The European residential MBS market sprang to life again last week, as the third securitization of prime mortgages from SNS Bank's Hermes program was being actively marketed. The deal is being led by ABN Amro and SNS Financial Markets, and launch is scheduled for June 19.

The transaction, for EURO900 million, consists of three floating-rate pieces: a EURO831 million class A tranche with a 5.7-year average life, rated triple-A, an EURO50 million B class (mezzanine) rated A1/A, and a EURO19 million junior piece rated Baa1/BBB. The last two pieces each have an eight-year average life.

The class A tranche is being price-talked at Euribor plus 24-27 basis points, while the class B is being gauged in the plus-70 basis points area, and the class C at plus-135 basis points.

The deal has a reference portfolio consisting of 6,715 first-charge mortgages with an outstanding balance of EURO837 million. The follow-up transaction, Hermes 4, is scheduled to appear sometime in the fourth quarter.

KfW's PROMISE program will produce another issue in the near future, sources said, this time from DG Bank, who is going to be issuing a synthetic CLO.

The structure of the deal is expected to be similar to the last PROMISE issue, which was launched in May and led by Dresdner KW.

That deal, known as PROMISE K 2001-1, was reference to a pool of EURO1 billion of loans to small and medium-sized companies. However, due to reasons related to capital efficiency, only EURO57.5 million was offered publicly. DG Bank intends to execute its deal in a similar manner.

According to sources, DB Banks intends to launch a lease-backed transaction for a German company after the launch of its synthetic CLO. The originator has not yet been announced.

Also last week, Royal Bank of Scotland (RBS) was preparing to price a deal for Paragon Group. The securitization consists of three tranches and it is backed by secured and unsecured consumer loans. It is set to price sometime this week.

The transaction totals GBP250 million, and is split into triple-A, single-A and triple-B tranches, in the sizes of GBP175 million, GBP 52 million and GBP 22.5 million, respectively.

Paragon does not have any outstanding triple-A consumer-loan paper, but sources said that the deal would probably price with Libor plus 30 basis points.

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