RMBS emerged as a major theme in last week's relatively sluggish European market, as several mortgage deals from the U.K., Portugal and Spain sought investors.

Permanent Financing No. 6, a GBP3.87 billion equivalent deal from HBOs, dominated the week, pricing at new tights. Citigroup, Credit Suisse First Boston and Deutsche Bank Securities led the benchmark U.K. RMBS deal, divvied up across 16 tranches and denominated in Euros, Sterling and U.S. dollars.

The pricing set tighter spread expectations for the sector, analysts at the Royal Bank of Scotland wrote in their market commentary. The dollar-denominated notes finished at 35 basis points over three-month Libor for triple-Bs with a 0.8-year average life; 45 basis points over for triple-Bs with a 3.1-year average life; and 14 basis points over for double-As with a 3.1-year average life, the RBS analysts noted.

The triple-Bs were well within the previous HBOS issue. Permanent 5, which priced in July, offered dollar-denominated, triple-B rated notes at 50 basis points over for a 0.9-year average life, and 65 basis points over for a 3.1-year average life, the analysts said.

The Euro and Sterling tranches also tested market levels, with the Euro 5.2-year triple-As pricing at three-month Euribor plus 14 basis points and the Sterling 6.8-year triple-As at plus 16 basis points, they said. Comparable notes in Permanent 5 priced several basis points wider - plus 17 for the 5.1-year Euro tranche and plus 19 for the 6.9-year Sterling.

The RMBS options going around last week also included one from Spain and two from Portugal.

A 530 million deal called TDA Mixto 22, reportedly via Banco Santander, offered mortgages originated by five Spanish banks: Granada, Credifimo, Tarragona, Terrassa and Navarra.

And from Portugal, Citigroup had a 281 million deal called Azor Mortgages in the market for Banco International Funchal, while a 1.2 billion deal for Banco Espirito Santo, called Lusitano Mortgages No. 3, was being led by ABN Amro, Calyon Securities, Lehman Brothers and ESI.

But even with the RMBS surge, November got off to a slow start, as the U.S. elections diverted attention, said several analysts, who expected the lull to be brief.

"Market tone remains firm and certain deals are trying to test tighter levels, but more active markets likely will prove whether current levels can go tighter in the face of a likely vigorous yearend," the RBS analysts wrote.

Outside the mortgage sector, one of the more notable deals to start marketing last week was the 468 million PREPS 2004-2, a true-sale German and Austrian SME CLO. The deal, backed by 67 mezzanine loans totaling 616 million, came via HVB and JPMorgan Securities.

It was said to be structured in three tranches. Class A had 253 million of 6.9-year notes with a triple-A rating from Moody's Investors Service. The other two classes had a 7-year average life, with the 19 million in Class B rated A2' and the 9 million in Class C unrated. No price talk was available as of press time.

Other than the deal for HBOS, the European market saw few pricings by Thursday.

However, late in the previous week, Infrastrutture SpA wrapped up its 500 million tap issue, which is the second tranche in series 4.

The 30-year notes - rated Aa2 by Moody's, AA-minus by Standard & Poor's and AA by Fitch Ratings - finished in line with price talk at mid-swaps plus 21 basis points. That's three basis points inside the previous tranche for 1 billion in June, Merrill Lynch researchers pointed out.

The deal, led by Caboto, Dexia and Mediobanca, is part of an ongoing program to finance construction of a 30 billion high-speed railway between Naples and Turin, called Treno Alta Velocita SpA. The notes are backed by revenue from the project.

Also late in the previous week, SG Corporate & Investment Banking priced a 1.46 billion French RMBS deal for 10 banks. The deal, called CIF Assets, had 1.39 billion in a 7.2-year Class A, rated triple-A by Moody's and S&P, at three-month Euribor plus 10 basis points. The remaining 70.9 million in 15.9-year Class B notes, rated A2 by Moody's only, got done at plus 50.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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