A look at the major activity in structured finance over the past seven days

Pipeline
The pipeline comprised CLO and auto ABS transactions at the end of last week. The CLOs are: US$290m AMMC CLO IX; US$271.8m Dryden XXII Senior Loan Fund; and US$419m Liberty Island Funding 2011-1. The auto ABS deals are €995.3m Cars Alliance Auto Loans Germany 2011-1 and €573m SC Germany Auto 2011-2.

Pricings
A variety of asset classes were represented in last week's pricings. Among these were three credit card ABS deals: US$325m Nordstrom Credit Card Master Note Trust II series 2011-1; US$400m Discover Card Master Trust 2011-A4; and US$600m Penarth Master Issuer 2011-2. Two auto-related ABS - the US$1bn Volkswagen Auto Lease Trust 2011-A and the US$519.2m-equivalent Bella Trust 2011-3 - as well as an equipment (US$424.2m GE Equipment Small Ticket series 2011-2) and a container (US$200m Cronos Containers 2011) transactions also printed.
Additionally, two CLOs - the US$315m Ivy Hill Middle Market Credit Fund III and the €485m IM BES Empresas 2011-1 - priced. Issuance was rounded out by an RMBS (€2.69bn Record Lion RMBS 2011-1) and a CMBS (US$784m JPMCC 2011-FL1).

Markets
Last week, the ABS market was an island of activity in an otherwise quiet market with little flows in other US securitisation sectors, according to ABS analysts at JPMorgan. The new issue market continued to be busy (see above) and, in the secondary market, flows across most sectors picked up as the new issue calendar started winding down for year-end.
However, the JPM analysts add: "Broader themes are largely unchanged. Due to the low rate environment, investors continue to prefer fixed rates for the carry. Furthermore, the secondary market remains rich relative to new issue."
In US CMBS, Citi securitised products analysts report that as secondary volume picked up to near average levels, senior spreads modestly widened. GG10s widened by 15bp, while new triple-A classes increased by 5bp-10bp. Insurers and pension funds added marginal selling, while money managers and fast money accounts showed increased demand.
Meanwhile, secondary supply has picked up in a head start on year-end activity in European CMBS, according to Deutsche Bank CRE debt analysts, with last week seeing BWIC activity of just over €30m current face and around €20m already in the pipeline for this week. Of last weeks' lists, roughly half the names traded - with execution approximately in line with price talk.
The Deutsche analysts add: "Of recent BWIC activity, probably the execution of Opera METC A (backed by Europe's largest shopping and leisure complex in the northeast of England, with a high quality sponsor in Capital Shopping Centres) at a level just inside 350DM gives a good indication of where the market for high quality paper is at the moment."
Non-agency RMBS saw continued light volumes, with US$1.1bn in for the bid in non-agencies and US$970m in subprime (versus US$800m and US$1bn the previous week), according to MBS analysts at Bank of America Merrill Lynch. Yet, they add: "One brighter spot on the week was a relative increase in investor interest. Demand for super-senior option ARMs and bonds backed by alt-A hybrid collateral saw a pick-up. SSNR option ARMs are down 4-6 points from the end of July, but up about two points from the swoon in prices in October."
The BAML analysts continue: "Alt-A hybrids are down about six points since July as well. After seeing continued lack of interest from investors due to collateral concerns and their lack of carry, this week's revival of interest is encouraging."
Secondary CDO trading has also been on the light side, with month-to-date BWIC volume of US$1.3bn, according to CLO analysts at JPMorgan. They say the lack of supply seems to be holding CLO pricing in, with US double-As to double-Bs tightening by 10-50bp last week.
The JPM analysts go on to highlight US CLO equity, which appears to be shaking off sovereign concerns. "The trade du jour has been in long-dated equity, which has been attracting strong bids due to the longer reinvestment potential. For example, recent bid covers - for example, 2014 end of reinvestment period equity - imply cash prices as high as the US$100+ context," they note.

Deal news
• Freddie Mac is to begin securitising certain mortgage loans that were previously delinquent and that the company has purchased from its related mortgage participation certificate pools. These mortgage loans have been reinstated to current, performing status and have not been modified.
• The Malaysia Building Society has signed an RM1bn agreement with Cagamas to proceed with a recourse securitisation of personal financing receivables and conventional mortgage assets. The transaction was facilitated by Maybank, Affin Bank, RHB Bank and AmBank.
• S&P has published its global methodology and assumptions for rating financial future flow securitisations. The criteria provide a framework for assigning ratings to financial future flow transactions based on a multifaceted approach consisting of: the indicative issuer credit rating for the originating bank; a structural assessment; knock-out features; and a sovereign interference assessment.
• Northern Rock's Granite master trust has endured a difficult few years, but its performance has improved recently. While the programme's popularity with investors is well established, amortisation means that its benchmark status is finite.

Regulatory update
• Fannie Mae and Freddie Mac have released key implementation details for the revised HARP programme (SCI 26 October), in line with market expectations. Overall the changes represent a moderate easing in reps and warranties for FHLMC, with waivers on reps and warranties on old loans being the most prominent.
• The European Commission is proposing to toughen European legislation on credit rating agencies. The proposed draft Directive and draft regulation has four main goals: to ensure that financial institutions do not rely only on credit ratings for their investments; more transparent and more frequent sovereign debt ratings; more diversity and stricter independence of credit rating agencies to eliminate conflicts of interest; and make CRAs more accountable for the ratings they provide.
• The European Parliament has voted into law a regulation to curb short selling and trading in credit default swaps. The regulation requires traders to locate and have a "reasonable expectation" of being able to borrow the underlying from the located party.

Deals added to the SCI database last week:
5180 CLO 2011
Ally Auto Trust 2011-5
American Express Credit Account Master Trust 2011-2
CarMax Auto Owner Trust 2011-3
DT Auto Owner Trust 2011-3
Enterprise Fleet Financing 2011-3
FCC Auto ABS Compartiment 2011-2
Fraser Sullivan CLO VI
Gracechurch Mortgage Financing series 2011-1
Harley-Davidson Motorcycle Trust 2011-2
IM Banco Popular FTYPME III
Mercedes-Benz Auto Lease Trust 2011-B
New York City Tax Lien 2011-A
Nissan Auto Receivables Owner Trust 2011-B
Paragon Mortgages 16
PFS Financing Corp 2011-B
Porsche Innovative Lease Owner Trust 2011-1
Private Driver 2011-3
Race Point CLO V
Sierra Timeshare Receivables Funding 2011-3
SLM Student Loan Trust 2011-3
SMART Trust 2011-4US
Storm 2011-IV
TIB Diversified Payment Rights 2011
Torrens Trust 2011-2
WFRBS 2011-C5
World Financial Network Credit Card Master Note Trust series 2011-A
World Financial Network Credit Card Master Note Trust series 2011-B
World Omni Auto Receivables Trust 2011-B

Top stories to come in SCI:
European CMBS refinancing trends
European ABS relative value
US CLO manager trading strategies
Profile of Solve Advisors
Profile of CastleOak Securities