The U.S. asset-backed market had an aptly international flavor last week, as the largest-ever multi-currency global mortgage securitization priced. In addition, a wide array of assets were marketed including offerings backed by equipment leases (Marlin Leasing), tax liens, and insurance premiums (see p. 13).
The largest U.K. mortgage lender, HBOS plc, brought a $5 billion securitization of foreign mortgages to the global market. Demand for the offering - which offered investors a choice of dollar-, Euro- and Sterling-denominated classes - saw strong demand, leading to a 25% increase in the deal size from the initial $3.5 billion (USD equivalent).
The deal, dubbed Permanent Funding No.1, was led by global bookrunners JPMorgan and Schroeder Salomon Smith Barney with some help from Barclays Capital as joint lead on the triple-A-rated classes only.
Of the total, $2.7 billion was offered to domestic buyers, with the remainder sold in the U.K. and continental Europe. Spreads came in tighter than previous foreign RMBS transactions seen this year, with the three-year senior floating-rate dollar class pricing at 12.5 basis points over three-month Libor, versus 16 to 17 basis points over Libor on all of the comparable classes of Australian and U.K. RMBS transactions this year.
Also seeing interest in Europe was a student loan-backed deal from Arizona Educational Loan Marketing Corp, which priced a $125 million single-tranche five-year offering, of which 40% was placed overseas, according to sources close to the offering. The yield hungry European investors caused spreads to widen from initial talk, pricing at 19 basis points over three-month Libor from indicative levels in the 16- to 17-basis point range. The relatively small amount of supply combined with the infrequency of the issuer was blamed for the widening.
The City of New York securitized $105 million of tax lien receivables, its annual June offering, through Morgan Stanley. The fixed-rate offering, with four two-year classes going down to triple-B, tightened across the board with two-year triple-Bs moving in 11 basis points. JER Revenue Services is servicing the deal.
The strong demand for sub paper was also evident in Mitsubishi Motor Credit's 2002-2 auto loan deal in the market via Merrill Lynch. This is a change for the issuer, as Mitsubishi has seen trepidation from the buyside in past securitizations due to the zero-down, zero-interest and zero-payment incentive loans that have been in Mitsubishi deals since its 2000-1 offering.
In addition to the strong demand for down-in-credit ABS supply, the previous deals from MMCA are just starting to develop a behavioral history. This is the eighth ABS backed by the heavily subvened collateral, and sources close to the deal said a level of investor comfort has developed with Mitsubishi.
While the senior classes came in within guidance, the single-A-rated B class tightened 10 basis points from initial guidance and the triple-B-rated Cs moved in 15. This was just the second triple-B-rated class offered by the issuer. Demand for two-year auto supply continues to lag and the A3 class showed some softness, pricing at 24 basis points over Swaps, sources added.
American Express brought $1 billion of notes backed by its green "charge, not credit" card collateral, the best in the sector. The three-year single-tranche floater priced at five basis points over one-month Libor via bookrunner Banc of America and joint lead manager Barclays Capital.
Late in the week, Chase had also brought a three-year floating-rate card deal - its fourth of the year - with the seniors shopped in the five basis point area over one-month Libor.
Keeping to its word, Household Finance was back in the primary market with its second home equity loan securitization of the year. The $1.29 billion floating-rate deal came as a single 2.4-year class that was wrapped by MBIA, pricing at 30 basis points over one-month Libor. Banc One and Credit Suisse First Boston split the books on the deal.