Dominion Bond Rating Service says it is inching into the U.S. synthetic RMBS and ABS sectors. Bank of America Corp. recently commissioned the Canadian rating agency to supply ratings to a pair of U.S. synthetic RMBS deals. These transactions constitute the first public ratings the rating agency has assigned to synthetics in the U.S. market. DBRS is currently preparing ratings for several other deals, according to Michael Nelson, managing director of U.S. structured finance.
DBRS rated certain classes of 12 synthetic balance sheet mortgage deals co-issued by RESI Finance Ltd. Partnership and RESI Finance DE Corp., totaling roughly $102 billion. The DE Corp. deal had been outstanding but not rated. In a related transaction, the rating agency assigned a "AAA" rating to the $1.9 billion senior interest balance of the CARSS Finance Ltd. Partnership 2004-A. The deals were backed by RMBS and retail auto installment contracts, respectively, and both were held on BofA's balance sheet.
While the rating agency has been approached to rate other types of synthetic deals - aside from RMBS and ABS - it has yet to do so, Nelson said. DBRS's U.S. arm has been involved in private synthetic deals since last year, according to Nelson. He said the increasing demand felt by DBRS to rate synthetic deals has come primarily from the issuers - whose interest in the structures continues to grow. The U.S. market for synthetic securities, particularly within the ABS and RMBS sectors, has seen rapid growth as the structures have traveled further along the road toward standardization and widening market acceptance.
Nelson said the agency appeals to investors. "Similar to other transactions, we provide timely customer service, efficient execution and knowledge and expertise of senior personnel," he said.
Since setting up its first U.S. shop in Chicago with a handful of commercial mortgage-backed securities analysts in 2003, (ASR, 10/10/06) the rating agency opened a New York City office in March 2004, to gain a foothold in the rest of the U.S. structured finance market. Since then, DBRS has rated more than $150 billion worth of deals, primarily within the residential mortgage market. DBRS has also ramped up to rate structured finance deals out of Europe. In September, the Canadian rating agency opened its first European office in London, and subsequently announced its second office in Frankfurt.
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