Bonds News

UPDATE 1-FDIC's $1.37 bln sale draws strong demand

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NEW YORK, March 10 (Reuters) - The Federal Deposit Insurance Corp sold $1.37 billion of structured guaranteed notes tied to the assets of failed U.S. banks into strong demand on Wednesday after a debut offering last week.

The latest securitization is backed by performing and non-conforming construction loans and real estate-owned assets originated form Corus Bank. TriMont Real Estate Advisors is the servicer, while Starwood is a 40 percent equity holder, market sources said.

Florida, California, New York, Georgia and Connecticut comprised the highest concentration of issuer assets, market sources said.

The FDIC’s sale included $150 million of 1.62-year notes that were priced at 18 basis points over Eurodollar swap futures, $850 million of 2.62-year notes at a spread of 21 basis points over swaps and $377.35 million of 3.62-year notes at a spread of 24 basis points over swaps, market sources said. Barclays Capital was sole underwriter for the offering.

“This deal was about eight to 10 times oversubscribed by investors. It’s got the full faith and credit of the government behind it and so comparable to agency debt,” said one ABS portfolio manager, who did not participate in the sale.

The sale follows a $1.81 billion FDIC-guaranteed securitization backed by option ARM mortgages that priced via underwriter Barclays Capital last week, which was also heavily oversubscribed.

The two deals are part of the total $3.85 billion of securitizations that the FDIC is selling to investors that are guaranteed by the government. The deals are backed by residential mortgage loans and construction loans.

The offering are seen appealing to larger bond and mutual funds as well as insurance companies.

“I bet the big bond funds are all over this. The insurance firms, too, because they like high-quality, long asset types,” said another bond investor. “These deals carry the full faith and credit of the government and are cheap to Treasuries and agencies,” the investor said.

A third $668 million FDIC guaranteed securtization is also in the works and is backed by performing and nonperforming residential mortgage loans on real estate-owned properties seized from Franklin Bank, market sources said. Residential Credit Solutions has a 50 percent equity interest and is acting as servicer on the loans, sources said.

The asset sales, tied to the mortgage meltdown, were highly anticipated by investors and dealers as the FDIC continues to accumulate loans from failed banks at a rapid rate.

The sales are seen as a positive step toward restoring investor confidence in the mortgage segment and reviving a market that has been largely frozen for two years, except for the government-sponsored programs of Fannie Mae and Freddie Mac. (Editing by Kenneth Barry)