This article appeared in Finance Magazine

EBS closes first Irish securitisation deal of the year
EBS Building Society has raised ‚ā¨750 million in funding following the completion of its latest mortgage-backed securitisation (MBS) issue - Emerald No.3.
In the first Irish MBS deal since First Active‚€ôs ‚ā¨750 million deal in October 2001, and the first Irish securitisation deal since Friends First‚€ôs ‚ā¨250 million securitisation of its motor and consumer loan book in August 2002, EBS Building Society has raised ‚ā¨750 million in a deal that was oversubscribed by 100 per cent.

Despite growing concern among European investors about inflated property prices, almost 60 banks and asset managers across 10 European countries including France, Germany, Spain and the UK bought into the deal.

Speaking to FINANCE magazine, Mark Whelan, senior manager, treasury, of EBS said, ‚€ėInvestors were reassured by our analysis of the key factors that have in recent years supported growth in the Irish economy, the Irish housing market and in turn EBS. Confidence in the future direction of these key factors was as important as their historical performance and this was reflected in the oversubscription of the issue. The level of oversubscription also reflects the unsatisfied demand from investors for this type of investment‚€ô.

According to Whelan, the deal is among the first Irish RMBS deals priced inside recent European MBS. ‚€ėHistorically, Irish deals tended to be priced less favourably to those in the UK and mainland Europe, but Emerald No. 3 priced on a par with or inside recent comparative European RMBS transactions.‚€ô

The €712.5 million triple-A tranche was priced at 26bp over for an average life of 4.8 years, with a call in October 2010 while the junior tranche, a €37.5 million single-A bond averaging 5.9 years, was priced at 72bp over Euribor.

The securitisation pools some 103,361 mortgages, of which nearly 40 per cent are located in Dublin. EBS has a very strong performance record, and has only had to repossess 24 houses since 1996.

Barclays Capital and Credit Suisse First Boston acted as joint lead managers while Rabobank, provided the third party facilities required to achieve a AAA rating for the bonds.

Emerald No.3 is EBS‚€ôs third MBS, following on from Emerald No.1, a €495 million deal, which was launched in 2000, and Emerald No. 2, a €525 million transaction, which was launched in 2001. Whelan confirmed to FINANCE magazine, that securitisation remains firmly a part of EBS‚€ôs financing strategy.

‚€ėSecuritisation as a transaction type is viewed as a both a funding transaction and capital transaction, however changes to the treatment of securitised assets resulting from Basel II may mean that securitisation will be viewed exclusively as a funding transaction. Consequently, in the future we may look at the comparative cost versus other transaction types such as public bonds or covered bonds. While we will review the covered bond as an option in the future, thusfar there has been little indication that an Irish residential mortgage bond transaction is imminent. Therefore securitisation remains a key component of funding strategy‚€ô.

The success of the Emerald No.3 deal follows closely on EBS‚€ôs last major funding transaction in December 2002 when EBS borrowed E500 million from a syndicate of twenty-nine banks around Europe. This was also significantly oversubscribed versus the initial amount of funds sought.
Meanwhile, EBS‚€ôs ability to fund its business competitively received further endorsement in the same week when Moody‚€ôs Investor Services, the bank rating agency, upgraded EBS‚€ôs short term rating from Prime- 2 (P2) to Prime- 1 (P1). The society‚€ôs long term rating remains unchanged at A3.
This article appeared in the May 2003 edition of Finance Magazine.