RNHB ends euro ABS drought with enlarged offering

Dutch specialist mortgage lender RNHB found sufficient pent-up demand for Dutch Property Finance 2023, the first broadly syndicated euro ABS to hit the market in three months, to bump up the deal size from €300m to €500m.

The Triple A rated Class A notes priced at 135bp over Euribor, the Double A rated Class Bs at 235bp, the Single A rated Class Cs at 300bp and the Triple B rated Class Ds at 430bp. The final spreads on Classes B, C and D were at the tight end of the final guidance ranges.

Dutch buy-to-let RMBS had been trading at spreads of around 110bp–120bp, according to a banker at one of the four lead managers, Barclays, BNP Paribas (billing and delivery), HSBC and Natixis.

The coupons had already been set before the marketing process began, so the bonds will be sold at discounted cash prices ranging from 98.733 for the Class As to 97.133 for the Class Bs.

The price tightening was made possible by strong demand across the capital stack, although the book was slower to build for the Triple B rated tranche, which was only 70% covered at the first book update on Tuesday afternoon. That coverage level was based on the previous, smaller expected deal size of €300m. But, later in the afternoon, the same tranche was about 3.7 times covered at final guidance of 430bp–435bp at its final larger size of €15m.

'All about windows'

Bankers said the strong positive response to the deal was a sign that the European ABS market was wide open to issuers, especially since the underlying mortgage pool included large portions of loans secured on commercial (18%) and mixed-use (16%) property, which are not to every investor’s taste.

However, they also said that the window could snap shut suddenly as the risks facing European economies remained much the same as they had been throughout last year.

“It does feel as though we’re on a bit of a precipice because of all of the wider macro stuff,” said a banker at one of the leads. “It feels as though we’re just in a brief period where the moon is eclipsing the sun and anyone wanting to issue should be seriously considering doing it now.”

A banker away from the deal expressed a similar sentiment: “This year’s going to be all about windows,” he said. “There’s a window now. Can you jump into it and take advantage of it? In the remaining 11 months of the year, I’m certain there will be periods of volatility.”

Long wait

DPF 2023-1 is the first broadly syndicated non-CLO euro securitisation to be priced since mid-October, when Volkswagen Leasing priced VCL 37, a €945.1m senior note backed by German auto leases, at 55bp.

Citigroup, Santander Consumer Finance and MeDirect Bank sold euro securitisations to investors in November, but they were all privately pre-placed. Jubilee Place 5, Citi’s pre-placed offering, was the most recently issued Dutch buy-to-let RMBS. The senior notes of that deal were formatted as a loan and kept by the bank, while the discount margins on the offered notes ranged from 325bp for the Double A rated Class Bs to 1,518bp for the Double B rated Class Fs.

DPF 2023-1 has a first optional redemption date in January 2028, at which point the margin will double on the Class A notes and step up by 1.5 times on Classes B, C and D. The deal also has a turbo feature which diverts available revenue to pay principal after the step-up date.

Dutch Property Finance 2023-1