-GC5
Mesena CLO 2011-1
National RMBS Trust 2011-1
Nissan Auto Lease Trust 2011-B
SC Germany Auto 2011-1
Sequoia Mortgage Trust 2011-2
State Board of Regents of the State of Utah series 2011-1
Toyota Auto Receivables Owner Trust 2011-B
VCL 14
Volkswagen Credit Auto Master Owner Trust 2011-1
Top stories to come in SCI:
CRE portfolio sales
Prospects for Trups CDOs
ABS recruitment trends
Spotlight on Beacon Seattle CMBS modification
Ramifications of Article 122a guidelines
Impact of Solvency II
CVA special report