A look at the major activity in structured finance over the past seven days
Pipeline
The number of deals entering the pipeline is picking up, with five new transactions remaining at the end of last week. A €1.44bn RMBS from Crédit du Nord (FCT BS CDN PPI) led the way and was joined by a second RMBS after Santander announced Holmes Master Issuer series 2012-1. These were followed by a US$276m student loan ABS (South Texas Higher Education Authority 2012-1) and a US$150m ILS (Vitality Re III 2012-1). Finally, Crédit du Nord also announced a €1.4bn SME CLO (FCT BS CDN ENT).
Pricings
As well as five deals entering the pipeline, five transactions priced. Three of the deals (US$1.6bn Ally Auto Receivables Trust 2012-1, US$226m MMCA Auto Owner Trust 2012-A and US$775m Santander Drive Auto Receivables Trust 2012-1) were auto ABS transactions. Additionally, a US$1.2bn-equivalent credit card ABS (Arran Cards Funding UK 2012-1) and a US$765m student loan ABS (SLM Student Loan Trust 2012-1) printed.
Markets
A positive tone was seen across the majority of the structured finance secondary markets over the past week.
In the US ABS markets, securitised products analysts at Barclays Capital say: "This week's secondary trading was characterised by better buying, with non-mortgage ABS investors in full fledged risk-on mode. The search for spread/yield continued across all non-mortgage asset classes, with broad-based investor participation, resulting in a general spread tightening trend for the sector."
In generic consumer ABS, credit card and retail auto ABS were up to 5bp tighter at the senior level, with mezzanine and subordinate paper 10-15bp tighter week on week, depending on name. In addition, FFELP student loan paper tightened 5bp across average lives, following the pricing of the new issue SLMA 2012-1 transaction.
US CMBS spreads have also continued their move tighter over the past two weeks. "The respite in market volatility over the past few weeks combined with relatively strong economic prints have contributed to the CMBS rally," Citi's securitised products analysts explain. "Spreads widened out a bit on Thursday on news of further liquidations out of the Maiden Lane portfolio, but are still generally much tighter than at year-end," they add. Generic legacy dupers have come in 55bp since year-end, GG10s have tightened by 25bp, AMs are in by 125bp and CMBS 2.0 triple-Bs are in by 75bp.
Last week finally saw the European CMBS market come to life as well. Deutsche Bank CRE debt analysts report: "The European CMBS market has started 2012 on a positive tone, with benchmark names TMAN 6 A and TMAN 7 A both up 3-4 points. BWIC volumes for the week were around €25m, with the majority of activity being over the counter driven."
Meanwhile, the US RMBS market last week saw a continuation of the optimism seen the previous week. US residential credit analysts at Barclays Capital say: "Last week's positive sentiment continued into this week as equities and corporate credit both rallied amid strong government bond auctions in Europe and reduced liquidity concerns in the European banking system. Non-agency cash bonds participated in the rally, with prices generally rising by 1-2 points week on week. In synthetics, the ABX remained relatively flat, while prices in PrimeX rose 1-2 points."
They continue: "Trading volumes picked up as accounts, especially real money, looked to deploy capital in the new year, with the fixed-rate prime and alt-A sectors attracting particularly heavy investor interest. Generally, average daily trading volumes reported by TRACE in the past week have been roughly 50% above the levels of the previous three months."
The European CLO market remains considerably quieter, however. Strategists at Chalkhill Partners say: "2012 opened much as 2011 ended for the European CLO market, with activity muted as expected and volumes low. In the last couple of weeks, activity has been muted as most holders of CLOs are figuring out the strategy for 2012, although there were a couple of BWICs punctuated by DNTs."
Deal news
• Anchorage Capital's chapter 11 plan for the liquidation of the Zais Investment Grade VII CDO has been approved, becoming the first-ever involuntary prepackaged case brought under the US bankruptcy code. It is also the first and only use of chapter 11 to unwind a CDO.
• Assured Guaranty (Europe) has replaced Ambac Assurance UK as financial guarantor and controlling creditor on Worcestershire Hospital SPC, a £97.2m UK Private Finance Initiative bond issue. The move is expected to enhance the creditworthiness of the bonds and was approved by 100% of the voting bondholders.
• Markit iTraxx LevX market makers have determined that a failure to pay credit event occurred in respect of SEAT Pagine Gialle, a constituent of the index and the subject of single name LCDS trades. They have voted to hold an auction in respect of SEAT, scheduled for 17 January.
• A noteholder meeting is being convened on 24 January to discuss and approve two proposals related to the Monastery 2006-1, Monastery 2004-1, Chapel 2003-1 and Chapel 2007-1 transactions. The meeting follows one week after a scheduled meeting to discuss improving reporting and accountability of the security trustee for Chapel 2003-1.
Regulatory update
• The Group of Governors and Heads of Supervision (GHOS), the oversight body of the Basel Committee on Banking Supervision, met on 8 January to discuss Liquidity Coverage Ratio (LCR) proposals and its strategy for assessing implementation of the Basel regulatory framework more broadly.
• Fitch suggests that the recommendations in a recent Federal Reserve white paper on the US housing market are challenging, but some may benefit the private-label RMBS sector. The Fed's commentary recommends policies that limit the growth of the inventory of foreclosed homes and make mortgage credit easier to access.
• GreySpark Partners has released a report examining the expected impact of OTC derivatives clearing from the buy-side, sell-side and third-party vendor perspectives. The report looks at the regulatory picture in Europe and the US, focusing on the MiFID review, European Markets Infrastructure Regulation (EMIR), Basel 3 and the Dodd-Frank Act.
Deals added to the SCI database last week:
Adriano Lease Sec
AyT Celeris Hipotecario I
AyT Goya Hipotecario FTA V
BBVA Empresas 6
CIT Railcar Funding Company series 2011-1
FirstMac Mortgage Funding Trust Series 2-2011
Liberty Series 2011-1 Auto
2011 Popolare Bari SPV
Top stories to come in SCI:
TRACE and ABS liquidity
CDS documentation
US CMBS modification trends
Asian CLOs
Developments in CDS clearing
Future of the infrastructure sector
Recruitment trends