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Securitization: European RMBS makes shaky progress

First true post-crisis deal; US buyers boost demand

Alliance and Leicester came to the market in early March with a £1.4 billion ($2.1 billion) RMBS issue through its Fosse master trust. This was the UK lender’s first issue since its acquisition by Santander. Led by Barclays Capital, Deutsche Bank and Credit Suisse, the deal set a positive tone to the market, being upsized from an initial £1 billion and attracting more than 40 investors to the book. It incorporated three tranches: fixed-rate and floating-rate sterling and floating-rate euros, and priced at 120 basis points over.

Much was made of the fact that the deal was the first in Europe not to incorporate a put option back to the issuer. Although there have been a number of deals since September 2009 they have all incorporated a put, leading some in the market to describe them as "covered bonds in ABS clothing".

No put for Fosse

According to Miray Muminoglu, director in the London syndicate team at Barclays Capital, a put option was never on the cards for Fosse. "We never thought about including a put," he says. "The issuer was very determined to discount it. In the secondary market Fosse, Holmes, Gracechurch and Dutch RMBS are all happily trading to call so it is not necessary.

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