Barclays Bank kicked off last week by marketing the first U.K. balance sheet CLO of the year, paving the way for what's expected to be a busy season for balance sheet CLO issuance in 2007.

Barclay's first balance sheet CLO of the year, Gracechurch Corporate Loans 2007-1, is structured as a GBP3.5 billion ($6.7 billion) equivalent fully funded synthetic balance sheet CLO. The transaction is backed by 1,832 loans to 1,434 medium- sized U.K. enterprises originated by Barclays Bank Plc and is aimed at providing regulatory and economic capital relief to the firm. The GBP3.43 billion equivalent secured floating-rate notes and the GBP70 million unrated Class G notes are to be issued by Lamdba Finance BV.

The new regulatory environment under Basel II should lead to an increase in bank balance sheet securitizations of corporate assets generally, and SME and large corporate loans specifically. "The demand for first loss pieces has also increased significantly, mainly from the hedge fund community, and as such we expect to see more originators looking to offload their retained first loss exposures in light of Basel II," Dresdner Kleinwort analysts said.

So far, 23 managers issued their first European CLOs in 2006. Six more are set to enter the European market in the first quarter of 2007. "One can expect that most of these new entrants are targeting to reach a critical mass of around 2 billion ($2.5 billion) of loan assets under management both to justify the costs of setting up CLO business and to ensure good access to primary market loan allocations," Royal Bank of Scotland analysts said. They estimated that existing European transactions would also create built-in demand in the range of 15 billion to 20 billion. CLOs also face increased competition for European assets from hedge funds, and from U.S. prime rate funds.

Other deals in the market

Also in the market this week is Northern Rock's Granite master trust 2007-1, which began marketing at the very start of the year. Dealers typically look to the first master trust issue as an indication of where the market might be at this time of the year. Early indications of price talk on the debut U.K. RMBS issue of the year are showing all of the tranches talked at levels achieved in November last year, with some pieces talked slightly inside those levels.

As for new deals in the primary pipeline, a new U.K. CMBS deal was announced. Bruntwood Alpha Plc, a GBP440 million U.K. CMBS, consists of two non-cross collateralized seven-year interest only loans and is backed by 48 predominantly office properties located throughout the U.K. The portfolio has a diversified base with 570 tenants over a range of industry sectors. Pricing is expected for the end of January.

Wilco 2007-1, the 404 million pan-European CMBS, was also announced. The transaction is backed by a pan-European portfolio of 26 loans for 26 properties originated by Westdeutsche Immobilienbank AG to German open ended estate funds with geographical concentration in France, Holland, the U.K., Belgium, Spain and Portugal. The weighted average LTV of the portfolio to be securitized is 47%. The loans with an LTV above 40% will be split into senior loans and junior loans.

Santander Consumer Bank's 700 million tap off of Italian consumer loan deal Golden Bar-4 2007 was also part of last week's line-up. The pool comprises 125,868 loans, 77% of which are auto loans and 15% of which are personal loans with 9.6-month lives. The deal will be issued from the 2.5 billion MTN program set up in 2004. The series is structured to be able to purchase new pools of up to 3.5 years.

Credipar, the captive lender owned by Peugeot's Banque PSA Finance, announced a 1.25 billion French auto ABS, FCC Auto ABS Compartiment 2007-1. Pricing is slated for the end of January.

(c) 2007 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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