In what has been a quite period for asset-backed deals in Europe, the only transaction to come to market was a GBP69.4 million securitization for Britain's Keele University.
The deal, which was arranged by BNP Paribas and jointly led by Paribas and the Royal Bank of Scotland, parcels future rents from Keele's student accommodation.
The 30-year final, 22.8-year average bond, called Owengate Keele Plc, was wrapped by FSA, whose managing director, Philippe Tromp, hailed it as a way for the university to access cheap, long-term funding.
"This transaction allows Keele to gain those benefits through a new type of lease structure," he said. "By securitizing its rental income, the university obtains immediate cash to support its programs while reducing its overall cost of capital. It's an approach that should benefit many universities."
The interest on the notes is 6.67% and the launch spread was 170 basis points over the 2021 Gilt. The notes are rated triple-A by Moody's Investors Service and Standard & Poor's, based on the wrap.
They were placed with U.K. pension funds and insurance companies and sold out on pricing, Paribas said. Asset backed pros suggested that interest was keen as such investors need to buy long-dated deals to match their liabilities, but face a dwindling supply as the British government's budget surplus sees it issuing fewer Gilts
The deal is structured with a covenant that obliges Keele to fill the accommodation that backs the deal before any other.
The technique, though the time it has been used in the U.K., is more widely known in the U.S., where universities have been using student rents as collateral for deals for several years.