The month of September is only half over and the European securitization market has already priced 27 billion ($34.3 billion) of new deals. With another 20 billion actively marketing expected to price by the month's end, the question remains whether investors will tolerate tight pricing levels. More deals this month are getting done just at their order levels.
"We believe that the European ABS market is beginning to show signs of fatigue, with a staggering supply of transactions weighing on investor appetite," reported Royal Bank of Scotland analysts. "As a result, participants are increasingly getting allocated near or even at their order levels, a marked change from recent trends. We remain watchful of the trend going forward, but, thus far, secondary levels appear to be holding."
New this week is the GBP321.4 million ($608.8 million) Victoria Funding (EMC V) U.K. CMBS transaction from Citigroup's commercial mortgage conduit. The deal is backed by three loans that are secured by 15 properties and have a weighted average LTV of 64.4%. The transaction will offer a 6.8-year senior class, supported by three subordinated tranches.
As for price guidance offered last week, underwriters looked for tighter levels on Douro Mortgages No. 2, the 1.5 billion first and second lien Portuguese RMBS for Banco BPI. The 1.5-year Class A1 notes were talked at a level of four basis points from the five basis point area it was originally talked at. The 1.5-year, double-A rated Class B tranche saw talk lowered to 17 basis points from the high teens, the 7.6-year, single-A rated Class C tranche was lowered to 23 basis points from the mid-20 basis point area, and the triple-B rated Class D tranche was lowered to 48 basis point from the low 50 basis point area. Price guidance was offered on Banco Espirito Santo's 1.4 billion Portuguese RMBS, Lusitano 5. The triple-A rated 5.8-year Class A tranche was talked at the 13 basis point area, the double-A rated 7.5-year Class B tranche was talked in the high teens, the single-A rated Class C tranche was talked at mid-20 basis point area, and the triple-B rated Class D tranche was guided at 50 basis point.
Underwriters began actively marketing three of five tranches for GAT FTGENCAT, a 440 million SME CLO for Caixa Catalunya last week. Of the collateral, 49.7% is linked to first mortgages, two-thirds of which are commercial real estate assets. Generalit de Catalunya has guaranteed the Class A2 tranche, which was preplaced along with the Class B notes. Initial price talk for the 1.0-year, triple-A rated Class A1 tranche was talked at a spread of the six basis point area. The 5.3-year, single-A rated Class C tranche was offered a range of 30 to 33 basis points, and the low triple-B rated Class D notes were talked at a range of 60 to 65 basis points.
Price guidance was offered on Preferred Mortgages' GBP615 million near-prime and sub-prime U.K. RMBS Eurosail 2006-2BL. The 0.97-year Class A1 notes, expected to be split into a U.S. dollar- and sterling-denominated tranches, were guided at a spread of 5.5 basis points and 6 basis point area, respectively. The Class A2, 4.79-year tranche was talked at a spread of 16 to 17 basis points over Euribor, while the double-A rated Class B1 tranche was talked at the 25 basis point area. The Class C1 tranche was talked at 43 to 45 basis points.
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