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Obvion Prices Dutch RMBS

Obvion priced a Dutch residential mortgage loan securitization today at the tight end of initial price guidance.

The deal, Storm 2014 III is the third transaction Obvion has issued from the trust so far this year. Fitch Ratings assigned ratings to the notes on offer.

The 1.9-year, €258 million, ‘AAA’ rated class A1 was sold at a spread of 25 basis points over 3-month Euribor. The notes were originally being talked in the 25bps to 30bps area. Obvion sold €942 million of 5-year, ‘AAA’ rated bonds at 35bps.  The class A2 notes were being talked in the 35bps to 40 bps area.  

The deal priced tighter than the last Dutch RMBS to come to market in August, Arena NHG 2014-I. That deal priced its senior, class A1 notes with a weighted average life of 1.4 years priced at 33bps over three month Euribor; and the class A2 notes with a weighted average life of 4.4 years priced at 63bps over three month Euribor.

However the deal featured an unusual way to hedge the interest rate mismatch created between the predominately fixed rate loans backing the transaction and the floating rate note issued by the trust. Instead of using a traditional  interest rate swap to offset the interest rate differential between the floating-rate notes and the predominantly fixed-rate mortgage loans, the deal introduced an interest rate cap.

Obvion, in its latest transaction which is also backed predominately by fixed rated mortgages but issues floating rate note, used a swap agreement to hedge the mismatch between the fixed and floating rate of the mortgage portfolio and the floating rate of the notes.  

The loan pool is comprised of Dutch residential mortgage loans, originated and sold by Obvion. Since 10 May 2012, Obvion has been 100% owned by Rabobank Group . This is the 29th transaction issued under the STORM series since 2003.

Of the loans included in the pool, 33.9% of are fully guaranteed by the Dutch national mortgage guarantee scheme, Nationale Hypotheek Garantie. The pool of collateral has an average of 68 months of seasoning, with a weighted average (WA) original loan-to-market-value of 88.0% and a WA debt-to-income ratio (DTI) of 28.8%, both of which are typical for Dutch RMBS transactions.

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