Kreditanstalt fur Wiederaufbau (KfW) kept the new issues coming recently and launched two new transactions under both its Provide and Promise programs. The firm has become a regular in the market and investor reception is expected to be good, sources said.
Under the new Provide structure, Provide-Blue 2002-1, German-based issuer, home loan and savings bank BHW Bausparkasse AG will securitize its portfolio of private housing construction loans through the KfW platform. This marks the first time a home loan & savings bank has issued through the program.
And while BHW is indeed the first home loan & savings bank to make use of the KfW platform for securitization, the loans securitized are similiar to housing loans made by mortgage banks, said a spokeswoman at KfW. "The main differences are that these loans are linked to a home loan savings contract with a fixed savings rate and the saving contract will - after attaining a certain amount of savings - give access to a low-interest fixed- rate loan for the remaining lifetime of financing needs," she said. "This latter loan is part of the so-called collective business (Kollektivgeschft) of the home loan & savings banks, i.e. the loans in the securitized pool are a kind of prefinancing loans of these home loans, [referred to as] Bauspardarlehen."
The securitization pool covers a volume of approximately EURO1.3 billion. Though the loans resemble housing loans made by mortgage banks, BFW becomes the first home loan and savings bank to employ a synthetic securitization of its own loan portfolio. The prefinancing loans are risk-weighted at 75% and offer "substantial" capital relief for BHW, allowing the bank additional capacity for new loans. Nonetheless, funding and liquidity needs were equally a driver of the transaction, said sources close to the transaction.
"Many home loan and savings banks are in a similar situation and have a business comparable to BHW due to special regulations," said the source at KfW. "They may follow the positive example set by BHW. In the end they will be able to reap the benefits of the standard platform PROVIDE and its extension to home loans, a product now already introduced to international investors. We expect some other transactions under PROVIDE in the coming months.
"Provide Blue 2002-1 familiarizes both rating agencies and investors with the structure of fixed-rate home loans which are collateralized in part by mortgages and in part by building savings accounts. The possibility of securitizing this loan type is of great interest for many German building societies that can use this instrument for regulatory capital relief and in combination with the global loan for funding."
This is the third transaction to be structured under the Provide platform and sources expect that the next transaction will most likely be the securitization of a mortgage loan portfolio of Rheinische Hypothekenbank AG.
On its Promise front, KfW was in the market last week launching a EURO259.7 million collateralized loan obligation of loans made to small and medium-sized German companies. This IKB Deutsche Industriebank AG securitization is said to be the largest yet, both in terms of public note issuance and underlying portfolio volume, offered under the Promise platform. Deutsche Bank acts as lead arranger.
It's the sixth deal under the Promise platform and also the second time IKB issued under the series, said market participants. "The first transaction, Promise-1 2000-1, has not suffered any losses, but has experienced the highest level of delinquencies and defaults of the series," said analysts at Dresdner Kleinwort Wasserstein.
The deal is a partially funded synthetic similar to prior structures that have come under the Promise series. Here, KfW acts as intermediary and sells protection to IKB (See ASR 12/17/01).