Thornburg Mortgage has been making headlines for all sorts of reasons lately. The most notable is that it received and met margin calls on its reverse repurchase agreements that exceeded $300 million between Feb. 14 and Feb. 27.
In a Securities and Exchange Commission filing, the company also warned investors that it had reduced readily available liquidity to meet future margin calls.
Therefore, when Thornburg announced that it had priced an $856 million MBS transaction secured by hybrid ARMs, the news raised eyebrows in several corners of the market.
Aside from the Thornburg MBS, the market managed to price student loan, credit card and commercial MBS deals last week.
Nelnet Student Loan Trust, 2008-1, priced a $1.2 billion transaction via Barclays Capital, Deutsche Bank Securities and JPMorgan Securities. Just about all of the notes, rated AAA' by Standard & Poor's and Fitch Ratings, priced at par, according to the ASR Scorecard database.
The most senior tranche priced at three-month Libor plus 55 basis points, while the most junior class of notes came in at 125 basis points over the same benchmark.
Banc of America Securities came forward with a $2.3 billion deal. That transaction had a long senior/subordinate structure with notes that ranged from 2.52 years to just under 10 years and spreads that betrayed very little investor confidence in the sector. The triple-A rated, senior tranche, for instance, priced at swaps plus 310 basis points. The most junior tranche within the senior-level notes, also carrying triple-A ratings, came in at 640 basis points over swaps.
After blazing a trail in January and pulling back somewhat in February, credit card issuers got back into the game on March 3, with a $1 billion deal from the Discover Master Card Trust. Led by Merrill Lynch and Morgan Stanley, that transaction priced its note on target with guidance, at 100 basis points over the one-month Libor.
The market also saw a pricing from an insurance-linked note issuer, Newton Re, 2008-1. Essentially Newton will use the proceeds of the issuance to provide $150 million of reinsurance to three entities of the Catlin Group. That company writes insurance policies for protection against U.S. and European windstorms, earthquakes in the U.S., Japan and Canada.
Not only is that transaction the first insurance-linked securitization of the year, but its notes also carry BB' ratings from an atypical combination of rating agencies: S&P and A.M. Best Co. of Oldwick, N.J. The latter has a long track record of rating credit for financial and healthcare services companies, and has been in business since 1899, but it only received the coveted NRSRO designation in March 2005, after the Enron meltdown put the first spotlight on rating agency business practices.
This is the second issuance from the Newton Re Ltd. trust, which is expected to continue issuing notes, according to A.M. Best.
In another break from the norm, the commercial sector was also represented, with a $389 million deal from the Small Business Administration Participation Certificates.
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