Securitisation is again being seen as a crucial funding tool in Europe and a route to access funding through capital markets.
Precise, Paragon, Kensington and Jerrold Holdings have all successfully undertaken securitisations over the past 18 months totalling £2.7 billion. If you take all the securitisations in the UK in Q1 this year, residential mortgage backed securities amounted to approximately £4 billion.
The pricing of Paragon and Precise's deals reflects the damage the protracted Greek debt negotiations did to investor sentiment in the European ABS market.
The triple-A rated bond was sold at £180.4m a 99.6405 cash price. Precise priced its senior tranche 30bp wide of the comparable tranche off its most recent offering, at 125bp over three month sterling Libor.
The lender is taking a 5% retention piece "randomly selected" from various parts of the deal, according to a deal announcement.
Despite securitisation's perceived role in the credit crisis, it is once again being seen as a vital tool to increase access to credit by enabling banks to free up their balance sheets for more lending.
Alan Cleary, Managing Director at Precise Mortgages, said:
“The reason that we became a bank was very simple: one of the biggest lessons we took from the financial crisis was that capital markets can – and will – be unpredictable and, if you have only one source of funding it is very difficult to build a sustainable business. That being said, now that Grexit appears to have been averted we were very happy to be the first lender to get a deal done.”
Meanwhile Paragon also priced its top rated sterling and euro tranches at the level of initial price thoughts. The sterling tranche level of 110bp represents a 30bp widening from its last deal, sold in March.
The Paragon deal was valued at £300.15m, included both sterling and euro denominated tranches and was led by Lloyds, Macquarie, Morgan Stanley and Natixis.
