After BHW Bausparkasse and KfW Bankengruppe priced the sixth private residential mortgage loan securitization under the PROVIDE platform, it wasted no time in marketing its seventh deal issued under the platform last week.
The PROVIDE Blue 2005-2 deal, which priced last week, has approximately 3.461 billion ($3.9 billion) of securities on offer, backed by both amortizing and bullet loans. Deutsche Bank Securities acted as lead manager of the transaction, which has an average LTV of roughly 52%. KfW takes an intermediary role in these securitizations, assuming the default risk of the underlying loan portfolios on behalf of BHW. At the same time, the risk is transferred to the capital and swap markets under the lead of Deutsche Bank.
BHW's 4.8 billion synthetic RMBS PROVIDE-A 2005-1, has a total of 239 million of five-year triple-A rated notes offered along with four junior tranches. The pool contained 52,000 loans, with a 77.5% weighted average LTV.
Including the synthetic transaction BHW has already carried out, seven transactions totaling approximately 16.5 billion ($19.2 billion) are outstanding under the PROVIDE platform. BHW is the most prolific PROVIDE platform issuer to date and PROVIDE Blue 2005-2 is the third synthetic securitization to be carried out via the PROVIDE platform this year, said a spokeswoman at KfW.
"The liquidity of the platform grows with the continuously increasing number, and the size, of the transactions. Since the launch of the platform back in 2001 we concluded 29 deals with a total volume of 47.5 billion," said the KfW spokeswoman. "From our experience and the feedback we get, the demand for the [credit linked notes] from different investors - for example insurance companies and funds - is increasing, and since the launch of the platform, the investor base has thus continuously broadened."
BHW, acquired by Deutsche Postbank in October, uses synthetic securitizations for its own loan portfolio as an instrument to fine-tune its credit risk and to reduce minimum capital requirements on its liable equity. At the same time, it optimizes its housing loan business.
Following Postbank's acquisition of BHW, the merged entity has become the leading credit provider in Germany, with approximately 14.5 million domestic customers. Postbank's 3Q05 earnings revealed strong growth in new mortgage lending, resulting in a 24.9% year-over-year expansion in its on balance sheet private mortgage book to 27.9 billion.
But loss allowances for loans and advances rose 17% to 791 million versus last December. This provision represented 1.10% of the bank's gross lending - including both private and public mortgages as well as corporate and wholesale lending - compared with 0.93% as of December 2004.
The bank also reported reduced securitized liabilities, which it described as a comparatively expensive form of funding, by 2 billion to 14.5 billion.
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