Beacon touches new pricing low with latest ABS deal

Fri Sep 28, 2012 7:38pm IST

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Sept 28 (IFR) - Investor hunger for returns in the current ultra low-rate environment is pushing asset-backed securitization (ABS) yields to new lows.

Beacon Container Finance set a fresh record this week for the lowest yield paid for the senior tranche of an ABS deal backed by container lease receivables.

The five-year Single A rated class A was priced at a yield of 3.75%, the lowest ever, according to bankers close to the deal. The coupon was set at 3.72% and the dollar price was US$99.99553.

The transaction was increased in size from an initial amount of US$200m, reflecting increased acceptance of a product that had little traction with investors until last year.

"Some of the reasons for the increased investor interest are the yield pickup and the fact there is more liquidity in the asset class given the increased issuance of container ABS this year with seven different marine container companies issuing in the ABS market in 2012," said Jay Steiner, managing director and head of banking and origination, structured credit for the Americas at Deutsche Bank.

"So far this year, container lease-backed securitization deals have totaled about US$2.4bn versus about US$1.5bn a year earlier," he said.

Deutsche Bank (structuring lead) and Wells Fargo were joint leads on the US$250m 144a Beacon Container Finance 2012-1. The transaction represents Beacon Container Finance, LLC's inaugural securitization. It's also the first time that Kroll Bond Ratings has rated a deal in the ABS container space.

S&P also rated the deal and both agencies assigned a Single A rating to the five-year tranche.

According to Kroll, the structural characteristics are similar to previous container leasing securitizations. These include a 10-year expected maturity, a 15-year legal final maturity, and certain performance tests that if breached could trigger a rapid amortization or result in the replacement of the manager.

The strong response to container lease-backed ABS in the primary market has been supported by a rise in secondary market activity in the product, said Steiner.

"These deals are also now finding interest from investors who have not previously purchased container ABS, notably money managers, showing the growing acceptance of the asset class," he said.

"Investors are comfortable buying container lease-backed ABS because the pre-credit crisis transactions continued to perform as expected during the recent economic downturn and the underlying portfolios are diversified across a number of shipping companies."

About two dozen investors took part in the deal, a significant increase from earlier deals that were driven by large orders from one or two investors.

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