First CMBS in US$15bn pipeline sets positive tone

By Joy Wiltermuth and Andrew Park

NEW YORK, Sept 8 (IFR) - Wells Fargo and RBS (LSE: RBS.L - news) gave a shot of confidence to the commercial mortgage bond market on Monday, raising US$1.5bn from a conduit deal at attractive rates, ahead of what is expected to be a record month for supply in the sector.

The 129-loan trade, dubbed WFRBS 2014-C22, priced some 3bp-40bp tighter than the last CMBS deal to price in August, according to IFR data, and helped allay fears that issuers would have to pay up following a late summer sell-off.

Bankers now hope the deal will help set the tone for some US$15bn of supply earmarked for this month, which would be a post-crash monthly record.

"[Deals from that Wells] shelf typically price well, but names without the same allure may pay a bit more," said one analyst.

The deal's benchmark Triple A rated A5 class priced at Swaps plus 84bp, which was 6bp inside a similar conduit CMBS bond that printed in August - a Deutsche Bank (Xetra: 514000 - news) and Cantor Fitzgerald US$1.17bn trade called COMM 2014-CCRE19.

The bottom BBB- class on the Wells trade priced at S+345bp, 25bp inside the prior trade, but the most dramatic change was seen in the A- class, which came 40bp tighter than the Deutsche trade at S+190bp.

AAA OR NOT?

The new trade also renewed debate about CMBS loan underwriting standards, and whether Triple A marks can be trusted.

Moody's Investors Service assigned a Aa1 rating to the so-called "junior" Triple A level - the first time since the crash that any rating agency had penciled in lower marks for this type of bond, according to a Bank of America report on Monday.

Fitch Ratings and Kroll Bond Rating Agency both gave their top grades to the tranche.

Moody's rated last month's Deutsche deal, but did not assign marks to the junior Triple As - or any other class below the "bullet-proof" 30% credit enhanced Triple As, according to IFR data.

"What's good is that [the tranche] kept the rating, and at least showed what [Moody's] had done," a second analyst said of the Wells deal.

One the flip side, the analyst said the different approaches by the rating agencies was a concern.

"Unfortunately, it is also a reflection of where credit has gone," the analyst said.

The junior Triple A tranche priced at S+115bp, which was 3bp tighter than the similar 22% credit enhanced slice on last month's deal.

Wells did not respond to a request for comment. RBS declined to comment.

The only other deal to price on Monday was an upsized credit card ABS from Bank of America, BACCT 2014-3, which grew to US$1.1bn from US$750m.

Its sole Triple A rated class priced at one-month Libor plus 29bp, which was 2bps wider than the issuer's second print of the year at 1ML+27bp in May, according to IFR.

STRUCTURED FINANCE WRAP 09-08-2014

ABS PRICED:

BAACT 2014-A3: US$1.1bn credit card ABS upsized from US$ 750m. 2.92 year WAL. 31.75% C/E. Servicing by FIA Card Services. BAML. Priced at one-month Libor plus 29bp versus 27bp for May trade.

ABS PENDING:

CPS 2014-C: US$273m subprime auto ABS deal. Subordination was increased on the A and B classes by 1.25% from the second deal. Weighted average FICO of 568 and LTV of 113.39% consistent with previous deals. Expected to price Tuesday. Citi.

GEEMT 2014-1: US$589.1m equipment originated by General Electric Capital Corporation. 1.63% Class A subordination compared to 1.55% in last year's deal. Pricing Tuesday or Wednesday. Credit Suisse (NYSE: CS - news) and JP Morgan.

GRAIN SPECTRUM II: US$196.545m wireless spectrum-backed ABS. The single tranche was rated BBB+(S&P)/A-(KBRA)/A-(FITCH). Morgan Stanley (Xetra: 885836 - news) (sole str and lead books).

SDART 2014-1: US$1.1bn subprime auto ABS deal. The weighted average LTV rose to 114.01% from 112% on its third deal while the weighted average FICO rose to 597 from 593. Pricing Tuesday or Wednesday. Bank of America (str) and RBC.

WOLS 2014-A: US$734.07m auto lease ABS. 32.2% Camry, 13.7% Corola, 12% RAV4 with 68% of leases concentrated in Florida. The base residual value is 55.99% of MSRP compared to 54.12% in 2013 and 48.65% in 2012. Pricing Tuesday or Wednesday. BAML, Credit Suisse, and Morgan Stanley.

CMBS PRICED:

WFRBS 2014-C22: US$1.266bn conduit CMBS deal from Wells Fargo and RBS. The A4 tranche priced with a 3.376% yield. 110.1% LTV with 25.5% of the pool with an LTV greater than 120% and 12% greater than 130%. Additional subordinated debt increases the total LTV closer to 123.5%, according to Moody's analysts. 29.6% of collateral located in a top tier market.

CMBS PENDING:

COMM 2014-UBS5: US$1.416bn CMBS deal from Deutsche Bank, UBS (NYSEArca: FBGX - news) , and Jefferies. Office buildings, hotels, and retail spaces make up a majority of the loans. 8.6 year WAL with a weighted average loan coupon of 4.63%. Expected to price this week. (Reporting by Joy Wiltermuth and Andrew Park; Editing by Natalie Harrison and Marc Carnegie)