Bonn-based bankDeutsche Postbank has launched a synthetic partially funded residential mortgage-backed securities transaction with an excess spread mechanism--the first German synthetic to feature one. The EUR117.8 million (USD149 million) deal is also the first public transaction the firm has done this year.
With an excess spread mechanism, future profit margins are used as additional collateral. The major benefit of this strategy is there is no need for a first-loss piece. "There is no other credit enhancement other than the excess spread," said Tom Beckmerhagen, an executive in the firm's securitization group. The excess spread is calculated on a quarterly basis and does not accumulate.
Postbank typically completes plain vanilla transactions as it wants simple structures it can sell easily to investors, said Jens Kaessner, head of securitization. The transaction is being done for capital relief reasons, he added.
Kaessner added Postbank does not come to market frequently but is completing this deal as a result of its recent acquisition of BHW, a German savings bank. "We used securitization as a tool for capital ratios," he said. Beckmerhagen added part of the proceeds will be used to retire unsecured debt, with the remainder spent on Pfandbriefe.
