SNS Bank securitised approximately EURO680 million worth of Dutch residential mortgages through Hermes II BV.

The transaction was lead-managed by UBS Warburg. The bank launched a similar deal in October of last year, and this is a repeat transaction. Hermes II was divided in two tranches: the EURO621 million Triple A tranche (Moody's/Fitch), with an expected average life of six years, was launched at three month Euribor + 27 basis points; the EURO28 million B tranche, with a 9.8 average life, was rated single A1/A and priced at three month Euribor + 80 basis points; and the EURO16 million tranche was retained by the issuer.

The loans carry a fixed rate of interest until their interest rate reset dates, which are set between June 2008 and March 2012. It is anticipated that SNS or a third party will buy back each mortgage loan seven months prior to its interest-rate reset date.

If SNS or a third party does not buy the mortgages back, they will be removed two months prior to their interest rate reset date through a put option mechanism. The put option is provided by Rabobank.

"We were relatively happy with the pricing achieved, although the initial pricing indication was at around 25 to 23 basis points." said Jeroan Belt of SNS Bank's structured finance department. "We were slightly disadvantaged as a consequence of the volatile market."

Another Dutch MBS came to market a week later. Holland Homes MBS 2000-1 BV launched a total of EURO349.5m. This represents the first public issue of notes originated by DBV Levensverzekeringsmaatschappij, owned by DBV Wintherthur Holding AG, which in turn is part of Credit Suisse. Stater Nederland will act as servicer. The transaction was lead-managed by Fortis Bank and Morgan Stanley Dean Witter.

Holland Homes priced 4bp wider than the Hermes II launched the previous week. But Holland Homes, a first time issuer, had a much longer average life than Hermes II, and was a smaller issue than Hermes II. Given the liquidity and the fact that it was launched in difficult market conditions, the pricing achieved was understandable, said one source close to the transaction, who noted that some large U.K. investors passed on the deal because the spread was too tight.

The transaction was divided into three tranches: EURO334 million in senior Class A floating-rate notes, rated Triple A by Fitch and Moody's and priced at 31 basis points over one month Euribor, with an average life of 8.7 years; EURO11 million mezzanine in Class B fixed-rate single, rated A/A2 by Fitch and Moody's; and EURO4.549 million in junior Class C fixed-rate notes, rated Triple B.

Paul Broholm at Fortis Bank commented that: "The most noteworthy aspect of the transaction is that it involves a true sale of the mortgages. Until now Dutch MBS have used a so-called "silent pledge" to transfer the mortgages to the SPV. A true sale under Dutch law requires notification to the borrowers, which is something that the seller was prepared to do. This gave greater protection to investors."

Rising property prices, combined with a drive towards more efficient balance-sheet management, are encouraging an increasing number of Dutch mortgage lenders to use securitisation as a financing tool, commented Brian Kane, associate director at Standard & Poor's structured finance ratings group in London in a press release.

Against this backdrop of good market fundamentals and substantial stocks of assets, Kane added that there would be an increased drive towards securitisation going forward as Dutch lenders are recognising the benefits that off-balance sheet risk transfer can offer.

"A number of Dutch mortgage lenders have made successful market debuts this year and there is a first tier that has already revisited the market, which bodes well for securitisation," said Kane. "Market feedback suggests that demand for Dutch risk is also on the up." - Courtesy of International Securitisation Report

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