Whole business securitization was back at the end of July as Wightlink, a U.K. ferry company that operates short routes from the South coast of England to the Isle of Wight, tapped the markets with a Barclays Capital-arranged GBP135 million ($218 million) deal.

Taking advantage of the competitive pricing and long maturities that securitization offers, Wightlink used the proceeds to refinance bank debt taken out when the management bought into the business in 1995, make payments to shareholders and invest in new ships.

According to a delighted Wightlink official, securitization offered by far the best financing alternative, compared to a stock market listing, unsecured bonds or bank debt. In particular, the deal allowed Wightlink to lock in funds for over 20 years at historically cheap rates.

Barclays said that it had placed the paper with top U.K. institutional investors, including life insurance companies and fund managers.

The bank had considered a more traditional senior/subordinated structure, with a GBP100 million single-A tranche and a GBP35 million piece rated triple-B, but during the marketing process found that investors were keener on strong triple-B paper and that a single chunk would prove most cost effective.

A market observer hoped that Barclays' decision to go for a single tranche was further proof of a deepening of European appetite for paper rated at the low end of the investment grade spectrum. "It's hard to read anything into one deal, but one of the constraints of the European market is the lack of appetite for low rated tranches, hopefully this is a sign that investors are becoming happier to move down the credit spectrum," he said.

One key strength of the deal is Wightlink's dominant position and the high barriers to entry: the Isle of Wight is near enough to the mainland to make the introduction of scheduled flights unlikely, yet far enough away to make a bridge or tunnel uneconomic.

MSDW Sells Italian NPLs

Other deals that came to market in the second half of July included a third transaction from Morgan Stanley Dean Witter parceling non-performing Italian mortgages.

The E120 million ($129 million) deal - like the first two not fully publicly launched - was called International Credit Recovery 3 and backed by assets that Morgan Stanley acquired 1998 and earlier this year from Cassa di Risparmio in Bologna and Italiano di Credito Fondiario.

The transaction, issued via an Irish SPV, was split into a senior tranche worth E110 million, rated single-A by Standard & Poor's and single-A plus by Fitch IBCA, and a retained E10 million junior piece.

According to Morgan Stanley officials, the majority of the paper was sold to investors in Germany and the U.K. and priced tighter than the 140 bps over Libor level of the recent Trevi deal that repackaged non-performing assets for Banca di Roma.

The underlying assets will be managed - essentially liquidated - by a joint venture between Corso Venezia, a Morgan Stanley subsidiary, and Servizi Immobiliari Banche, a company set up by the Italian Bankers Association to manage non-performing assets.

Citibank Crosses the Pond

A more prosaic deal - though still important an important benchmark - was Citibank's first credit card-backed deal denominated in Euros. Until recently, swap spreads had prevented U.S. issuers from being able to fund as cheaply in Euros as in dollars and the predicted rush of issuers crossing the pond had not materialized.

However, with swaps moving in, MBNA decided to tap the Euro market and Citibank has now followed suit with a E1 billion transaction, lead managed by Salomon Smith Barney, with help from WestLB and CDC Marches.

With the deal closing at 42 bps over the five year BTAN - equivalent to 15 bps points over Euribor - and factoring in the four bp swap cost the transaction priced in line with what Citibank would have expected in the U.S., but with the added advantage of tapping several new investors, according to a Citibank official.

Finally, Deutsche Bank brought yet another deal from a Portuguese issuer to market, to further reinforce its dominance in Portuguese ABS. The E101 million transaction, called Silk Finance No. 1, packaged autoloans for Interbanco and Multirent in a senior/subordinated structure. The E92.1 million, 4.5-year average life senior tranche was rated triple-A and priced at 35 bps over three-month Euribor, while the 6.9-year, single-A junior tranche priced at 75 bps over.

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