United Kingdom's Royal Bank of Scotland (RBS) made its debut into the U.S. credit-card sector with a $1.6 billion transaction, helping to push the U.S. asset- and mortgage-backed markets towards globalization.
The deal, dubbed Arran One - one that many U.S. investors were anxious to get a piece of - was backed by a pool of credit-card receivables from the U.K. that were swapped into U.S. dollars and structured as three-year and five-year soft bullets, a similar characteristic of U.S. credit card deals.
"We think it priced very well," said William Grady, co-head of global asset-backed and mortgage finance at Salomon Smith Barney. Salomon was a joint manager on the deal.
"Beyond the pricing levels themselves, the book was very, very broad," Grady said. "It was a who's who' of U.S. asset-backed investors. That was an important part of the objective of this transaction."
Grady feels that globalization will reach new heights this year in both the ABS and MBS sectors, with a U.K. mortgage-backed deal expected to price as early as next week.
"I think that this is the beginning of a trend that we're seeing for this year, where we're going to see non-U.S. assets coming to the U.S. market," he said.
Grady cited several reasons why this new phenomenon will occur, one being that there is a benefit to the issuer in terms of dollars from a swap standpoint. With the size of some of the transactions being done, people are feeling that accessing U.S. investors is something very attractive and desirable, he said.
"The large U.S. investors are very attracted to the fact that this is an opportunity for them to diversify within the consumer finance sector into other countries such as the U.K. or Australia," he said. "For guys who have been buying large credit card transactions where there have been a number of bank mergers shrinking their portfolios over time, this not only affords them the opportunity to add a new name but also a new asset on their consumer side."