Hypo Real Estate Bank has leveraged the super senior tranche of a commercial mortgage-backed securities portfolio it first launched in the fall. The firm started marketing the leveraged, AAA-rated, USD1.4 billion tranche to investors this month as an alternative to offloading the risk to a monoline insurer, said an official familiar with the trade. "It allows [Hypo] to tap a different investor base," he said. Hypo closed the AAA, AA and BBB notes of the structure, issued through special purpose vehicle Halcyon, in October.
RBC Capital Markets has been brought onboard to distribute the tranche globally to money managers, asset insurers, bank portfolio managers and conduits. "Hypo is comfortable with the CMBS product, but doesn't have the sales capabilities," said the official, adding RBC was also keen to capitalize on the boosted returns CMBS offers over corporate underlyings. One structurer estimated the pick up in spread is between 10 and 20 basis points.
Structuring officials at both firms declined comment and the price of the tranche could not be determined. A combination loss and spread trigger has been attached to the tranche, which satisfies both protection buyers--who prefer loss--and dealers, who prefer mark-to-market valuation. It is expected to close in January.
