They promised the expansion would happen, and they weren't lying. After delivering its platform capabilities to Austria, KfW, the German-based government-sponsored bank, has moved into U.K. territory, vowing to conquer new countries going forward.

The firm's latest transaction is a testament to the benefits of partnering with KfW. Not only has KfW managed to bring its synthetic platform onto U.K. shores, but it has managed to launch the largest public U.K. synthetic. Under the Provide Release 2003-1 securitization, the German bank teamed with U.K Egg Banking plc to transfer the risk on a GBP1.75 billion (US$2.8 billion) pool of prime residential mortgages. To investors' dismay, only GBP42 million (US$67.5 million) of the bonds were sold in the initial round, said sources working on the deal.

"The liquidity of the platforms will be increased by more securitization transactions of European portfolios," explained a spokeswoman at KfW. "This leads to a broadening of the investor base, and a growing investor demand entails greater

liquidity."

Accessing a wider market is KfW's main incentive for spreading its wings across Europe. The bank hopes that with the success of its latest deal more issuers will be inclined to ride the Provide platform. The Egg securitization demonstrated what the KfW swap counterparty structure can offer. The 50% risk weighting typically applied to a synthetic structure dwindled down to nil - a first in the U.K, which means that the issuer achieves 100% capital relief.

The securitized portfolio is backed by 31,890 individual loans. Under the capital structure, the two triple-A tranches priced at 40 basis points over Libor, a double-A piece priced 65 basis points and a single-A piece priced at 85 basis points.

KfW is hopeful that as it moves into new jurisdictions, its platform will help circumvent the discrepancies across the various European legal systems. "With more European originators making use of these standardized platforms, we estimate that the standard brought to Europe via our platforms will contribute to a diminution of the fragmentation of the European securitization market," said the spokeswoman.

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