AmeriQuest Mortgage came to market with a $1.2 billion series 2005-R2 deal last week that was apparently unhindered by the company's highly publicized legal troubles earlier this month. In the beginning of February, just as the ABS West 2005 conference was underway, the Los Angeles Times broke that AmeriQuest was being sued in California and 20 other states for improper lending practices ranging from forging documents to lying about borrower's income, in order to qualify them for loans they otherwise could not afford. According to one source, the company made sure to cover its tracks and smooth the way for last week's transaction, which priced inside of initial guidance.

"They talked to investors and made the market comfortable," said a source close to the deal.

Another market source reported that certain tranches of the deal, and not only the subordinated tranches, were six to eight times oversubscribed. "There was a significant amount of global investor demand for this deal relative to deals in the last couple of months," said the source. He also agreed that AmeriQuest's legal troubles did not affect how the deal priced. "The deal would not appear to be affected by any of those issues," he continued.

The deal was split into 19 classes, three of which were not offered, including the largest two of the deal. Those tranches comprised roughly half the deal, and it is routine for large senior tranches to be carved out for purchase by agencies such as Fannie Mae and Freddie Mac. The two most subordinate tranches were sold privately.

The credit enhancement on the deal mirrored that of AmeriQuest's previous AMSI 2005 offering, a $1.48 billion series 2005-R1, in spite of speculation the issuer would need to pad the deal to compensate for the legal troubles. RBS Greenwich Capital and UBS acted as joint leads on the deal, with Morgan Stanley and Wachovia Securities as co-managers.

Copyright 2005 Thomson Media Inc. All Rights Reserved.

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