Many market players found the rather tame start to the new year a bit unexpected. The hefty December calendar promised some spillover, as it was said that issuers, particularly from the CMBS space, would hold on to their deals and wait for a January debut. But the headlines this month have been more about secondary trading action, as market players contemplated benchmark primary pricing levels for the debut RMBS issue of the year. As the month began to wane last week, players finally got a taste of where levels stood - and this came not a moment too soon, because the deal pipeline is starting to flow freely.
Underwriters last week finally priced the generously upsized GBP6.1 billion ($12.1 billion) prime RMBS transaction from Northern Rock's Granite master trust, Granite Master Issuer 2007-1. The first U.K. master trust deal of the year, it was upsized by over GBP700 million. Market sources said that demand for the deal was strong, with the leads successfully pricing the deal at levels inside initial guidance on most tranches. At the triple-A level, the 0.9-year dollar- and sterling-denominated class 1A1 and 1A3 tranches were offered at three basis points, while the $1.45 billion 2.8-year class 2A1 notes priced at seven basis points. The $1.5 billion class 3A1 and 1.65 billion ($2.14 billion) class 3A2 tranches priced at 10 basis points, the 5.4-year class 5A1 notes at 11 basis points and the 6.9-year class 6A1 tranche at a fixed rate for gilts at 51 basis points.
Price guidance was issued on Westdeutsche Immobilienbank AG 404 million Pan-European CMBS, Wilco 2007-1. The triple-A rated 4.8-year Class A tranche was talked at a spread of 18 to 20 basis points and the double-A rated 6.5-year Class B notes were talked at a spread of 30 to 35 basis points over the three-month Euribor. Bookrunners also released price guidance on Bruntwood Alpha, the GBP440 million U.K. CMBS. The triple-A rated 6.9-year notes were talked at 20 to 22 basis points, the double-A rated Class B tranche was talked at 28 to 30 basis points, and the single-A rated Class C notes were talked at a spread of 52 to 55 basis points. The transaction is backed by two non-cross-collateralized, seven-year, interest-only loans.
Traders at Dresdner Kleinwort Wasserstein said that the books are building well for the Bruntwood deal because the deal offers some diversification away from the London office market, and the underlying loans have no subordinated debt held outside the securitization, which is unusual for recent conduit CMBS issues.
Right on the back of Granite's pricing, the first deal from HBOS's Permanent Master Issuer trust was announced. Size and tranching have not been determined, but the deal is expected to launch as part of the February line-up. Dealers also announced VCL No 9, the 970 million auto ABS transaction for Volkswagen Leasing GmbH. The deal is backed by a static pool of German leasing contracts, backed mainly by new vehicles, with a weighted average seasoning of 5.8 months and regional concentration in North Rhine-Westphalia, Bavaria and Baden-Wuerttemberg.
According to market reports Marks and Spencer, a U.K. retailer and supermarket, is expected to redeem its GBP331 million sale-and-lease-back CMBS, Amethyst Finance, issued in December 2001. According to Dresdner traders, the redemption would release properties with an estimated market value of GBP550 million, which the company intends to place in a new property-backed partnership designed to help fund its pension deficit. The transaction consists of two floating-rate tranches, callable at par, and one fixed-rate tranche.
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