Lloyds TSB was back in the market again last week toting a top up to its GBP7.015 billion ($13.6 billion) debut RMBS transaction issued just last month. Encouraged by the positive reception, dealers settled in for a second round of financing, issuing GBP3.256 billion under its second deal that began marketing last week.
"We were delighted with the market reaction to our inaugural transaction which was the Lloyds TSB Group's debut public securitization of its own assets," Helen Weir, group finance director, said. "In response to strong demand for the initial issue, we have decided to bring forward our second transaction from this master trust as well as introduce Canadian dollar securities in the new structure to reflect specific demand from Canadian investors."
The Arkle 2006-2 transaction is issued from the same de-linked master trust revolving program as Lloyds' debut deal and is backed by the same collateral as the Arkle 2006-1 transaction - prime residential owner-occupied mortgages originated principally by the group's wholly owned subsidiary Cheltenham & Gloucester plc.
The capital structure will include notes issued in dollars, euros, sterling and Canadian dollars. Lloyds and Citigroup arranged the transaction, with the joint bookrunners being Lloyds (for the non-U.S. notes only), Citigroup and Merrill Lynch. The transaction is expected to price in early December and close in the middle of the month. Lloyds' debut transaction was divided into 25 tranches, denominated in euros, sterling and U.S. dollars, the latter of which was 144A eligible.
So far the reception has been good but a spokesperson working on the deal said that it was still in the early stages of marketing. "The fact that we are a debut issuer in this space and that the deal is backed by highly rated liabilities with a fairly standard portfolio for U.K. RMBS helps the transaction," the spokesperson said.
The U.K. continues to host strong prime RMBS flows. New sellers in the market this year have thus far accounted for 44.8 billion ($58.9 billion). Inaugural deals from Lloyds as well as Alliance and Leicester, Barclays and the Royal Bank of Scotland brought some sought after diversity to the sector.
"Spreads have proved remarkably stable for all ratings, as strong demand mirrored heavy supply," Societe Generale analysts said. "The U.S. dollar bid has provided much demand."
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