The Federal Deposit Insurance Corp.(FDIC) is prepping a new $367.9 million securitization deal that will be managed by the Royal Bank of Scotland, according to a Reuters report.
The deal, which is a follow up on the FDIC's $409 million 2010-R1 deal, which priced in July 2010, will offer investor a tranche of Class A certificates that will be issued with a U.S. government guaranty.
The Class A bonds will have a fixed-rate coupon, a 15-year legal final maturity of July 2026, and are expected to price at par. The Class M certificates will be offered separately, according to the report.
The transaction will be backed by a pool of residential mortgage loans originated and acquired by seven different failed institutions in receivership.
The deal comes in the midst of mounting concerns of a U.S. government default if no resolution can be made before the Aug. 2 debt ceiling deadline. Citigroup analysts said they see "about a 50-50 chance that the U.S. is downgraded in 2011," but a downgrade to 'AA' will likely have very little impact on the markets.
If the U.S. were to be downgraded, that would mean that all government agencies would also be downgraded thereby rendering government guarantees below triple-A. With that looming threat, market sources said that government-backed ABS bonds continue to trade at a triple-A level.
"Obviously there is a lot going on in the market and spreads are widening but from an issuer perspective, if you have a product to sell I don't think you can wait until things get better because no one knows the answer to that," a market source said. "You have to look at levels today and where the yields are and you can still find value in these bonds."
According to the Reuters report, the FDIC mortgage securitization is slated for pricing on Wednesday.