Last week got off to a quiet start with the July 4 holiday dampening the fireworks on the European secondary market. However, primary flows continued to set off sparks. After explosive record issuance in June, July is poised to offer more of the same as the primary pipeline keeps building ahead of the summer slowdown.
June 2006 has turned out to be the biggest month in terms of European securitization primary issuance, with a total of 59.6 billion ($76 million) of bonds coming to market. Analysts at the Royal Bank of Scotland said that the record had been previously set in November last year, where spreads widened on the back of heavy supply. By contrast, spreads have broadly held tight over the last month. Analysts at Deutsche Bank said that floater spreads have proved steady with senior bonds widening limited to around one basis point and no observable pricing impact on subordinated paper.
"Midway through 2006 European issuance is 25% higher than during the first half of 2005, driven by several multibillion euro transactions," said RBS analysts. "July looks set to continue this growth, with a 17.1 billion pipeline already exceeding last July's 16.6 billion total. The primary markets remain fairly strong ahead of the expected summer slowdown, though some deals and tranches are subscribing slower than in recent weeks."
From Portugal, Banco BPI is said to be queuing a Portuguese RMBS transaction while Banco Espirito Santo is also expected to come to market in July with a Portuguese SME CLO. Banco Comercial Portugues issued guidance for its latest 1.5 billion Portuguese RMBS, Magellan 4. Magellan offers 1.4 billion of 6.2-year triple-A rated notes talked at the 14 basis point area, with four additional tranches rated from double-A to double-B talked at the high teens, mid-20 basis point area, 50 basis point area and 140 basis point area, respectively. The most junior notes are to be repaid from excess spread.
Dealers began work for a 525 million mixed Spanish MBS transaction for Caixa Terrassa, dubbed IM Terrassa MBS 1. Only the triple- A rated notes are offered, with a 5.1-year average life and are talked at 17 basis-point area. The provisional pool has a 70.7% LTV, 20 months seasoning and includes 69.2% residential loans.
Marketing is also underway for TDA 26- Mixto, a 908.1 million Spanish RMBS for Banca March and Banca Guipuzcoano. Pool 1 contains loans with LTVs below 80% and pool 2 contains loans that are 80% and higher. All of the tranches were pre-placed except the 165 million Class A1 notes from pool 1.
A number of Irish banks have also recently raised new financing to fund the continued strong growth in Ireland's mortgage sector. EBS Building Society priced its latest 1.5 billion Irish RMBS, Emerald Mortgages 4. Emerald's 4.9-year senior tranche came at 12 basis points, the double-A rated Class B tranche priced at 15 basis points and the triple-B tranche priced at 45 basis points. The provisional pool had a 63.3% LTV and 19 months seasoning. Irish Life and Permanent also raised 2.15 billion in a major securitization program that will be used to fund future mortgage lending.
Credipar, a French subsidiary of Banque PSA Finance, issued guidance on its 1.25 billion French auto-lease deal. The offering was expected to price by the end of last week. BNP Paribas and HSBC are the lead managers for the bond, which is backed by a portfolio of French auto leases to individuals and small businesses for new cars.
And from Germany a 250 million German leasing deal for Grenkeleasing, Goals 2006-1, began marketing. The deal offers 212.5 million of 1.2-year triple-A rated notes alongside 3.0-year single-A rated Class B notes and 3.5-year triple-B and double-B rated notes. The leases are small ticket office equipment leases with an average size of 3,834.
CLOs, CLOs and more CLOs
Marketing is underway for Moorgate CLO II, a 500 million leveraged loan CLO for Winchester Capital Principal Finance. The pool will contain a minimum 90% European, 95% senior secured and a maximum 5% mezzanine or second lien loans. The Class A notes were unrated and not offered. The junior triple-A rated Class B notes were issued guidance at 38 to 40 basis points. Also on offer are double-A, single-A and triple-B rated notes talked at 55 to 60 basis points, 80 to 90 basis points and 190 to 200 basis points all with 10-year average lives.
La Caixa also began marketing its latest 606 million balance sheet SME CLO, Foncaixa FTGENCAT 4. A total of 165.0 million of non-guaranteed triple-A rated notes are offered alongside a 636.4 tranche guaranteed by the Region of Catalunya. The preliminary pool included 76.5% mortgage backed loans with a 52.8% LTV and 2.6 years seasoning.
AXA Investment Managers began work on its 500 million leveraged loan CLO Adagio III. The deal offers 351 million of triple-A rated notes with an 8.9-year average life. Four subordinated tranches rated from double-A to double-B is also marketing.
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