May issuance in the European ABS market saw volumes predominately led by RMBS paper, making up about 80% of supply this month. But despite a slower May calendar that has seen volume uptake primarily supported by the giant 5.4 billion (US$6.6 billion) Granite deal, year-to-date volumes have already reached 91 billion (US$111.6 billion). That level is nearly 20 billion (US$24.5 billion) more than volumes recorded at the same time last year.
Last week's activity was once again dominated by a dose of RMBS supply that saw investors take in pieces of the large repertoire of Dutch deals marketing throughout the week. Dealers tested the market's inner limits on Storm 2004 BV's A class, bringing in guidance to 14 basis points over three-month Libor - levels typically reserved for U.K. master trusts - before the week began.
But the buyside held to original talk and priced the deal at 15 basis points for the 5.4-year dated paper. The double-A rated B tranche and single-A rated C tranche both priced at the tight end of talk, at 27 and 38 basis points over Euribor, respectively. The pool consists of first lien mortgages with five months seasoning and an 86.8% weighted average loan to value. "On this basis, the value of the triple-A rated, master trust soft bullet structure has slipped for investors over diversification into one of Europe's next most prolific ABS asset classes," reported analysts at Royal Bank of Scotland.
Perhaps not as ambitious as the 14 to 15 basis point spread guidance on the Storm deal, SNS Bank's Hermes VII still kept its pricing talk at levels close to U.K. paper. It's 1.56 billion (US$1.91 billion) RMBS deal issued via Deutsche Bank Securities and Citigroup Global Markets kept talk for the class A notes at 17 to 18 basis points over and the class B notes were revised inward to 45 to 50 basis points from the 50 basis points area. This was along with the triple-B rated B class that tightened mid-week to 150 to 175 basis point over from 190 to 200 basis point over. The 7.1-year A class priced at 17, B class at 40, the C class at 80 and the D class notes priced at 150 basis points over Libor - all at the tight end of guidance. The provisional pool had a 108.2% LTFV and 16 months seasoning.
Also marketing last week on the Dutch calendar was the 1.25 billion (US$1.53 billion) RMBS transaction for Achmea Hypotheekbank, DMPL IV via ABN AMRO, Deutsche Bank and JP Morgan Securities.
Investors looking for some repose from the heavy Dutch- and U.K.- dominated calendar could look to a new 750 million (US$920.3 million) Greek RMBS deal - only the second issue to emerge from the country following revisions made to Greece's securitization legislation (see ASR 6/30/2003). Themeleion Mortgage Finance Plc issued by EFG Eurobank Ergasias began roadshowing its transaction at the beginning of the week via Citigroup and Deutsche Bank, and is offering investors 693 million (US$850.3 million) of triple-A notes dated at 4.6 years, 32 million (US$39.2 million) single-A notes and a 24.5 million (US$30.6 million) triple-B rated tranche - both of the latter dated at 6.9 years.
With a mortgage portfolio of 3.1 billion (US$3.8 billion), EFG is the third largest bank and mortgage lender in Greece, acording to market reports. The deal securitizes nearly 30% of its lender holdings, and, unlike the debut RMBS issue via Aspis Bank, EFG possesses an investment-grade rating. This rating allows it to circumvent the back-up servicing arrangement with The Bank of Greece presently written into Aspis's RMBS deal earlier this year.
The U.K. also absorbed its share in RMBS headlines last week, showcasing GMAC-RFC's second deal of the year. The GBP1.35 billion (US$2.47 billion) subprime deal issued via joint leads Barclays Capital and RBS Greenwich will include a US$1 billion 2a7 eligible 0.8-year money market piece. All of the tranches are backed by an AMBAC guarantee. The structure will also include GBP652.5 million (US$1.19 billion) of 3.3-year notes, which will be split into sterling, euro and dollar denominations - amounts that will be determined by investor demand. Also, GBP14.6 million (US$26.8 million) in class A3 notes will be offered.
GMAC-RFC priced its earlier deal at 20 basis points over Libor for the three-year triple-A notes, and sources said the current market environment could see pricing on the latest issue come even tighter. "This year, the differential between U.K. prime and subprime has narrowed substantially. However, note that in the past two weeks this has been the result of prime sterling RMBS softening rather than subprime tightening further," added analysts at Dresdner Kleinwort Wasserstein.
Room for more than
Despite predictions made at last year's Barcelona conference that saw the Italian central government securitization program shadowed by smaller regionally based issues, the market has seen virtually no activity until last week. That is when Italy added another dimension to its regional government securitization program via a 51 million (US$62.5 million) real estate transaction for the Italian Region of Friuli-Venezia Giulia.
DEXIA Capital Markets launched and priced P.R.I.M.A. F.V.G. Srl, offering investors a single tranche offering, backed by a regional government guarantee and rated AA' by Standard & Poor's. The primary source of interest and principal will be revenues derived from the sale of real estate properties in the portfolio, consisting of 123 real estate assets sold for the specific purpose of this transaction by the region to the issuer.
"This deal - the first in this asset class originated by a local authority in Italy - has shown that transactions involving a `smaller' real estate portfolio are financially viable for the originator. The main upsides of the transaction are in terms of: allocation of resources, acceleration in the sales process, valorisation of the portfolio," said a spokesperson at Dexia, adding that the group was currently arranging a similar transaction originated by the City of Venice. It should come to the market in the third quarter of 2004.
Also, a new synthetic CMBS from German-based AHBR began marketing last week. The 953.7 million (US$1.16 billion) Castanea One follows the issuer's debut deal from the Provide platform that priced earlier in May. A reference portfolio backs the latest transaction, and it is comprised of 115 loans totaling 2.87 billion (US$3.52 billion). The capital structure includes two triple-A rated pieces, a double-A and single-A rated tranche. It is geographically diversified with 35.0% of the properties located in the U.K., 19.5% in France, 14.8% in Germany, 12.0% in Spain, 11.8% in US and 7% located in "other" regions. The deal is structured with a 12-month replenishment period.
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