Permanent Master Issuer Trusts final placement was tighter than spread guidance and demand was higher than expected. The positive reception is likely to lead to other U.K. master trusts tapping the market in the near future, market analysts said.
The latest issue under the trust saw its class A1 note indexed to three-month Libor retained, the class A2 priced at 170 basis points, over the three-month Libor and class A3 notes priced at 170 basis points over the three-month Euribor. The class A2 notes were partially placed with JPMorgan and the class A3 notes were publically issued.
Unicredit analysts noted that the deal had a considerable weighted average life despite the short-term paper of senior auto ABS notes currently marketing, which indicates that investors are willing to accept such maturity. Eventual extension risk in the deal is mitigated by a mandatory call by Lloyds at five years after issuance.
The deal is also structured as a classic ABS transaction and is not a kind of commercial property covered bond like the U.K. Tesco deal.
The fact that Permanent notes have been issued when some auto ABS and the second Tesco deal are tapping the market is further boosting confidence in the market and indicates that demand is picking up again across different asset classes, Unicredit analysts said. We clearly see a risk transfer and a transfer of funds, which are the two basic principles of securitization. This indicates that risk is regarded as acceptable for the currently offered spreads and that the lack of liquidity nightmare will end in 2010.