Though typically during the summer months the European market slows for the sunshine and vacation, the downpour of deals is lasting well into July. By Wednesday last week, the market had seen at least E6 billion (US$ 6.7 billion) in new transactions.
Among the new transactions was a billfold of U.K.-denominated issues that added some hefty volume to the already rapidly growing whole business sector. On the tail of the Southern Water deal that priced last week was another water securitization led by Royal Bank of Scotland (RBS). The GBP185 million (US$293 million) single tranche offering from the bank's Artesian Finance II conduit is backed by a Financial Security Assurance guarantee and is being marketed with price talks in the Gilts plus 56 basis point area, said bank sources.
A new healthcare deal was added to the lineup, also managed by RBS. The U.K.-based Priory Group originated a GBP205 million (US$325 million) healthcare receivables securitization. Three classes were included under the capital structure offering GBP120 million (US$190 million) of single-A notes, GBP70 million (US$111 million) of triple-B notes and GBP15 million (US$23 million) of double-B notes.
Morgan Stanley also added more cushion to the CMBS market, fresh off of having priced the GBP813.3 million (US$1.2 billion) transaction marketed for the British Broadcasting House (BBC) under the European Loan Conduit (ELOC). The BBC transaction marked the 14th issue launched under ELOC. Its single tranche offering wrapped with an MBIA guarantee, priced at Gilts plus 52 basis points. The new deal, Lolaus, will make it the 15th issue under ELOC and the fourth deal launched so far this year. ELOC 15 is backed by 11 loans on 48 commercial properties and will offer investors exposure to GBP394.3 million (US$625.5 million) of U.K. commercial mortgages.
Moving outside of the U.K., the buyside found some opportunity in Spanish mortgage paper. At least E350 million (US$391 million) is being marketed under the Ayt Hipotecario structure offered as two tranches, rated by Moody's Investors Service, Aaa' and A3', respectively. The Spanish residential mortgages included are from the portfolios of the Caixa Laietana, Caja Ingenieros and Caja General de Granada. It is backed by 7,000 loans with a 59.8% weighted average LTV.
Also from Spain is a transaction following the popular small- and medium-sized-entity securitization structure, FTPYME. The latest is a E1.8 billion (US$2.0 billion) transaction dubbed FTPYME FTE that includes two triple-A rated tranches. A E700 million (US$782 million) piece will be backed by a Kingdom of Spain guarantee, and a second E906 million (US$1 billion) piece is also offered.
Despite the negative rating activity that continues to define CDO transactions, investors still find the time to look at selective structures. Last week, a number of issues were added to the pipeline still dominated by leveraged loan CDOs and CDO of ABS structures.
According to a report from Dresdner Kleinwort Wasserstein, leveraged loan deals are still performing well, and have yet to experience defaults. But analysts added that on the CDO of ABS front, because most deals are still relatively young, it is difficult to gauge a performance history. That said, ABS cash flow CDOs are performing well and synthetic deals referencing triple-A tranches have been stable to date.
Societe Generale was marketing the 100 million (US$111 million) Rainbow CDO of ABS issued under the Claris Ltd. series. Unlike the CDO of ABS structures currently marketing, the Rainbow CDO bucket consists of already distributed flexible mezzanine CDO tranches, said sources. The capital structure will include a total of 14 tranches: half rated triple-A and the other half double-A.
Also marketing was Intermediate Capital Manager's E230 million (US$266 million) managed arbitrage CDO backed by leveraged loans and a E139.5 million (US$155 million) transaction originated by BNP Paribas' leveraged finance arm, which was dubbed Leverage Finance Europe Capital.