Market predictions hint that 2003 could bring record-high issuance volumes, generated primarily by the strength that European asset securitization structures have exhibited in the face of economic stress. While the pace this month has been slow in starting, a trickle of new issues has already made January 2003 busier than the beginning of last year, when strong year-end issuance in 2001 dwarfed January 2002 activity.

RMBS looks set to dominate January issuance. The market kicked of with the US$3.8 billion U.K. RMBS Granite 2003-1 issue - the fifth and largest issue to emerge from Northern Rock's master trust structure. According to Dresdner Kleinwort Wassestein, if the deal comes to market this month it will contribute to the largest issuance seen for January. The deal is co-managed by Salomon Smith Barney and Merrill Lynch. Similar to prior issues, the U.S. dollar tranches dominate the deal, with the Euro tranches the next largest, market sources said.

HBOS plc is rumored to be coming to market with its second Permanent Financing deal. Sources indicate that this next issue could be up to US$6.8 billion in size, but it's likely that the deal will be held until the Granite deal prices.

There are a number of transactions outside the U.K. in the pipeline. Telecom Italia is back with a US$104 million tap issuance to its securitization that priced in June 2001, dubbed Securitization Srl. The deal is expected to launch mid January and will be co-managed by BNP Paribas and West LB. The triple-A class A2 notes are being offered at tight spreads. "The E100 million of triple-A rated, class A2 notes are being offered, which originally priced at 27 basis points over Euribor," reported Royal Bank of Scotland. "The current average life is closer to the Class A1 notes, which came at 19 basis points over Euribor, suggesting they will be sold at a premium."

Locafit has also re-ignited marketing efforts for its US$1.2 billion lease securitization titled Vela Lease. Since its arrival on the market last December, the transaction has undergone some modification of price talk for the class A1 and A2 tranches. The two triple-A rated tranches have price talk at 30 to 32 basis points over Euribor and 42 to 45 basis points over Euribor, respectively. Original talk was 28 to 30 and 40 to 42 basis points over, respectively.

Spanish-based supermarket group Eroski Group is in the market with a E104 million sale/leaseback transaction that includes seven of its supercenters located throughout Spain.

On the CDO front, Helevetic Asset Trust II Ltd began marketing last week - a US$1.7 billion equivalent synthetic balance sheet CDO. The reference obligations total 2380 loans made to Swiss SMEs. In the case of default, the credit-linked notes would take a fixed loss at 45% of the notional, explained one market source.

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