It has been another busy week for European securitizations as the market gingerly takes on the remaining months of this year. Last week, U.K.-based mortgage lender Southern Pacific was in the market with a GBP350 million subprime issue that was hashed out in three tranches of floating-rate notes.
The issue, Southern Pacific Securities C Plc, priced its GBP301.5 million, triple-A-rated class A notes at +44 basis points over the three-month Libor; its GBP28.2 million single-A-plus-rated, class M notes priced at +150 basis points and a GBP20.1 million triple-B-rated class B tranche priced at +275 basis points. The deal was co-managed by ABN AMRO and Lehman Brothers.
According to Dresdner Kleinwort Wasserstein, while the pricing came in wider than comparably rated issues that have been in the market recently, the spreads are in line with the high credit enhancement level required to cover the weaker collateral pool. "Overall the pricing reflects investors' desire for prime underlying and their caution towards assets that would be more exposed to an economic downturn," said an analyst at Dresdner.
Belgium-based Rosy Carat Blue N.V. finally priced its July-launched Rosy Blue Carat transaction. Nomura Securities managed the diamond-backed single- tranche deal that lost some of its sparkle as a result of the September 11 events. Issued as a dollar-denominated deal, the investor appetite for the $100 million, single-A-rated floating-rate tranche was not at an optimum, said an analyst following the deal.
Backed by the originator's stock of rough and polished diamonds, the single- tranche issue priced at +100 basis points.
Pipeline continues to build
Just as one issue prices there seems to be a replacement waiting to debut before year-end and it seems to be open to innovation. Along with the first Swedish-based synthetic, the market last week saw the rumblings of the first securitization of charge and credit receivables originated by Diners Card and payments due from consumers and corporate customers.
Already an anomaly in Europe, this credit card transaction totes the title of the first Pan-European ABS of charge and credit card receivables. The EURO339.4 million transaction initiates what will be a series issued from the Euro medium term note program, Diners Card PLC.
The deal is managed by Schroder Salomon Smith Barney and will consist of two tranches: a EURO324.8 million, triple-A-rated, class A piece with an expected weighted average life three years; and a EURO16.4 million, triple-B-rated class B piece with a similar tenor.
The receivables that originate throughout Europe are generated by four subsidiaries of Diners Club that include its companies in the U.K. and Ireland, Belgium, the Netherlands, Germany and Italy. Four separate special purpose vehicles will purchase the assets originated by these subsidiaries within their respective jurisdiction. According to Moody's Investors Service, it is this multi-jurisdictional exposure that adds a level of complexity to the deal.
Each SPV issues notes, which are purchased by the central SPV, Olympia Securitization Ltd., that create funds for each individual SPV to purchase assets. Dresdner explains: "Olympia issues loan notes to fund its purchase. The senior and mezzanine notes are bought by the issuing SPV, Diners Card Finance Plc, and it issues the rated notes to fund this purchase. The subordinated-loan notes are bought by DCI and provide additional credit enhancement.
"European credit card deals, and especially floating-rate paper, are rare and hence we would expect to see strong demand, although there is additional complexity involved."