A collateralized debt obligation backed 100% by a pool of U.K. sterling-denominated mortgaged-backed securities will hit the market this month. The £150 million deal, called SterlingMax I MBS, is being arranged by CIBC World Markets and Westfaelische Hypothekenbank. The collateral pool will include sub-prime residential mortgage-backed securities, prime RMBS and commercial mortgage-backed securities, says Mark Hardisty, an asset-backed syndication banker at CIBC in London.
SterlingMax MBS I, believed to be the first all-sterling MBS CDO, is an outgrowth of WestHyp's existing CDO of MBS program called EuroMax--backed by European collateral. Hardisty says these deals are investor-driven (reverse inquiry) and further sterling deals will depend on investor interest and performance. Typically, investors looking to take a leveraged play in MBS go for these types of CDOs instead of buying MBS paper in the primary or secondary markets, notes Hardisty.