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Despite currency risk, structure offsets some dangers for investors, although lower credit quality remains
No one is sure when AI's threat will strike, or where
Spread on the triple-A rated notes is 8bp tighter than for the issuer's recent deals
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RABOBANK quietly executed a $7.2bn collateralised loan obligation in late October. Atlantis Finance Two used a similar structure to Rabobank's first CLO. That deal transferred $5.5bn of exposure to corporate loans from Rabobank's Utrecht headquarters in December 1997. The bank set up a special purpose vehicle, Atlantis Finance, that issued $5bn of senior notes, rated AA- by Fitch IBCA and $500m of BBB rated junior bonds.
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ILLINOIS electricity utility Commonwealth Edison has reopened the stranded cost securitisation market with a $3.4bn deal lead managed by Goldman Sachs (books), Merrill Lynch and Salomon Smith Barney. The bonds are all placed and the deal will likely price today (Friday) at the tight end of price talk. Illinois passed legislation earlier this year introducing competition to the state's electricity market. To compensate ComEd for infrastructure investments it made believing it would continue to operate in a regulated market -- so-called stranded assets -- the state has permitted the company to raise a statutory levy on electricity users.
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INVESTORS eager for rare Belgian franc floaters snapped up Bacob Bank's third mortgage securitisation this week. Bacob lead managed the Bfr10bn issue through special purpose vehicle MBS-3, parcelling some 4,500 Belgian residential mortgages.
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Kredietbank, Belgium's second largest commercial bank, launched its first securitisation last Friday - a Bfr15.3bn mortgage backed deal. Deutsche Morgan Grenfell and Kredietbank were joint bookrunners on Home Loan Invest-1, which is the first Belgian securitisation of the year. The transaction comprised two tranches - Bfr14.23bn of 'A' notes, rated triple-A by Fitch IBCA and Moody's, and Bfr1.07bn 'B' notes, rated Aa3/A. Tranche 'A', with a 4.32 year average life, pays 16bp over three month Bibor, while the 'B' notes were priced at 38bp over Bibor with a 4.85 year average life. Passthrough amortisation begins immediately.
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LEHMAN BROTHERS brought $600m of fixed rate bonds this week, backed by rental income and repurchase agreements on Avis Rent-a-Car's US fleet. The Euro/144A bond is the second from Aesop Funding II LLP, a master trust which began funding in July last year with a blow out $1.65bn deal, also lead managed by Lehman.
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HAMBROS BANK introduced the Guinness Trust to the capital markets this week with a £60m bond secured on a portfolio of social housing. The 40 year deal, rated Aa2 by Moody's and AA- by Standard & Poor's, was re-offered at 100.4436 to yield 95bp over the 8% 2021 Gilt on a 7.5% coupon.
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PUMA MANAGEMENT Ltd returned to the Euromarkets this week with a blow-out $900m securitisation of Australian mortgages. Lead manager JP Morgan increased the deal from $700m and still had spare orders. Kieran Brush, Puma's treasurer, said: "The bond was a resounding success by any standards, but in the adverse market we have now it is a triumph. We wanted a well priced, large issue and that is what JP Morgan delivered."
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NATIONSBANK has set up a fully supported US asset backed CP conduit called Coral Sea Funding Corp to securitise Australian assets. The programme debuted last week, selling CP worth between $100m and $200m. The proceeds from CP are lent to the conduit's parent, Coral Sea Pty, registered in Australia. It will extend secured loans to Australian corporations and buy trade receivables, bringing the benefits of cheap USCP funding to Australian businesses.