After a somewhat sluggish start to the year in terms of European issuance, the recent upsurge in activity in June and the start of July suggests that the market is finally catching up with demand. And with more deals in the pipeline, there is every chance that this could be yet another record year in terms of volume and the number of deals done.
According to recent statistics released by Merrill Lynch's ABS/MBS research team, new issuance for the first half of the year reached $37.8 billion, the same figure for the equivalent period last year. The number of deals however exceeded last year's figure of 74, increasing to 84 for the first six months.
Among the most recent deals was a consumer loans deal issued by French finance company, Finaref. Called FCC Odyssee, Compartment Espace, the E217.4 million ($206 million) transaction was arranged by Credit Lyonnaise.
The deal was split into two tranches: E200 million of A class notes, rated Aaa by Moody's Investors Service, and an A3-rated subordinated E17.4 million. The A notes have 4.58-year average lives and the spread on them was 30 basis points over three-month Euribor.
Another new entrant to the market was EBS, Ireland's largest building society. They came to town with a E495 million residential mortgage deal, called Emerald Mortgages No.1. UBS Warburg was arranger, and the deal was backed by around 7,000 mortgages with an average loan-to-value ratio of 70.5%.
The transaction was split into two floating rate tranches. The E473.4 million A notes, rated Aaa by Moody's and AAA by Fitch, carry an average life of 4.9 years and priced at 29 basis points over three-month Euribor. The spread on the junior E21.6 million B notes - rated A2 by Moody's and A by Fitch - was 80 points over Euribor.
Bank Labouchere of the Netherlands has also been active, launching a E787.5 million deal backed by lease payments. Tied to its own asset-backed commercial paper conduit Sunflower, the latest issue, called Lease Assets Backed Notes, was, like Sunflower, arranged and managed by ABN Amro.
The deal was split into a E747.5 million senior tranche, rated Aaa by Moody's, and an Aa2 rated E40 million junior tranche. The Sunflower conduit bought the notes in order to take the assets off the bank's balance sheet and provide a new source of funds.