February issuance should fall behind the record-setting 15 billion (US$19 billion) in pricings during January this year, but this is no signal of an overall slowdown. Reports show that more than 10 billion (US$12.7 billion) is already expected for the debut of March.
Year-to-date funded issuance this year has reached 24 billion (US$30.52 billion), more than 12 billion (US$15.26 billion) higher than figures recorded last year. The U.K. is still in the lead, topping volumes with a series of hefty master trust issues that continue to pressure spreads in; Italy retains its second-place spot with a total of 6.47 billion (US$8.22 billion) issued so far this year.
Things may have looked calmer earlier this month but at least another 4 billion (US$5.08 billion) is expected to price before the calendar close this month, said market sources. The heavily oversubscribed Intesa Lease Securities Srl saw spreads come in from guidance. This was attributed largely to the news that the Upper House of the Italian Parliament approved legislation that makes securitized leases non-cancelable in the case of originator bankruptcy.
Late last year, a legislative loophole created a legal uncertainty. It was unclear, in the event of bankruptcy, if a liquidator acting on behalf of the lessor would have the right to terminate a lease contract even if a lessee met all payments. The development stalled what had up to that point been a busy market. At least 2.4 billion (US$3 billion) of lease ABS was postponed as a result.
The Italian Supreme Court responded quickly with an amendment that closed the loophole but the decision was still awaiting approval from the Parliament. Intesa priced a 1.5 billion (US$1.9 billion) securitization, with its two-year class A1 note pricing at 20 basis points over Euribor. The 4.4-year class A3 priced at 30 basis points over Euribor, and the EIF guaranteed class A4 notes priced at 11 over Euribor.
Residential mortgages continue to buoy market activity. On the U.K. subprime front, the markets saw guidance revised to tighter levels for GMAC Residential Funding Corp.'s GBP700 million (US$1.3 billion) non-conforming RMBS transaction with all notes wrapped by Ambac. Three tranches, two of which were split into three currencies, were offered. The euro, dollar, and sterling one-year A1 notes priced at 11 basis points over their respective three-month floating-rate benchmark, while the three-year A2 notes, also offered in dollar, euro and sterling, priced at 20 over. The sterling-denominated 5.8-year class A3s priced at 26 over three-month Libor. All classes came at the tight end of talk.
London Mortgage Company, a subsidiary of Matlock Bank, is marketing a GBP300 million (US$568 million) subprime RMBS deal with all classes offered in euro, dollar and sterling. The capital structure includes 3-year triple-A notes and 3.8-year single-A notes, and triple-B notes. Unlike past subprime deals, this transaction will not be wrapped.
"The market seems to have imposed a floor of around 27 basis points for triple-A paper, with little regard for the benefits of a monoline guarantee," said Merrill Lynch researchers. "Not long ago, a wrap was worth five to 10 basis points, but now the non-wrapped paper, RMS 17, has priced the tightest. With demand for mezzanine paper dragging spreads down to miserly levels, a monoline guarantee may soon not make economic sense."