It was a busy beginning to 2005 and a busy end for 2004, with market estimates nearing 210 billion ($276 billion) for total 2004 issuance. As the market rallied to reach critical mass, the story that emerged was an ever-tightening spread environment that took 2004 into the New Year. With evidence that the demand for European paper is still there, issuers are lining up early to debut their 2005 wares.

The typical year-end widening was not to be found in December with deals pricing at the same tight levels seen throughout the year. "For as far back as we can remember, for the first time, pricing of new transactions did not soften at year-end," reported analysts at Merrill Lynch. "If anything, it seems to have moved tighter. We believe that the tightening bias of December will continue in January, when more trading and issuance comes to market."

Currently in the pipeline is the first-ever dealer floorplan ABS to emerge from Europe. The 850 million ($1.19 billion) deal from France's RCI Banque via Citigroup Global Markets and SG Corporate & Investment Banking. Sources at RCI said the deal would begin roadshowing this week, adding that initial interest for the deal had been good. The securitization will be issued under RCI's Car Alliance program. Two tranches - a triple-A rated A class and a single-A rated B class, each with five-year bullet maturities -with further note subordination acting as credit enhancement. Sources said the deal would include new and used inventory and spare parts financing, with loans made to French Renault and Nissan dealers.

Also in the pipeline is what's being promoted as Northern Rock's first de-linked master trust RMBS structure (see p. 13). The GBP4.5 billion ($8.42 billion) Granite 2005-1 is structured with a smaller portion of U.S. dollar-denominated tranches than in recent past transactions, which is offset by an increase in the euro denominated tranches.

While similar to last year's MBNA Europe Bank de-linked structure, market sources say that some of the differences in structuring make this a very different deal. "Northern Rock issued a prospectus that says it is a de-linked structure but it's not de-linked in the same way the MBNA deal was," added one market source. "This structure includes the reserve that benefits a different series of notes issued independently, and hence, more of a socialist structure - the A, B and C notes still have to be sized proportionately to one another. MBNA employed more of a capitalist structure where each series that is issued has nothing to do with any other series that may be issued from the program."

At 3.79 years, the expected weighted average life of liabilities in the transaction will be longer than those in the Granite deals launched in 2004 and reinforce the issuer's commitment to use securitization as a funding tool rather than a capital tool, according to analysts at The Royal Bank of Scotland. The transaction is expected to begin marketing this week.

KFN Holding is re-offering 450 million ($592 million) of a single loan CMBS backed by 71 office properties. KFN Office Finance I issued via ABN AMRO tops up the issuer's December offering that priced at 21 basis points over Euribor.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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