It was another week of heightened activity in the European ABS market, although the pipeline for new deals is closing up as the year comes to an end. Pricing levels remain relatively decent, sources said, despite heavy issuance. The market showed little sign of traditional year-end spread widening.

The CMBS pipeline continues to deliver, with a heavy load of issues last week from the continent. The E964.1 million (US$1.14 billion) Paris Residential Funding priced its triple-A piece at 38 basis points over Euribor, the double-As at 65, the single-As at 100 and the triple-B plus piece at 205 basis points. Sources at Dresdner Kleinwort Wasserstein noted that, particularly at the senior level, PRF came relatively tight for the asset class, attributed to a more granular underlying collateral than is typical for these deals.

On the German front, a second issue under Deutsche Bank's commercial lending DECO series has been slated as the first true-sale CMBS backed solely by German assets. The E549.3 million (US$643 million) transaction is backed by loans secured on a regional German shopping center located in Oberhausen. It offers investors three tranches at the triple-A. Guidance on the top two tranches is 36 to 38 basis points and 50 basis points, respectively.

"We'll probably see more deals backed by German estates," said one market source. "The German banks' loss of state guarantees means that more banks are developing conduit programs to gain some regulatory capital relief. With commercial loan conduits, they avoid having to weigh these loans."

Morgan Stanley unleashed another deal from the ELOC program, a pan-European deal dubbed ELOC 17. Guidance on the senior tranche came in to 38 basis points from 40 basis points. The deal was expected to price before the end of the week. Backed by commercial mortgages originated in Belgium, France and Italy, ELOC 17 marks the first time a multi-jurisdictional CMBS deal has come to market, said a source close to the transaction.

"People have been hesitant in the beginning because of the different legal system from one jurisdiction to the next, which means that the legal system costs have been more than double for the structure, but it will serve as a pioneer transaction that other people might be able to copy going forward," said the market source.

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