Amongst the flood of deals to close in the last couple of weeks, Deutsche Bank closed a E267 million ($278 million) synthetic securitization of second lien commercial mortgages for Deutsche Hypothekenbank (DHB), a subsidiary of the Netherlands's ING Group. ING Barings and BHF Bank were co-managers.

According to Deutsche, not only was the deal the first German CMBS, it was also the first synthetic securitization of European commercial mortgages.

The credit-linked notes mirror the performance of the reference pool (634 loans on around 370 properties). The mortgages are not removed from DHB's balance sheet as would be the case in a traditional securitization, but they do result in an equivalent transfer of credit risk, allowing the bank to write more mortgages.

"[The transaction] is a cost-effective way for us to transfer credit risk while keeping the assets on our balance sheet. It furthermore diversifies our funding sources and allows us to reach a new investor base throughout Europe," said DHB's Andreas Rehfus.

According to K. V. Prabhakar, head of ABS syndicate at Deutsche, the deal was sold to continental Europe and the U.K., with the senior 3.83 year triple-A tranche pricing at 32 basis points over three-month Euribor. "There is cash around for well-structured, well-priced deals. This is the first German CMBS so people were keen on it because it adds to their diversification," he explained.

The transaction had five other tranches rated between single-A and double-B minus by Fitch IBCA and Duff & Phelps and an unrated first loss piece.

Barclays Goes Global

That there is a bid for the best quality vanilla assets at a good price no matter the time of year was further demonstrated by Barclays Capital, who closed a much-anticipated global credit card deal worth $1 billion.

The deal, called Gracechurch Card Funding No. 1 and backed by Barclays Bank's sterling-denominated credit card portfolio, was split into a triple-A tranche worth $900 million, a $50 million piece rated single-A and a $50 million piece rated triple-B.

The decision to issue in dollars was reportedly partly made because of the basis swap pick-up between sterling and dollars and partly because it guaranteed the widest possible distribution and greatest liquidity.

Pricing was over one-month Libor and came in at 18 basis points over, 43 over and 90 over respectively. The deal was oversubscribed with well over half going to American investors, with the rest placed with investors in the U.K., continental Europe and the Middle East

Masterful Paribas

Elsewhere, Paribas was busy securitizing mortgages for its real estate lending subsidiary, UCB, via the sixth transaction in the Domos series.

Unlike the previous deals in the series, the latest transaction, called MasterDomos 1999-1, is issued through a revolving structure, itself called MasterDomos, which resembles a U.S.-style master trust. Taking advantage of French regulatory changes introduced in 1997, the vehicle is able to acquire new loans as loans in the initial pool are repaid and also to issue further series of notes.

According to Fitch IBCA, because the vehicle can purchase additional portfolios, investors should be aware that the make-up of the assets might change significantly over time. While credit enhancement and excess spread are shared between this first deal and any later ones, principal redemptions of loans will be allocated to series whose proceeds have been used to purchase the specific loans.

"Fitch IBCA will adjust credit enhancement requirements for each new issuance in order to maintain credit risk compatible with the outstanding ratings," the agency said.

The initial transaction backed by 35,000 housing loans was worth E1.525 billion and was split into five triple-A rated fixed rate and floating tranches and a single-A rated subordinated floater. Ratings came from Fitch and Standard & Poor's.

Paribas has clearly been won over to the advantages of master trust-like structures, having earlier established a revolving vehicle, called Master Noria, to securitize loans originated by its consumer finance subsidiary Cetelem.

The transaction was Paribas' second housing loan-backed deal in as many weeks, after closing a deal worth E959 billion for Electricite de France (EDF). The deal, called Electra 1, is backed by 52,000 fixed rate housing loans extended by EDF and Gaz de France to their employees.

It was split into four fixed rate tranches, rated triple-A by Fitch and Moody's, and a subordinated chunk rated single-A and Aa3 respectively.

According to an EDF official, the deal will allow the company to reduce its debt burden and fund expansion into the European electricity market. Further transactions backed by similar assets are likely, the official said.

Don't Forget The Spanish

Not to be left out, Spain's Banco Santander Central Hispano was in the mortgage-backed market with a E519.2 million deal, split into two tranches and lead managed by Morgan Stanley Dean Witter. The triple-A rated senior tranche had a 5.1 year average life and pays three-month Euribor plus 27 basis points; while the subordinated tranche has an average life of 10.4 years, was rated single-A and pays 75 basis points over.

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