Bank of America Merrill Lynch tightened pricing across the capital stack of the €1.07bn Taurus 2013 GMF 1 CMBS ahead of closing a profitable return to European securitisation.
Between Wednesday lunchtime and thursday afternoon’s final closing, guidance pricing – over three-month EURIBOR – tightened as follows:
• Class A: €710m – AAAs (39.8% LTV) from 110 bps to 105 bps
• Class B: €130m – AAs (47.1% LTV) from 155 bps yesterday to 150 bps
• Class C: €120m – As (53.9% LTV) from 215 bps yesterday to 200 bps
• Class D: €95m – BBBs (59.2% LTV) from 300 bps yesterday to 275 bps
• Class E: €19.8m – BBBs Low (60.3% LTV) – previously cited as placed – from 375 bps to 350 bps
This indicative pre-final pricing implies that that the blended margin on the Taurus 2013 GMF 1 CMBS notes at between 140.5 basis points over three-month EURIBOR.
According to the “pink” offering circular, BAML underwote two fixed rate senior loans, worth €1.02bn, priced at 240 basis points over three-month Euribor, and two floating rate senior loans, together worth €53.8m priced at 225 bps.
These four loans together put the blended margin at 239 basis points, which implies an excess spread – excluding BAML’s issuer costs, such as the HSBC €35m liquidity facility, Fitch Ratings and DBRS’ costs as well as legals – of between 90 and 98 bps per annum.
This would likely crystallise a significantly profit for BAML’s Taurus by European securitisation standards, implying an excess spread of between €8m to €9.5m per annum, CoStar News understands.
The US investment bank has benefitted from both a returning appetite for German multi-family rated bonds and – somewhat fortuitously – a broader market tightening in spreads in the less than three months since the loans were originated with Gagfah.
By contrast, in the period between origination and final pricing for the re-securitisation of Merry Hill, spreads widened against Deutsche Bank, the originating bank, exemplifying bumpy spreads remain.
BAML is expected to close final pricing later this afternoon, with the four major accounts across the €1.07bn issuance understood to be BlackRock, PIMCO, JPMorgan and M&G, CoStar News understands.
Taurus 2013 GMF 1 CMBS, launched under two weeks ago, is secured by 46,151-strong Dresden multi-family-focused “Woba” portfolio, in the first new issuance European CMBS of the year.
BAML’s expected success is likely to be viewed positively by the market – both issuing banks – that there is a returning appetite, although perhaps still a watershed to pass is the return of secondary trading for the handful of post-global financial crisis deals.
The oversubscription of the notes – excluding protected orders – will give some comfort to those banks planning new issuances for the remainder of the year.
According to guidance issued yesterday, oversubscription ratios were as follows: class As at 2 times, class Bs at 5 times, class Cs at 20 times, class Ds at 32 times.