State Street will be selling investments worth roughly $11 billion while taking a $350 million loss on the securities.
The transaction increases its balance sheet flexibility in deploying capital, enhances its capital ratios under the evolving regulatory capital standards and reduces its exposure to certain asset classes.
The primary asset classes and approximate amounts included in this transaction were U.S. non-agency MBS ($4.1 billion) and ABS ($3.7 billion), as well as non-U.S. MBS ($2.5 billion) and ABS ($0.6 billion).
According to market reports, Barclays Capital and Goldman Sachs Group bought most of the securities. Barclays bought some of the deal's ABS. Press reports also indicated that Goldman Sachs bought about $6 billion in non-agency MBs in the sale, almost all of which were below triple-A-rated.
Goldman will be offering the newly acquired bonds to investors, according to a Bloomberg report. "[It] honestly makes me more bullish than I was before," said Jesse Litvak, mortgage-bond trader, Jefferies & Co. "When is the last time you heard of someone taking down six yards in December. It makes the case for paper going higher."
To be sure, Goldman and Citi announced this week its $876 million CMBS deal. The deal, GSMS 2010-C2, is backed by 43 mortgage loans to purchase 108 properties. More than two-thirds of the collateral is either retail or office properties. These are located in 32 states with a more than 10% concentration in Pennsylvania, Ohio, New York and California.
The top-rated class of $347 million with a five-year term provides investors with the protection against the first 17.5% of defaults. The deal is expected to be sold to investors next week.
