With more deals lining up, 2005 is as busy as ever and is set to be another record year for the European securitization market. Market focus remains firmly on new issue activity. Little prospect for competing corporate debt issuance is holding a firm bid for ABS product, with many investors long cash.
Among the new deals marketing this week was Windmere VI, the second deal to come from this series this year. The deal offers GBP704.3 million ($1.2 billion) of notes backed by U.K. commercial properties and follows a trail of CMBS that has saturated the market in recent weeks. Lehman Brothers' Windmere transaction is secured by 10 loans on 20 U.K. properties, including two properties in the Canary Wharf estate. The provisional pool had a 78.2% weighted average LTV and 57% to 38% office-to-retail concentrations. Morgan Stanley represented the largest tenant within the pool, at 15% of passing rent. The structure uses a modified pro-rata pay-down structure until the pool base reaches 50%, at which time payments become sequential. Nearly 70% of the securitized loan balance has additional debt in the form of B notes.
Early in the week, guidance was issued for the GBP592 million Cornerstone Titan 2005, issued by Credit Suisse First Boston and GMAC Commercial Bank. The 4.6-year triple-A rated senior tranche was talked in the 24 basis point area over Libor, and the six-year tranche, also rated triple-A, was talked in the 29 basis point area over Libor. The portfolio includes nine loans on 71 properties split 82% office, 7% self-storage, 5% industrial and 6% other. The loans had a 73.9% LTV.
"We hear that Cornerstone Titan 2005-1 is meeting investor resistance due to vacancy levels in properties," reported analysts at The Royal Bank of Scotland. "Price guidance was adjusted to match demand, which should re-grab investor attention."
On the RMBS front, Kensington Group's 21st deal in its RMS series came on to the radar, as well as a 2.25 billion ($2.75 billion) deal backed solely by guaranteed loans will be issued from NIB Capital's new vehicle, Sound B.V. Kensington's GBP750 million RMS 21 will offer tranches in U.S. dollar, euro and sterling denominations, including a 1.2-year, 2.1 year and 3.7 year class A notes. The provisional pool includes 6,020 loans totaling GBP656.4 million with a 76% weighted average LTV, 18.6% county court judgments, and 2.6% arrears attributed, in part, to the refinancing of RMS 11 in this transaction. The RMS 21 pool is slightly less exposed to London than prior RMS deals and also includes approximately 33% of prefunding.
Frequent Dutch RMBS issuer NIB last week began marketing its first deal backed by National Mortgage Guarantee or NHG loans. An NHG guarantee is considered a government guarantee. According to market reports, the NHG guarantee ensures the repayment of mortgage loans to the lender. If the income is reduced by factors such as unemployment, disability or divorce, the dwelling may be sold, fetching less than the amount still to be repaid, resulting in a residual debt. The fund pays the residual debt to the lender. As a result of this security, a lower interest rate is charged. The most important condition required for eligibility of an NHG is that the dwelling may cost no more than 240,000, including all additional costs such as civil-law notary costs, commission and refurbishment. According to the NHG governing committee, roughly half of dwellings within the 240,000 limit bought last fall are financed by NHG. On average, the fund provides 60,000 guarantees a year.
NIB pre-placed the class A and E notes. Price talk for the double-A rated B class tranches came in the high-teen area over Libor and the single-A rated C class notes were talked between 25 to 28 basis points over Libor and the triple-B rated D class notes were talked in the 50 basis point area over Libor. The provisional portfolio comprised 100% NHG-guaranteed loans to 15,343 borrowers with a 94.7% weighted average current LTMV and 112.4% LTFV after 25 months seasoning.
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