CMBS tops US$6bn in monster week for structured finance

By Joy Wiltermuth

NEW YORK, Nov 18 (IFR) - More than US$6bn in CMBS deals has rolled out in a monster week for structured finance, including likely one of the last trades from the Royal Bank of Scotland (LSE: RBS.L - news) before it shutters its US mortgage unit.

Since 2011, Wells Fargo (Swiss: WFC.SW - news) and RBS have pooled loans into 23 public CMBS deals under the WFRBS shelf, according to SEC filings. But the completion of their latest trade - a US$875m issue called WFRBS 2014-C25 - brings that collaboration one step closer to an end.

"It will not be their last," a source familiar with the situation said. But the unit, along with the rest of the RBS US mortgage business, is in the process of winding down.

Instead of cutting 400 jobs in the US as announced this summer, the banking group recently shifted course to completely exit its mortgage-backed securities, commercial real estate and CMBS sales and trading operations.

The UK government, which is a majority stakeholder, has been pressuring RBS to instead focus on UK retail and commercial banking.

The Wells-RBS conduit priced this afternoon ahead of other multi-borrower CMBS trades, including a US$1.3bn Deutsche Bank-UBS (NYSEArca: FBGX - news) deal and a US$1.25bn Goldman Sachs (NYSE: GS-PB - news) -Citigroup (Swiss: C.SW - news) transaction.

The deal's biggest 9.93-year A5 class of Triple A bonds priced at a spread of swaps plus 85bp, 1bp tighter than a similar tranche of JP Morgan's print in early November, according to IFR data.

But beyond the three conduits, some US$2.5bn in single-borrower and single-asset CMBS deals are also making the rounds with investors, as well as a US$1.2bn Freddie Mac (OTC BB: FMCC.OB - news) agency deal.

FRETTING OVER FLOW

After this week's wave clears, more bonds are being readied.

Bank of America (Swiss: BAC.SW - news) analysts expect some US$21bn in CMBS to print in November and December, a tally that would bring private-label issuance to US$91bn in 2014, according to a report issued on Friday.

And thanks to a heavy refinancing calendar in 2015, deal pace isn't expected to let up anytime soon.

Legacy loans maturing in 2005-era CMBS deals could push next year's conduit issuance to US$70bn-US$90bn out of a total forecast of US$90bn-US$110bn, according to Barclays (LSE: BARC.L - news) analysts.

But away from CMBS originators, whose success is measured by their ability to offload loans into the bond market, not everyone is cheering the current state of play.

Analysts at the rating agencies and investment banks increasingly have raised red flags about the sector's slipping underwriting standards, bigger cashouts for borrowers and rosier cash flow projections than evidenced by historical data.

And they are not alone.

"A myriad of factors make me skeptical of new issuance," said a CMBS bond buyer at a major bank.

"Keeping on top of those small incremental deteriorations in underwriting is worthwhile because, before you know it, the sector is setting itself back to where underwriting went through the floor."

Elsewhere in structured finance, Ford Motor Company (NYSE: F - news) priced a US$1.6bn prime auto trade, while Tal Containers printed its US$266m container ABS bond.

There are still 13 more ABS deals waiting to price.

STRUCTURED FINANCE WRAP FOR 11-18-2014

ABS PRICED:

FORDO 2014-C: US$1.6bn prime auto securitization from Ford Auto. Priced at Swaps plus 24bp on AAA rated A3 tranche down to Swaps plus 70bp on A+ rated C class. 731 FICO seasoned on average around 9 months. Initial excess spread of 4.07% per year. BAML (str), Citi, RBC (Other OTC: RBCI - news) , and RBS.

TAL 2014-3: US$266m no-grow container lease securitization from Textainer. Priced at a 3.3% yield on A rated A class to 4.25% yield on BBB rated B class. Senior/sub with a 5.03 year WAL. RBC (str), BAML, and Wells Fargo.

ABS PENDING:

ACAR 2014-4: US$178m subprime auto securitization from American Credit Acceptance Corp. 15.25% initial OC. Price guidance of EDSF plus 100bp area on AA rated A class down to Swaps plus 400bp area on BB rated D class. Three month pre funding period until February 23, 2015 for US$39m. Weighted average FICO 544, 130.32% LTV. 12.57% of loans with no FICO score. Deutsche Bank (Xetra: 514000 - news) (str) and Wells Fargo.

Apollo Aviation Securitization Equity Trust 2014-1: US$556.3m non-recourse asset backed term loan facility from Apollo Aviation Group. Proceeds to purchase 40 in-production aircraft. WAL 14.2 years. 55% LTV on series A and 72.5% LTV on series B loans. Goldman, DVB Capital Markets, Credit Agricole.

AH4R 2014-SFR3: US$530m single family rental (SFR) 10-year bond from American Homes 4 Rent (NYSE: AMH - news) . Backed by 4,521 homes in 10 states. Third deal from the issuer. LTV is low at 66.3%, versus a 78.9% average of 12 SFR bonds so far, according to Kroll Bond Rating Agency. GS (KSE: 078935.KS - news) (str).

CITEC 2014-VT1: US$750m equipment lease securitization from CIT Finance. Price talk of EDSF plus 40bp to 45bp on AAA rated A2 class to Swaps plus 150bp area on A rated C class. 15.35% initial CE. 39,708 receivables composed of 76% true lease contracts followed by 24% in finance leases. Barclays (str), BAML, and Credit Suisse (NYSE: CS - news) .

Gold Key Resorts: US$144.912m timeshare ABS from Gold Key. 10,509 loans with a weighted average coupon of 15.92%, 116.3 months of seasoning on average and 686 FICO score. Rated Single A to BB by Standard & Poor's. BB&T Capital Markets.

HENDR 2014-3: US$203.265m structured settlement securitization from J.G. Wentworth. Barclays (str) and Credit Suisse.

Hercules Capital Funding Trust 2014-1: US$129.3m collateralized by 29 loans to companies in the life science and technology sectors backed by venture capital. Portfolio balance of US$237.4m. WAL of 2.5 years and 18 month reinvestment period. 3.524% coupon rated A by KBRA analysts. Guggenheim.

HAROT 2014-4: US$1bn prime auto ABS from Honda Finance Corporation. Weighted average FICO of 757 seasoned on average about 13 months. Credit Suisse (str), BNP (Paris: FR0000131104 - news) , SMBC Nikko.

Kilimanjaro Re 2014-2: US$500m catastrophe bond reinsuring earthquakes in the US, Canada, and Puerto Rico from November 2014 to November 2019. Tsunamis are not a risk that are modeled in the loss analysis. Rated A+ by S&P analysts. Deal closes on November 18. Aon Benfield.

NAVSL 2014-8: US$757.6m FFELP student loan ABS from Navient Student Loan Trust. 76,598 borrowers with 20% rehabilitated loans. Price talk of one month Libor plus 30bp to 32bp on AAA A-1 class to one month Libor plus 200bp to 210bp on A rated subs. 5.3% weighted average rate with 116 months to maturity. 91.2% Stafford, 8.8% PLUS/SLS. 65% in repayment, 1.3% in school, 19% in forbearance. Barclays (str) and JPMorgan.

Oxford 2014-1: US$204m collateralized by senior secured loans to life science and healthcare service companies. 56 loans to 46 obligors with an initial balance of US$293.5m, or 30.5% of initial overcollateralization. Portfolio weighted average yield of 10.3%. 96.4% exposure to life science companies. Rated A by Kroll analysts. Barclays.

SDART 2014-5: US$1bn subprime auto ABS from Santander Consumer USA. Price talk of EDSF plus 48bp to 50bp on AAA rated A-3 class to Swaps plus 170bp to 175bp on BB rated E class. 556 FICO, two months seasoning, 93.9% of loans with terms over 60 months. 113% weighted average LTV. 10% initial OC growing up to 17%. Citi (str) and Deutsche Bank.

SPMF 2014-4: US$510m triple net lease ABS from Sprint Realty. Morgan Stanley (Xetra: 885836 - news) (str) and Deutsche Bank.

RMBS PENDING:

FirstKey 2014-1: US$286m prime jumbo RMBS from FirstKey Mortgage, its inaugural securitization. 401 loans with a 70.4% LTV, 767 FICO, and 33% DTI. 13.8% originated by CMG Financial, 9.3% Cornerstone Mortgage, 5.4% Bank of Internet Federal Bank, and 5% Impac. 51.7% California concentration. Third party due diligence conducted by Clayton on 100% of the loans in the pool. BAML.

CMBS PRICED:

WFRBS 2014-C25: US$900m CMBS conduit. Priced at Swaps plus 36bp on A1 down to Swaps plus 340bp on BBB- rated D class. 59 loans on 73 properties. 84.22% LTV and 2.05x DSCR as calculated by Morningstar (NasdaqGS: MORN - news) analysts. RBS (str) and Wells Fargo.

CMBS PENDING:

Colony Mortgage Capital 2014-FL2: US$307.6m CRE CLO. 65.6% occupancy rate of portfolio properties occupied as of October 1. 108% LTV and 1.66x DSCR on first lien. Including US$12.392m mezz loan, 135.2% LTV. Weighted average spread 5.308%, 56.9% WARR and 4.8 years WAL. Credit Suisse.

COMM 2014-FL5: US$557.1m floating rate CMBS conduit securitization. 33 properties located across seven states. All loans are two-year terms with up to three one-year extensions. 94.8% LTV according to Kroll analysts, up to 119.8% including junior mezz debt. Deutsche Bank.

COMM 2014-UBS6: US$1.3bn CMBS conduit. 89 loans secured by 267 properties. 9 years WAL with 4.49% average loan coupon. 100.7% LTV, 1.7x DSCR, and 9.9% debt yield calculated by Kroll analysts. Deutsche Bank (str), UBS, Cantor, and Jefferies.

FREMF 2014-K717: US$1.2bn CMBS multifamily securitization from Freddie Mac. 75 loans. Barclays and JP Morgan.

JPMCC 2014-FL6: US$38.38m CMBS conduit on five commercial and multifamily properties. 2.39x DSCR and 79.9% LTV. JP Morgan.

CLOs PRICED:

Neuberger Berman CLO XVIII: US$512.85m CLO from Neuberger Berman. Priced between Libor plus 148bp on AAA A1 tranche down to Libor plus 525bp coupon on BB rated D tranche. 3.78% weighted average spread. 101 issuers with an average B+ collateral rating according to S&P analysts. Citi.

Northwoods Capital XIV: US$462.5m floating rate CLO from Angelo Gordon. 3.93% WAS. 6.23 weighted average maturity on 104 issuers. Goldman Sachs. (Reporting by Joy Wiltermuth; Additional reporting by Andrew Park; Editing by Shankar Ramakrishnan and Marc Carnegie)