With a little over six weeks left in 2005, there is no sign that European securitization volumes are shrinking and pricing levels indicate that there's been no shrinkage in appetite either. Primary marketing continues to swell aggressively close to 30 billion ($35 billion) for the near term with a wide variety of collateral available. "We do not believe the market has yet shifted the upper hand from a sellers' perspective to a buyers' one, but it grows closer to a balance," said analysts at The Royal Bank of Scotland.
It's been a year of firsts for the European auto sector that saw its first wholesale dealer floorplan transaction and last week saw DaimlerChrysler AG set a new pricing benchmark for European auto ABS paper. Silver Arrow Compartment 1 priced its 1.5-year A class at five basis points over Euribor and its B class notes at 16 basis points over Euribor. "Daimler set up and structured the deal to appeal to investors - they wanted their first deal to be well accepted, to position themselves for future issuance in Europe, the short average lives appeal particularly to money market funds - the pricing achieved reflects that," said one market source.
On the CMBS side of the coin, Deutsche Bank began Premarketing DECO 6-UK2 from its established conduit program. DECO's senior notes were split into 3.9-year and 6.5-year triple-A rated tranches supported by three 8.2-year subordinated tranches rated between double-A and triple-B. The deal is backed by a mixture of loans for shopping centers, regional office space and space at the Canary Wharf development in London. Marketing also began for Morgan Stanley's 327 million deal from its ELoC conduit program. ELoC 21 securitizes five French loans and one Belgian loan on 13 properties. Approximately 37% of the rent receivables are due from the French government and an additional 42% from other investment-grade tenants.
Exposure to U.K. office space was also on offer via London & Regional Debt Securitization No. 1 plc - or LoRDS No. 1 - a GBP234.2 million ($401 million) CMBS. Of the rental income, 62.9% is due by the U.K. government and 77% is from central London office space. LoRDS offers a GBP207.7 million 7-year triple-A rated class in addition to GBP26.5 million of double-A and single-A split rated notes with 51% and 57.5% equivalent LTVs respectively.
Axa SA announced an innovative 200 million French auto insurance securitization, FCC Sparc. The transaction aims to transfer the deviation of claims the costs above a certain level, in relation to AXA France's motor insurance portfolio, which is characterized by high claims frequency. While providing catastrophic risk coverage for a portion of Axa's French motor insurance portfolio, it excludes natural disasters and low-severity claims. A total of 105.7 million of 3.75-year triple-A rated notes were offered in addition to single-A and triple-B rated notes. All tranches of the deal were privately placed.
"It is fairly unique for the senior tranche [of] insurance securitizations to be rated [triple-A] on a standalone basis," explained analysts at Dresdner Kleinwort Wasserstein.
On the RMBS side, marketing is underway for Southern Pacific Securities 2005-3, a GBP400 million nonconforming RMBS. Excess spread backs three tranches, rated triple-B, double-B and single-B. The provisional pool had a 75.7% weighted average LTV and two months of seasoning, 14.9% of the loans are second liens and 1.24% are buy-to-let. Spanish RMBS is also being offered via AyT Genova Hipotecario VII, a 1.4 billion deal for Barclays plc's Spanish operations. Fast- and slow-pay triple-A rated notes are offered, including 308 million of one-year notes and 1.05 billion of 7.6-year notes. The provisional pool includes first-lien owner occupied properties with a 60.2% weighted average LTV and 12 months of seasoning.
Also on offer was a new GBP351.9 million U.K. hospital deal for Central Nottinghamshire Hospitals No 1. Proceeds from the deal will fund the construction and maintenance of three hospitals in Nottinghamshire for Sherwood Forest Hospitals Trust. It will offer GBP319.9 million of senior bonds due 2042 wrapped by FSA.
The week also saw several deals announced in the CLO asset classes. Among them was a GBP5 billion multi-currency synthetic CLO from Barclays, named Lambda Finance referencing a portfolio of loans to U.K. small-to-medium enterprises. It will be issued in U.S. dollar, euro and sterling but the currency splits will be decided by market appetite. This transaction is marketing alongside HSBC's GBP2 billion balance-sheet CLO, Metrix Funding No. 1. and a fourth CLO from AIB Capital Markets, named Boyne Valley.
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