With the Easter four-day weekend around the corner, European trading on the secondary front dried up by mid last week. Meanwhile, primary pipeline flow focused on pricing deals, as new transactions being marketed slowed to a trickle.
Dresdner Bank announced it is working on a 3 billion ($3.6 billion) balance sheet CLO of corporate exposures, RCL Securitization, which is expected to publicly offer 1.0 billion of notes using Germany's True Sale Initiative (TSI). The transaction will also optimize the bank's balance sheet ahead of the implementation of Basel II capital requirements in January 2007, and follows up on a transaction Dresdner placed via TSI in the beginning of this year. The new deal will consist of a single 1 billion tranche rated triple-A.
A tap of Greene King's pub securitization also began marketing last week. This will consist of new fixed and floating single-A tranches and a new floating triple-B tranche totaling GBP550 million ($965 million). The bonds are backed by 1,750 pubs and pub restaurants, primarily located in the southeast of England. Greene King is U.K.'s third-largest pub operator
The pubco transaction currently has GBP587 million fixed and floating-rate securities outstanding. The tap is expected to offer three new classes of notes that will include a Class A3 GBP170 million single-A rated floating rate tranche; a Class A4 GBP265 million single-A fixed rate note; and a Class B2 GBP115 million triple-B rated floating rate tranche.
The upcoming issue will bring the total amount outstanding to approximately GBP1.1 billion and add a combined 212 managed pubs and 589 tenanted pubs to the collateral. Analysts at the Royal Bank of Scotland, which is also managing the transaction, said the tap was widely expected and therefore already priced into the initial deal.
Secondary trading was patchy over the shortened holiday week. Modest premiums were achieved for recent issues but typically only by a few cents, which amounted to a fraction of a basis point tightening. "The same old story still rings true; this market really needs something to stir it back into action," Dresdner Kleinwort Wasserstein analysts reported. "Having been through a couple of cycles before, retail investors seem happy to sit on the sidelines while spreads are tight and wait until the market goes wider again to get back involved. However, the absence of any bottleneck in new issuance has ensured that street support has not waned, and so this widening that people have been waiting for has not materialized."
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