The City of New York priced its $91.4 million tax lien securitization at 85 basis points over the Eurodollar synthetic forward curve (EDSF) for the 1.12- year, triple-A rated tranche.
According to a Citigroup securitization report, new issue spreads for these deals have ranged from 85 to 160 basis points since 2010 for triple-A rated classes with weighted average lives that range from 0.20 to 1.5 years.
The NYCTL 2013-A transaction, underwritten by J.P. Morgan, is backed by solely first-lien tax liens imposed by the City of New York on certain properties due to unpaid property taxes, sewer rents, sewer surcharges, and/or water rents.
First liens typically have priority over other claims, including mortgages, and are only subordinate to subsequent tax liens.
Despite the decent yields for minimal risk on the triple-A notes, the transactions are sometimes rated by only one rating agency. This, Citigroup said in the report, can detract from bond re-marketability but the spread and short bond duration make up for this limitation.
“Tax lien securitizations are a short [weighted average life], off-the-run ABS sector which has a good track record and attractive pickups to generic ABS — since 2010,” said Citigroup analysts.
The New York deal however has been rated by both Standard & Poor’s and Moody’s Investors Service.
New York City is one of the most prolific issuers of tax lien securitizations, according to Citigroup. The city has priced one deal annually since 1996 (with the exception of 2007) in amounts ranging from about $33 to $215 million.