It has been a no-holds-barred week for pipeline RMBS issues generated from across continental Europe, as the markets prepare for a flux of large prime consumer ABS paper.
"Over August and September we didn't see many flow deals at all," said Birgit Specht, director of debt research and head of ABS at Dresdner Kleinwort Wasserstein. "In August, most market participants were on holidays, and deals then got delayed by the events in the U.S. Prime consumer ABS paper in the safest form is RMBS. Typically large in size these deals generally fare better when the investors are present."
Merrill Lynch and Banca Monte Paschi di Siena Finance are gearing up a 1.1 billion Italian prime RMBS, Siena Mortgages 01-2 Spa. The issue will be structured in four tranches. The class A1, triple-A-rated tranche is expected to carry a final maturity of two years with notes slated to be due in May 2003. A 792 million class A also rated triple-A carries an expected maturity of notes due August 2007. Both the 38.5 class B tranche rated Aa2 and the 49.5 million Baa2 rated class C tranche is expected to mature August 2007.
The true-sale sequential pass-through amortization structure has performance triggers in place to protect the senior note holders as well as credit enhancement for the Class A notes which is provided by the subordination of the Class B and Class C notes. According to Dresdner, support is also provided by excess spreads.
In Germany the RMBS tune came in the form of a synthetic structure in line with past German-originated products. Hypovereinsbank is leading the 145 million transaction for originating bank Bayerische Hypo-und Vereinsbank AG (HVB). It's the first transaction slated under the Provide program and follows the Promise securitizations issued earlier this year.
"The underlying assets in this case will be German residential mortgage loans, as opposed to loans to German small medium enterprises," explained Specht. The program is expected to total 1 billion and consists of 25,584 loans with about 45% of the properties, included in the portfolio, fully let. The deal is expected to come to market sometime beginning this week.
The Dutch are next in the pipeline with a 813 million RMBS that is dubbed Hermes IV B.V. UBS Warburg and BNP Paribas led the deal. It's a true-condition sale similar to other recent Dutch transactions. The senior tranche, class A, triple-A rated tranche amortizes on a passthrough basis. The class B, single-A tranche and the class C, triple-B-rated tranches carry a soft bullet maturity of 7.8 years.
"Any excess spread available following the replenishment of the reserve fund will be used to amortize the Class D notes," explains Dresdner's Specht. SNS Bank Nederland NV [the originator] will provide a 8 million liquidity facility.
Hermes IV experienced some of the highest levels of credit enhancement experienced in the Dutch market to date, with 10.8% provided for the class A notes through subordination of the class B notes, which received 5.5% enhancement provided by the class C notes. The class C notes are structured with 1.7% enhancement provided by the Class D notes. "The range of credit enhancement shows how risk is coming behind these notes," explains Specht.
Celtic Irish Mortgage Securitization No.7 Plc and Irish RMBS are slated to come to market this month. Its 650 million deal led by BNP Parisbas is structured in two tranches: A 612 million triple-A-rated tranche with a 4.9-year average life and a 34 million single A tranche with a 6.2-year average life.
Over 25% of the loans included in this portfolio were previously securitized in a private placement transaction in 1996. Those Mortgages originated prior to 1996 exhibit higher levels of arrears, but Fitch expects that losses on these loans will be minimal given house appreciation since then.