Secondary trading moved sideways last week despite a lack of primary paper actively marketing in Europe. Not even the $10.5 billion Granite 2006-1 deal managed to pressure trading in either direction.
"[There is] little visible supply at a time of year when there is clearly money waiting to be put to work," reported traders at Dresdner Kleinwort Wasserstein. "However, as we approach psychological barriers in terms of spread, it is conceivable that the market may simply reach a state of stagnation if the pipeline begins to grow in size from here."
By midweek, the triple-A tranches of the Granite deal were trading slightly inside re-offer and offered little momentum in either direction. As a result, investor attention has started to focus on subordinated paper.
A trader at BNP Paribas said the tone of the market is stabilizing. Client buying is slower, but regular, with still little pipeline ahead.
Pipeline building
Although the new issue pipeline is still relatively sparse, additional deals are starting to circulate with an estimated 7.5 billion ($9.18 billion) of deals in the near-term pipeline, which could explain the reluctance of traders to push the market any tighter, said market sources.
Among the new names to begin circulating last week was a new GBP376.6 million ($672.4 million) Southern Pacific Mortgages deal dubbed SPS 2006-1. Talk of a new health-care deal from the Italian region of Lazio has also emerged. The deal is reported to include 1.8 billion ($2.2 billion) of receipts due, with marketing scheduled for February.
Also in the works is a 1 billion ($1.2 billion) leveraged loan CLO managed by Cheyene Capital Management, Cheyene Credit Opportunity CDO I. The deal has a two-year reinvestment period and is expected to be 10%-20% ramped at closing. It's expected to include a maximum 20% mezzanine loans, a minimum 55% senior loans alongside second lien loans and synthetic participations, with a weighted average single-B+ rating. To reduce costs during the ramp-up period, Cheyene is structured with 552 million ($675.8 million) of senior variable funding notes and 138 million ($168.9 million) of subordinated triple-A rated notes.
Dealers began marketing Berica 6 Residential MBS, a 1.4 billion ($1.7 billion) Italian RMBS for Banca Popolare di Vicenza Group. Berica offers five rated tranches, including 172 million ($210.6 million) of 1.7-year fast pay triple-A notes and 1.19 billion ($1.45 billion) of 7.0-year slow pay notes. The provisional pool had a 67% LTV, which included 16% exposure to southern Italy. Although it's the sixth deal in the Berica Series, it is only the third vanilla RMBS. The first three deals were backed by mixed pools of residential and commercial mortgage loans.
Consumer activity
On the consumer side, Finconsumo Banca began marketing its 700 million ($856.7 million) Italian consumer finance deal, Golden Bar Securitization Srl Series 3. A total of 2.5 billion ($3.05 billion) of notes can be issued from the program, allowing a further 1.1 billion ($1.3 billion) of issuance after this issue and the remaining outstanding on prior ones. The deal is structured with a revolving period for three-and-a-half years. The pool of loans may include a maximum 15% used autos and 15% personal loans, with a minimum 62% new autos and a minimum 8% other loans.
BMW is marketing a 1.4 billion South African rand (97 million equivalent) deal backed by South African auto loans (85.7%) and leases (14.3%). The collateral was split 63.5% new vehicles and 36.5% used with a 78% weighted average LTV. Auto Series Investments offers six tranches, all triple-A rated, with target maturities between six months and three and a half years.
Shipping collateral was also on offer last week by way of the French Shipping securitization, Vega Container Vessel 2006-1. The deal is backed by 12 container ships purchased by the French shipping company, CMA CGM. A total of 12 container ships due for delivery between 2007 and 2008 will provide collateral, adding to CMA CGM's fleet of 242 ships. The $253.75 million of secured notes offered will be dollar denominated and due in 2021, guaranteed by XL capital. About $245 million of unsecured seven-year notes, alongside a $283.3 million loan, are also on offer.
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