A look at the major activity in structured finance over the past seven days
Pipeline
Three auto ABS transactions entered the pipeline last week (¥25bn Driver Japan One, €912.3m FTA Santander Consumer Spain Auto 2011-1 and ¥8bn NBL-1112). There were also two US CMBS deals (US$774m CCFRE CMT 2011-C2 and US$374m JPMCC MST 2011-PLSD) and two Atlas catastrophe bonds (US$100m Atlas VI Capital series 2011-1 and €75m Atlas VI Capital series 2011-2). Additionally, JGWPT XXIV - a US$198m deal backed by structured settlements - began marketing.
Pricings
Last week saw a few ABS prints, with the largest deal to price being Foncaixa Consumo 1, a €3bn SME securitisation that had only entered the pipeline the week before. A large US$1.6bn Fosse Master Issuer 2011-2 global RMBS was issued, as well as US$400m Miramax Series 2011-1 Film Library Asset-Backed Notes and US$275m Compass Re (film rights and insurance-linked deals respectively). Also pricing were four European RMBS deals (€883m Quadrivio Finance 2011-1, €1.38bn Stichting Orange Lion 2011-6, €29m Goldfish 20211-1 and €942m Berica Residential MBS 10) and one CMBS (€2.131bn Siena SME 2011-1).
Markets
Risk aversion appeared to fall sharply in some parts of the structured finance secondary markets last week. The most significant driver of this move was the coordinated action taken by the Fed and five other central banks to reduce US dollar funding costs for European banks, according to securitised products analysts at Barclays Capital. Furthermore, they note that risk appetite was bolstered by strong employment data, successful European bond auctions and strong US holiday sales data.
The positive tone in broader markets, carried over to the ABS markets, the Barcap analysts add. "Investor interest remains relatively strong in higher spread/yield product, as well as in generic consumer ABS sectors. The renewed appetite for high-quality consumer ABS has resulted in generally stable spreads across the sector," they say.
Senior retail auto, credit card and FFELP ABS spreads were unchanged on the week, with the exception of three-year FFELP paper, which widened by about 3bp. On the subordinate front, spreads on single-A and triple-B rated auto ABS were generally unchanged.
The same holds for mezzanine and subordinate classes of credit card ABS. Similarly, spreads of the more off-the-run sectors of the consumer ABS arena remained relatively flat.
In contrast, Deutsche Bank CRE debt analysts say that performance in the US CMBS market was rather slow for most of the week. However, Friday morning's employment report sparked some activity. On the week, generic LCFs were 10bp tighter and AMs were 25bp tighter, they report.
Meanwhile, in European CMBS BWIC volumes were around €20m (current face), but - with few names trading - it was another quiet week, according to the Deutsche analysts. "The cover of around 350DM on REC 4 A1 (a retail park where British Land is the largest unit holder in the sponsor) a few weeks ago remains the best barometer of where 'super clean' CMBS is currently trading. Unfortunately, the tone in the market did not improve dramatically in the face of this week's broad-based rally," they say.
Equally, the Barcap securitised products analysts observe that though fundamentals in the non-agency RMBS space continue to be attractive, risk appetite remains muted, as heightened volatility and year-end liquidity concerns are keeping some investors on edge. They note: "Prices were relatively stable w/w, despite the sharp rally in the broader equity and corporate credit markets. The lone exception was with option ARMs, which were up a point. Synthetic indices, on the other hand, participated in the rally to some extent, with ABX and PrimeX indices generally higher by 0.5-1.5 points w/w."
Deal news
• The auction process for Uni-Invest Holdings, which had progressed to the second phase of due diligence, has been suspended. Difficulties of raising debt in the current economic climate against properties similar to those securing the remaining loan in the Opera Uni CMBS were cited as the reason.
• Following the update to Fitch's Dutch NHG-backed RMBS criteria (SCI 6 July), all the affected issuers have confirmed that they intended to restructure the 13 impacted deals. Fitch says it has been provided with updated pool cuts, historical NHG claims submitted to the stichting WEW, historical foreclosure data of the NHG-backed loans and set-off risk assessments.
• Heineken has acquired the Galaxy pub estate, which it had previously managed through its Scottish and Newcastle subsidiary, from RBS for £412m. The move is expected to have a positive impact on senior and mezz Unique and Punch bonds.
• The New South Wales Supreme Court has allowed the restructuring - as approved by its security holders and senior lenders on 22 November - of the Centro Properties Group to proceed, thereby paving the way for the firm to refinance its underlying syndicates and meet the scheduled obligations to Centro CMBS 2006-1 by 20 December.
• Aurelius Capital Management on 30 November gave written notice of its resignation as collateral manager for Aurelius Euro CDO 2008-1. Omicron Investment Management proposed its appointment as successor collateral manager on the same date.
• C-III Asset Management intends to transfer the CDO collateral asset management responsibilities for the ARCAP RESECURITIZATION 2003-1, ARCAP RESECURITIZATION 2004-1, ARCAP 2004-RR3, ARCAP 2005-RR5 and ARCAP 2006-RR7 CRE CDOs to C-III Investment Management. The key employees and technology infrastructure are expected to remain in place.
Regulatory update
• The Reserve Bank of India has implemented guidelines relating to the introduction of CDS for corporate bonds effective from 1 December.
• The OCC has proposed a rule to remove references to credit ratings from its non-capital regulations and related guidance to assist national banks and federal savings associations in meeting Dodd-Frank due diligence requirements in assessing credit risk for portfolio investments.
Top stories to come in SCI:
2012 outlooks: Asian ABS and structured credit; European ABS; US ABS; CLOs; CMBS and credit derivatives.