While spreads are tightening across the board for structured finance CDOs, Credit-Based Asset Servicing and Securitization, or C-BASS, stumped the whole sector with its most recent real estate-backed deal, a unique repackaging of double-B and triple-B home equity bonds and structured finance assets, 75% of which is serviced by C-BASS parent Litton Loan Servicing.
The non Litton-serviced collateral must be at least triple-B rated, according to a presale from Fitch Ratings.
The four-year triple-A class of C-BASS CDO IX priced at 36 basis points over three-month Libor, which is 11 points inside its comparable triple-A class from C-BASS CDO VIII, which priced in November. The 7.5-year, A-2 triple-A class priced at 60 basis points over three-month Libor, 25 basis points inside its November comparable.
More vanilla-like SF CDO senior classes - generally backed by triple-B and single-A structured finance assets - are pricing in the 40 to 45 basis point range, according to research last week from UBS. This is a five-point tightening year-to-date, and seven points inside of last fall's levels. UBS also notes the significant tightening in high yield CLOs, where triple-As have come in seven basis points to 43 over three-month Libor, compared with 50 basis points three months ago.
The C-BASS program is not directly comparable to typical SF CDOs, some analysts argue. These deals feature 8% in equity subordination, versus the 4% seen in other multi-sector deals.