Morgan Stanley and Bank of America priced its $1.23 billion commercial mortgage-backed securitization conduit, series 2013-C7 at strong levels.
At closing, the deal’s $102.2 million of class A-1, triple-A rated notes had a weighted average life of 2.64 years; $135.7 million of class A-2, triple-A rated notes had a weighted average life of 4.94 years; $111.6 million of class A-AB, triple-A rated notes had a weighted average life of 7.45 years; $466.3 million of class A-4, triple-A rated notes had a weighted average life of 9.85 years; $123.7 million of class A-S, triple-A rated notes had a weighted average life of 9.96 years; $85.3 million of class B, double-A rated notes had a weighted average life of 9.96 years; and $52.2 million of class C, single-A rated notes had a weighted average life of 9.96 years.
The bank did not disclose details on the $160 million class A-3 notes.
The notes priced at 28 basis points over swap rates with a coupon of 0.738% for the class A-1 notes; 36 basis points with a coupon of 1.863% for the class A-2 notes; 60 basis points with a coupon of 2.469% for the class A-AB notes; 72 basis points with a coupon of 2.918% for the class A-4 notes; 100 basis points with a coupon of 3.214% for the class A-S notes; 155 basis points with a coupon of 3.769% for the class B notes; and 200 basis points with a coupon of 4.189% for the class C notes.
The banks’ triple-A, 4.94-year notes and the class A-AB, triple-A rated notes with a weighted average life of 7.45 years priced within the comparable AAA notes issued by JP Morgan in mid-December, under its conduit deal, JPMCC 2012-LC9. That deal saw the 6.88-year triple-A’s sold at 90 basis points and the 9.86-year triple-A bonds sold at 85 basis points.
Strong demand has contributed to rising prices and lower yields. Analysts at BofA said in a Jan. 4, report that secondary spreads across the board have been tighter since the beginning of the year. The bank said that double-A rated bonds and single-A rated bonds are being quoted in the 165 basis point and 220 basis point area, respectively.
“It has led some investors to question whether CMBS bonds appear ‘rich’ at current levels," analysts at the bank said in the report. “Others have implied that current yields at ‘record’ low levels do not compensate enough for the level of risk inherent in CMBS bonds.”
But the analysts believe that CMBS bonds have not reached “rich” levels, especially relative to other sectors and said that there remains room for tightening for many bonds over the near-term.
The Morgan Stanley/BofA deal was assigned preliminary ratings by DBRS and Moody’s Investors Service. The mortgage pool consists of 64 loans secured by first liens on 123 multifamily and commercial properties, with an aggregate principal balance as of Jan. 1, 2013 of approximately $1.3 billion.