The week set off with an excess of 14 billion ($17.1 billion) circulating in the European pipeline. The strong supply is still maintained by a hearty appetite from investors, with the most liquid deals being well-subscribed and tightening further in secondary trades. "Though ABS investors have generally considered the market in classic supply and demand terms, European ABS over the last 3-1/2 years have demonstrated an inverse relationship," said analysts at Royal Bank of Scotland. "We are not sure how long this inverted relationship can last, especially if supply concerns are realized, but it is breathtakingly holding for now."
Dealers priced Northern Rock's upsized GBP3.75 billion ($6.7 billion) Granite 2005-4 at the wide end of revised guidance for its euro and sterling denominated tranches. The 1.0-year Class A tranches priced at three basis points and four basis points over Libor and Euribor, respectively, for dollar and euro denominations. The 2.4-year dollar denominated class A3 tranches priced at seven basis points, the 4.4-year Euro A5 tranche priced at 10 basis points over Libor and Euribor, respectively, and the 6.9-year sterling denominated class A6 priced at 12 basis points. Along with its size, which was initially offering GBP3.4 billion ($6.14 billion) of notes, average lives were also tweaked for several tranches. The shorter-dated dollar denominated notes were revised to 1.8-year from 2.0-year average lives and the initially marketed 3.5-year notes were shortened to a 3.1-year average life. "Demand proved strong for its sterling denominated 6.9-year A6 tranche, which absorbed the majority of the transaction upsizing, increased from GBP500 million ($903 million) to GBP815.4 million ($1.47 billion)," said analysts at RBS.
GMAC RFC's new GBP600 million ($1.08 million) deal, RMAC 2005-NS3 began marketing last week. All tranches are available in euro or sterling denominations, including 1.0- and 3.5- year triple-A rated notes sized at GBP198.0 million ($357.7 million) and GBP340.2 million ($614 million) equivalent respectively. The structure also has on offer 4.2-year double-A, single-A and triple-B rated tranches. The provisional pool included 7,830 loans with a 74.6% weighted average LTV.
Guidance has been revised for the subordinated tranches of the GBP200 million ($361.4 million) nonconforming RMBS transaction from Rooftop Mortgages, Farringdon Mortgages 2. Spreads on the subordinated tranches were revised to 90 basis point area over Libor from 70 basis point area for the single-A rated, 3.5-year Class M2 bonds, 150 basis point area from 100 basis point area for the triple-B rated notes, 4.7-year Class B1 notes and 375 basis point area from 325 basis point to 350 basis point for the double-B rated Class B2 notes. According to market sources, around two-thirds of the portfolio consisted of interest-only mortgages with a weighted average LTV of 77.5% and 2.7-months seasoning
Lusitano Mortgages No. 4 plc, the latest deal from Banco Espirito Santo gives the market some Portuguese RMBS for variety. A total of 1.2 billion of notes are offered including a 1.134 billion ($1.38 billion) 5.7-year triple-A rated tranche. The provisional pool had a 74.1% weighted average current LTV and 22 months seasoning, similar statistics to Lusitano 3, which priced last November. Marketing was also underway for DMPL V, a 1.25 billion ($1.2 billion) Dutch RMBS for Achmea Hypotheekbank. The provisional pool includes 21,356 loan parts to 10,850 borrowers with a 85.3% weighted average LTV. The DMPL program has performed well so far, experiencing no foreclosures and, consequently, no losses.
On the CMBS front dealers modified the GBP592 million ($1.06 billion) structure for Cornerstone Titan 2005-1 at the triple-B level. The Class F tranche was reduced by GBP35 million ($63 million) and the Class E notes increased. The Moody's Investor Service rating on the F tranche was also dropped. The portfolio includes nine loans on 71 properties broken down into 82% office, 7% self-storage, 5% industrial and 6% other. The loans had a 73.9% weighted average-LTV.
Guidance was issued for REC Retail Parks, a single GBP1.0 billion ($1.8 billion) loan CMBS. All tranches have been provisionally rated triple-A, with a 7.1-year average life, with both euro and sterling denominated notes on offer talked at Libor 25 basis point area. The Class A2 revolving notes have been preplaced. The loan is in two parts - up to GBP800 million ($1.4 billion) term and up to GBP200 million revolver; both to be sized based on investor demand. Collateral is comprised of 16 retail parks for Hercules Unit Trust. The retail parks have approximately 330 leases to 140 tenants with a weighted average 13 year remaining lease term and geographical diversity across the U.K. The loan has a provisional 49.8% LTV. Property acquisitions and disposals are allowed from the portfolio subject to certain criteria, including a minimum of 10 properties and geographic concentration risk.
Market sources said state sponsored transactions from Italy and Greece are expected for coming months. Italy is looking to mandate a 1.5 billion ($1.83 billion) to 3 billion ($3.6 billion) deal backed by revenues from electricity transmission and will likely follow the third SCIP transaction. Rumored to be in the works is a 2 billion ($2.4 billion) Greek securitization of delinquent tax receipts, which should begin to market before year-end.
Meanwhile, price guidance was released for the 550 million ($671 million) balance sheet CLO CM Bancaja 1 FTA for Bancaja that is backed by 181 loans. A total of 492.2 million ($600 million) of triple-A rated notes are offered with a guidance of 18 to 20 basis points over Euribor, along with four subordinated tranches rated from single-A to double-C. The double-C rated notes fund the reserve; however, the rating by Fitch Rating implies probable default, said sources at RBS. The loans are first lien commercial property loans with an average size of 3.3 million ($4.02 million).
Marketing is also underway for Moselle CLO, a global leveraged loan deal for Invesco. The collateral will be split approximately 50% US and 50% European collateral referencing larger more liquid credits. Triple-A, double-A single-A and triple-B rated notes are offered in both euro and dollar denominations. The BBVA 4 PYME FTA, a 1.25 billion deal for BBVA also began marketing. It is backed by a static pool of 6,861 SME loans, 27.3% of which were backed by first lien mortgages. Fast and slow pay triple-A rated notes are offered with 1.4- and 3.3-year average. Unlike many recent Spanish SME CLO deals, none of the tranches benefit from a state guarantee.
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