Primary issues continued to drive the European ABS market last week, pushing post-Sept. 11 volume for priced deals to 11 billion, stealing the light from a fairly quiet secondary market.
"Markets tend to be new-issue focused because investors and issuers are more comfortable with pricing," said one market participant. "They tend to view it as fair value and see the ability to dictate the size [of the issue], if need be. In Europe people look into the primary market as an indicator of how things should price in the secondary market."
Priced on the market last week was the Finnish-originated 500 million Fennica No.6 Plc. The deal, originated by the housing fund of Finland, Valtion Asuntorahasto (ARA) and co-managed by BNP Paribas, CSFB and Sampo, was issued in one single tranche of triple-A-rated notes. It is in line with the appetite of the times as many buyers are inclining towards higher rated, structurally secured issues and are willing to pay the right price for it. The notes priced at +24 basis points over the six-month Euribor, pricing one basis point tighter than price talk.
According to analysts at Dresdner Kleinwort Wasserstein, "On the demand side there is a lot of cash to be put to work and most triple-A bonds have proven their safe-haven qualities. Triple-A ABS not only offer a pick-up over plain vanilla issues and governments but also some downside protection due to higher rating stability."
Holmes Financing No.5 sails in on the RMBS wave that has captured the European audience. The deal issued in Switzerland franc (CHF) and Euros totals CHF 400 million in one fixed-rate tranche. At press time the main body of the deal had not yet priced. However, like its predeccesor, Holmes 4, the pricing of the CHF- denominated tranche had priced at mid-swaps level at +11 basis points. The deal was co-managed by Credit Suisse First Boston, Lehman Brothers and Schroder Solomon Smith Barney.
Meanwhile, the French edged into the market with a 170 million deal of unsecured consumer loans, dubbed FCC Libravou FL2. The deal, issued by Cofidis and managed by Credit Lyonnais, is structured in two tranches of floating-rate notes. The 150 Class A, triple-A-rated notes priced at +31 basis points, coming in one basis point wider than original price talk. The Class B notes, rated single-A-minus priced at +100 basis points.
While the last Libravou deal came in one basis point tighter, market analysts expected the recent deal to price at current levels, such as the Fiat deal, which was done at +26 basis points. "Compared to the benchmark French consumer loan Master Noria, this deal paid a significant premium," a Dresdner analyst said. Master Noria priced its Class A, triple-A notes at +30 basis points and its Class B, single-A notes at 47 basis points in May this year.
Morgan Stanley priced the 1 billion Italian NPL for issuer Credito Fondiaro Industriale SpA (Fonspa). International Credit Recovery was issued in five tranches of floating-rate notes and one equity piece. The deal was previously designed to issue its triple-A tranche in both dollars and Euros but scrapped the U.S. portion in the end.
Pricing on the Class A tranche came in at +48 basis opints. The Class B, double-A-rated notes priced at +75 basis points; the Class C notes, rated single-A, priced at +135 basis points and the Class D, rated triple-B, priced at +225 basis points.