UPDATE: Alliance & Leicester Plans GBP3B Private RMBS Issue

22nd Jun 2010 15:28

Adds background -By Mark Brown Dow Jones Newswires LONDON (Dow Jones)--U.K. lender Alliance & Leicester, owned by Spain's Banco Santander SA (STD), will issue GBP3 billion of residential mortgage-backed securities via its Fosse program, the bank said Tuesday. The bank is planning to sell three GBP1 billion tranches of AAA rated RMBS "for committed purchase by an institutional third party in a private placement under an upcoming Fosse 2010-3 transaction," according to a statement. The weighted average lives of the notes range from approximately three to six years. The weighted average life, or WAL, is the time an RMBS holder can expect to wait before their principal is repaid. RMBS are bonds serviced with the payments made on a pool of residential mortgages, allowing them to be taken off the mortgage providers' balance sheet. In the first half of 2007, U.K. lenders issued 96.2 billion euros of such bonds, making them a key source of mortgage lending. The collapse of the U.S. subprime-mortgage market all but killed investor appetite for RMBS, and despite the recovery in issuance in recent months, growing the market is still seen as a key way of helping U.K. banks fill and estimated GBP300 billion funding gap. Alliance & Leicester has been an active issuer this year, and was last in the market in May, selling triple-A bonds denominated in euros, dollars, and sterling in Fosse 2010-2. Although that deal was publicly distributed, JP Morgan Securities Ltd. had agreed to buy $1.5 billion worth of the Fosse 2010-2 bonds prior to its launch. But banks have resorted to private placements of mortgage-backed bonds in recent weeks as the volatility created by the sovereign debt crisis has made pricing public deals difficult. Lloyds Banking Group PLC (LYG) sold bonds backed by repayments on residential mortgages and credit cards, worth around GBP3 billion via private placements at the beginning of June, for example. -By Mark Brown, Dow Jones Newswires; + 44 (0)207 842 9485; [email protected] (END) Dow Jones Newswires June 22, 2010 10:28 ET (14:28 GMT)