Investors were left wanting more after the pricing of the first new issue from programmatic Saxon Asset Securities, following its divestiture from Dominion Resources earlier in the month. Even after a restructuring of the offering had many of the classes increasing in size, the issue still continued to tighten throughout the marketing process.
Last Wednesday Saxon sold $650 million of series 2001-2 home equity loan-backed paper via the lead of Greenwich Capital Markets, which was oversold in all classes leading to significant tightening across the board.
During the marketing stage, the largest class of the deal, $149 million of a fixed-rate 3.2-year conforming loan-backed AF1 class was pulled and the collateral was redistributed, beefing up the size of all Group I tranches.
Credited for the deal's success was the fact that Saxon did not tap the market in the second quarter, due to the spinoff, as well as increasingly strong bid for subordinated paper from CDO accounts, a sector-wide phenomenon.
One of the most successful tranches, according to Saxon senior vice president Brad Adams, was the AAA-rated AF5 last cash flow class, with a 7.55-year average life, pricing to yield 90 basis points over comparable swaps, 10 tight to initial guidance, despite being more than doubled in size to $38.65 million, from $18.9 million.
Also of note, with the divestiture from Dominion comes a change away from "gain on sale" accounting to a portfolio accounting method. This new practice will account for securitizations as a financing of loans rather than a sale leading to reduced earnings pressure to securitize assets. This will have the effect of allowing Saxon to time the market with respect to its securitizations, possibly skipping a quarter if necessary.
