New Issues: Abbey in £3.5bn RMBS move

New Issues: Abbey in £3.5bn RMBS move

By David Oakley

Published: November 6 2006 21:08 | Last updated: November 6 2006 21:08

Abbey, the UK mortgage lender, announced plans to sell a £3.5bn residential mortgage-backed security on Monday as it sought to take advantage of the low borrowing costs in this market, bankers said.

The RMBS market has grown dramatically this year, helped by the strong UK housing market and an increasingly diversified investor base in Britain and continental Europe.

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Issuance of new RMBS bonds to date is more than 70 per cent ahead of the first nine months of last year at €150.6bn, the European Securitisation Forum, the trade body, said this month.

One banker said: “Despite the growth in supply, spreads are very tight for RMBS deals, making them popular with a whole range of investors. There is also a large pan-European investor base, giving issuers confidence in these type of deals.”

Barclays Capital, Citigroup and Deutsche Bank are lead managers for the deal via Abbey’s Holmes 2006-1 vehicle. Pricing is expected next week.

British bank Northern Rock also plans to issue £3.25bn worth of RMBS bonds.

The multi-currency issue is the latest from Northern Rock’s Granite programme. A roadshow is expected next week. Deutsche Bank, Lehman Brothers and Merrill Lynch are managing the deal.

RMBS deals pool together groups of home loans and sell off differently rated bonds that carry varying degrees of risk.

The popularity of floating rate deals was underlined on Monday when a unit of US-German carmaker DaimlerChrysler priced a FRN due in March 2010 at the tight end of price guidance.

DaimlerChrysler North America Holding saw its €750m bond priced to yield 45bp over 3-month Euribor following initial guidance of “mid to high” 40s bp. BNP Paribas, LBBW and UniCredit Group (HVB) are the bookrunners.

DaimlerChrysler holds a Baa1 credit rating from Moody’s Investors Service and an equivalent BBB+ rating from Fitch Ratings, both on the third-lowest level of investment grade. Standard & Poor’s rates it one notch lower, at BBB.

Elsewhere, Dutch public sector agency Bank Nederlandse Gemeenten plans to sell a 3-year, dollar-denominated bond in Europe. The benchmark-sized deal will be launched and priced soon.

Barclays Capital, Goldman Sachs and RBS are managing the sale. BNG is rated triple-A by the three major credit ratings agencies.