Northern Rock said it is launching its first public securitization issue, which is in line with its agreed strategy. This transaction will diversify both the source and term of its funding base, and will be offered to investors in sterling and euros.

The size of the transaction is expected to represent roughly 2% of the balance sheet as of Dec. 31. Aside from this offering, Northern Rock will also remain substantially funded by retail savings.

This will be a standalone transaction that is backed by high quality U.K. mortgage assets that are selected from Northern Rock's total loan book worth £12.2 billion ($19.99 billion).   

Following the split of the former Northern Rock business at the start of 2010, all historical securitization funding is held by Northern Rock (Asset Management).

The deal comes amid some activity on the U.K. RMBS front. Skipton, a newcomer in the market, just priced its U.K. prime RMBS deal called Darrowby 1.

According to market reports, the shorter-maturity A1 notes priced at 125 basis points over the three-month Libor and the longer-dated A2 notes priced at 150 basis points over the three-month Libor. The subordinate B notes were retained by the issuer.

According to a Barclays Capital market update, Lloyds also has a new stand alone deal called Headingly RMBS 2011-1. The transaction will securitize a pool of  mortgages originated by the Bank of Scotland under the HBOS brand.

The senior tranches will offer Australian dollar-denominated notes along with sterling paper. Headingly RMBS 2011-1 will offer investors a 1.52-year class A1a Australian dollar-denominated tranche; a 1.5-year class A1b euro-denominated tranche; a 3.69-year class A2 sterling-denominated tranche; and 6.34-year class A3 sterling-denominated tranche.

All the offered classes of notes have a credit enhancement of 20.1%. The remainder of the capital structure comprises British pound-denominated class B and C tranches, which are retained.

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