Dutch investment bank NIB Capital recently brought to market its largest mortgage-backed securitization to date. The E800 million ($732 million) transaction - called Dutch MBS 00-1 - was NIB's seventh venture into the MBS market and the first time that it has veered away from a straightforward pass-through structure. The bank handled structuring itself and brought in BNP Paribas and Merrill Lynch to help it underwrite the deal.
The underlying collateral came from a pool of nearly 6,000 prime mortgages, originated by four of NIB's wholly owned subsidiaries. The average loan-to-value of the mortgages is 82%, and there is no major geographical concentration in any one area of the Netherlands.
The deal was split into five tranches, four of which were fixed-rate soft bullets and one was floating rate paper. Protection for the two senior tranches - the floating paper and one with a soft bullet maturity - comes from sub-ordination on the three junior tranches and a liquidity guarantee provided by NIB Capital.
The E363 million A1 floating rate tranche - rated Aaa/AAA by Moody's Investors Service and Fitch IBCA - has an average life of 3.94 years and priced at 25 basis points over one-month Euribor. The annual coupon on the Aaa/AAA rated E363 million A2 notes - with a seven-year average life - is 5.875% and the bonds priced at 65.2 over German Bunds.
All of the junior tranches also have seven-year average lives. The A1/A rated E38 million B-notes priced at 103.2 over Bunds with a 6.25% coupon. Pricing for the E14.5 million C-tranche and E11.5 million D-notes - rated Baa2/BBB and Ba2/BB - was 168.2 over and 338.2 over, respectively.
A structured finance official at NIB said the deal was fully subscribed for all the tranches and was happy with its wide distribution. "Between 80% to 90% of the bonds were placed outside of the Netherlands," he said. "We had a wide range of investors because we had a floating rate tranche as well as the fixed rate notes. So we had a lot of bank interest in the A1 tranche and institutional investors for the other notes."
The official was also pleased with the spreads even though it was investor driven. "We benchmarked the transaction against similar deals and got a good execution of pricing," he said. "This is because there is not much outstanding paper in the market at the moment, particularly on the MBS side."