Extended Stay issued the $350million, floating-rate component of its $2.5 billion single borrower CMBS deal this week at pricing spreads that fell within guidance.

The floating-rate notes structured under component A have an initial term of 2-years and fully extended to 5-years. The deal is managed by JP Morgan, Deutsche Bank and Citigroup. Fitch Ratings, Standard & Poor's and Moody's Investors Service assigned preliminary ratings to the deal.

According to one market source, the ‘AAA’ rated, class A-1 FL notes and the ‘AAA’ rated, class A-2 FL notes each priced 10 basis points tighter at 80 basis points over the one month libor and 70 basis points respectively.

The ‘AA-‘ rated, class BFL notes, which were offered at a spread of 125 basis points to 130 basis points, priced at 110 basis points. The ‘A-‘ rated, class CFL notes were talked at 175 basis points and priced at 150 basis points.  

One market source speculated that investor concern over rising interest rates may have driven demand for the floating rate paper. “Everyone is scrambling for yield these days - it's evident in the big ‘BBB’/’BB’ rally in CMBS 3.0 over the last 30 days and in the big rally in legacy for AJs and mezz paper,” he said.  “I would imagine the demand for floating rate paper is pretty high as well.”

The deal also includes the $350 million five-year fixed-rate component B notes that priced late last week. The, ‘AAA’/’Aaa’ rated A-1 and A-2 notes priced at 85 basis points and 90 basis points respectively. The Fitch rated ‘AA-‘, class B notes priced at 135 basis points; the ‘A-‘ rated, C notes priced at 175 basis points and the ‘BBB-‘ rated D notes priced at 254 basis points.

Price guidance for the $1.82 billion seven-year, fixed-rate component was issued and those notes are expected to price today, the market source said. The A1 notes are being talked at 155 basis points; the A2 notes are being offered at 130 basis points; the class-B notes are being offered at 190 basis points; the class C notes are being offered at 225 basis points and the class D notes are being offered at 300 basis points.

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