A look at the major activity in structured finance over the past seven days
Pipeline
A range of new transactions remained in the pipeline at the end of last week, including a couple of esoteric ABS - the US$400m Miramax Series 2011-1 Film Library Asset-Backed Notes and the US$787.57m TSA Minnesota tobacco settlement revenue bonds series 2011. Rounding out the ABS deals were the US$300m KAL ABS 8 and US$750m Volkswagen Auto Lease Trust 2011-A.
These were joined by two CMBS - the US$1.11bn FREMF 2011-K704 and US$784m JPMC Commercial Mortgage Securities Trust 2011-FL1 - a CLO (US$262m Ivy Hill Middle Market Credit Fund III) and an RMBS (A$712.5m IDOL Trust Series 2011-2).
Pricings
Auto-related ABS dominated last week's pricings, with four prime auto (the US$1.1bn Ally Auto Trust 2011-5, US$1.25bn Nissan Auto Receivables Owner Trust 2011-B, €800m FCC Auto ABS Compartiment 2011-2 and €953m Private Driver 2011-3), three lease (US$500m SMART Trust 2011-4US, US$1.1bn Mercedes-Benz Auto Lease Trust 2011-B and US$661.46m Porsche Innovative Lease Owner Trust 2011-1) and one fleet (US$696.6m Enterprise Fleet Financing 2011-3) deals printing.
Adding to the ABS volume were: the US$812m SLM Student Loan Trust 2011-3; US$1.15bn American Express Credit Account Master Trust 2011-2; and US$69.75m New York City Tax Lien 2011-A. Finally, one RMBS - the US$3.52bn-equivalent Gracechurch Mortgage Financing 2011-1 - completed the issuance.
Markets
Amid Euro-driven volatility and a short trading week in the US, securitisation markets were generally quiet in terms of trading volume last week.
The exception remains the consumer ABS primary market, which "continued to churn out transactions in what seems to be a sprint before the end of the year", according to ABS analysts at Barclays Capital. At the same time, the analysts say that secondary market trading volume remained generally robust, with interest remaining relatively strong in higher spread/yield product such as containers and aircraft ABS.
This resulted in senior fixed and floating rate credit card spreads moving 2-3bp tighter week on week, while other sectors' spreads were unchanged. However, mezzanine and subordinate classes of credit card ABS widened by 5-10bp following pricing of the AMXCA 2011-2 transaction.
Equally in US CMBS, Citi securitised products analysts note that although trading was moderately slow, volatility persisted. "Early in the week CMBS spreads were tightening. That trend reversed with the Wednesday sell-off triggered by the Italian debt contagion. The GG10 duper spread dropped below 300bp before reaching 315bp on Wednesday's close. With the spread back to 305bp in trading on Thursday, the sector actually held up relatively well in the face of another external macro shock," they say.
In addition, the Citi analysts report: "Strong demand continues for the new super senior classes. Spreads tightened on the week by 5bp to 130bp, as the publicly issued, 30% credit-enhanced bonds continue to garner broad appeal."
In the synthetic CMBS space, Deutsche Bank CRE debt analysts note: "TRX II volume increased as investors begin to get more comfortable with the product and see it as a good way to gain levered exposure to a limited supply new issue product." They continue: "TRX I widened by 11bp, a bit less than CMBX, while TRX II continued to grind tighter. The term structure of TRX II was fairly flat week over week, but has steepened 35bp since launch as spread risk has shifted from the front to the back end."
Meanwhile, Barclays Capital non-agency RMBS analysts say: "As the broader markets continue to take their cues from the European saga, non-agency markets followed suit. While the 'risk-on one day, risk-off the next' pattern is not as easy to observe in non-agency markets, we did see more enthusiasm towards the beginning of the week, only for it to wane on Wednesday to some extent."
Non-agency cash prices closed Wednesday marginally higher but mostly flat over the week. The ABX and PrimeX indices, on the other hand, were down by a quarter- to half-point on average.
Deal news
• The likelihood of a break-up of the eurozone has increased over the past few weeks, forcing ABS investors to consider the implications of currency redenomination. Should a country leave the eurozone, analysts expect significant consequences for related securitisations, with large losses on mezzanine tranches and downgrades of senior bonds.
• Investors in CMBS bonds backed by Stuyvesant Town and Peter Cooper Village collateral are likely to face negative consequences following a recent court ruling. Tenants in the properties were granted permission to continue with their US$215m class-action lawsuit against MetLife and Tishman Speyer Properties by the New York Appellate Court, the original case having been dismissed in 2007.
• Fitch has cut its ratings on the Punch A and Punch B pub securitisations by between two to four notches, with the most meaningful impact being the removal of the Punch B class A notes from the iBoxx investment grade index. While not unexpected given the agency's revised criteria for UK whole business transactions (SCI passim), some technical selling pressure on the notes is anticipated as a result of the move.
• Daniel Zimmermann has replaced Manfred Gabriel as the key person on the PULS CDO 2006-1 and 2007-1 deals. This follows the latter's resignation from the board of the portfolio manager, Capital Securities Group, which triggered a key personnel event (SCI 28 September).
• CWCapital Investments has been named as the successor collateral manager for Sorin RE CDO 1, following Sorin Capital Management's resignation.
Regulatory update
• The Australian Personal Property Securities Act 2009 (PPSA), due to take effect in February 2012, could be credit negative for transaction parties. The PPSA will replace 70 state and federal acts, as well as eliminate more than 30 individual securities registers and apply to a host of securitised assets and structures.
Top stories to come in SCI:
European CMBS refinancing trends
Spotlight on Northern Rock's Granite programme
Profile on Solve Advisors