MBNA Corp. announced a $370 million fixed-rate deal backed by equipment loans to dental practices through its subsidiary MBNA Practice Solutions, Inc., formerly Sky Financial Solutions, Inc. Sky Financial had been a regular issuer of such deals before it was acquired by MBNA last April, and this is the first securitization from the entity since.

The deal is led by Banc of America Securities, Merrill Lynch and Morgan Stanley, with Sky Financial's former underwriter Red Capital Markets involved in a "selling group capacity," said Thomas Wren, MBNA's group executive and treasurer. Wren said the deal had been slated for after mid-year, and that the flattening yield curve made it particularly attractive to bring the deal now.

"We like this type of funding" said Wren, adding that the deals have good liquidity and help the company manage interest rate risk, as the notes are fixed-rate. The deal also offers term funding that matches the terms of the underlying assets.

The overall loan pool consists of 1,552 secured small business loans to healthcare practitioners. The aggregate principal balance of the pool is $374 million, with an average remaining balance of $241, 089. Approximately 23% of the loans were made to California obligors, with 10.3% of the loans in Texas, and no other state comprising as much as 10% of the obligor base.

Previous Sky Financial deals securitized discounted loan balances and loan payment streams were discounted from their intrinsic rates when securitized, making the actual pool principal balance larger, while excess spread was substantially reduced. With the present deal, loan balances are securitized at their actual face amounts, leaving excess spread fully available to cover losses and fund the reserve account, and there is no prepayment risk to pool principal.

The deal is not entirely backed by dental practice related loans, but includes a small percentage of loans to other types of medical doctors and veterinarians. Wren said the Practice Solutions unit intends to expand its lending to other types of professional practices and that the composition of future deals will likely include higher percentages of those loans. Wren also said future deals from this trust would likely be of a similar size as the present one, as it represents an efficient size for such deals. Wren said it was currently unclear when the next deal from the series will hit the market.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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