Unlike previous years in European securitizations, January will not play host to any issues held over from last December's massive buildup. Traders said that aside from the two deals that are currently being marketed, there might be two more Spanish RMBS securitizations in early January that will spill over from last year's business. But the remainder of the month is expected to remain quiet.
"You rarely see a lot of stuff before the end of January, and I think this year we will have to wait until February to see the market really pick up again," said one trader. "Weirdly enough, everything was done and there was very little put back for this year -January is dead compared to the massive year-end pipeline that we saw in 2005."
Northern Rock announced details of its latest GBP4.0 billion ($6.9 billion) equivalent master trust deal, Granite 2006-1. More than a third of the notes offered are 1-year tranches - offered in dollar, euro and sterling denominations, which include both 2a7 and non-2a7 dollar tranches. In addition, 2.9-year dollar, 5.0-year euro and 7.1-year sterling denominated triple-A-rated notes are available. "Despite the preponderance of short-dated notes, we estimate that the weighted average life of the capital structure equaled 3.8 years, about the same as last January's deal and slightly longer than the last Granite transaction in September of 3.5 years," said analysts at the Royal Bank of Scotland. The notes were split 36% dollar, 34% euro and 30% sterling denominations; in its last deal Granite 2005-4, sterling represented only 23% of the capital structure.
Dealers are also working on Hyde Park CDO, a 500 million ($604 million) deal for Blackstone Debt Advisors LP. The provisional pool will include a maximum 5% high yield bonds and 5% CDOs, structured with a 6-year reinvestment period and a 270 day ramp-up period. Hyde Park offers 327.5 million ($395.8 million) of triple-A-rated notes in addition to four subordinated tranches rated from double-A to double-B.
On the secondary front, it's a bit of different story. December's massive business has certainly led to a busy start to trading. "There's a lot of activity, as to be expected, and a lot of buyers," said one market source. Analysts at RBS reported that the week started off with some light secondary trading volumes with spreads holding the tightening bias from year-end. Trading in Shield I's senior tranche was seen at 14 basis points over Euribor, somewhat tighter than the 17 basis point pricing spread from early December. "I think that things are off to a slower start than in prior years but in general the ABS market has always been slow to start," said one syndicate player. "We see at least 10 of our deals building that should be visible by mid-January."
What's up ahead?
Talk of new paper from Greece due out by the end of the month began circulating last week with an expected 875 million ($1 billion) RMBS deal for Emporiki Bank and a 350 million ($423 million) auto ABS deal for Egnatia Bank. Spain's Bancaja is also expected to bring its 2 billion ($2.4 billion) RMBS deal sometime in January.
Dresdner Kleinwort Wassertein is working on a 3 billion ($3.6 billion) German SME CLO due out shortly. The deal is expected to offer 1 billion ($1.2 billion) of triple-A-rated notes, with the subordinated risk bought by Dresdner's ABCP program. The true sale deal is expected to include a four-year revolving period.
And Trafford Centre Finance announced Wednesday that it would sell notes reserved by the issuer from last year's tap issue and refinancing. Trafford Centre Finance is backed by a large regional shopping center near Manchester in North West England. The reserve notes are all floating-rate and comprise GBP80.5 million ($141 million) triple-A, class A3 notes, GBP20 million ($35 million) double-A, class B2 notes and GBP66.2 million ($116 million) triple-B, class D1 (N) notes. The notes were issued, listed and rated last year, and their imminent sale this year does not have any rating implications, explained analysts at RBS.
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