Permanent TSB capital gain exceeds EUR150m in RMBS buyback

By Anil Mayre

LONDON, Oct 12 (IFR) - Irish originator Permanent TSB made acapital gain in excess of EUR150m with its RMBS tender offer,repurchasing EUR644.6m of bonds from the Fastnet 2 transaction.

The participation rate exceeded 50%, which is a rareoccurrence in the European securitisation market where holdersof legacy paper are generally reluctant to sell their bonds at aloss.

The originator offered a 3% bonus to investors that tenderedby the early deadline of September 28 2012, a week ahead of thefinal deadline of October 5 2012.

Minimum prices of 72.5% for Class A2, 50% for Class B, 40%for Class C and 30% for Class D - including the 3% sweetener -were advertised. The bank said it would satisfy in full allorders from those investors that tendered at or below theminimum price.

The expectation that investors would come in at the minimumprice may have influenced Permanent TSB's decision to use amodified Dutch auction, where the bank pays a single priceacross all investors in each tranche, rather than dealing withindividual prices as through the unmodified auction.

ABS research analysts have pointed out that the unmodifiedauction process enables institutions to maximise the pricingbenefit, but they also argued that the process was not the mostinvestor-friendly because those considering tendering bonds areunsure if they are under-selling themselves.

Permanent TSB ended up above the minimum price by some way,some 7.5 points over the Class A2 tranche at 80%. It boughtClass B notes back at 56%, Class C at 50% and Class D at 42%.

It received EUR658.2m of offers for Class A2, andrepurchased EUR544.7m, bought EUR34.7m of Class B from EUR36.1mof orders and took out the EUR23m of Class C and EUR32.23m ofClass D in full. In total, investors tried to sell backEUR749.6m of bonds.

In posting a gain in excess of EUR150m, Permanent TSB wentsome way to achieving its objective to "strengthen the qualityof the purchaser's capital base and to contribute to improvingthe purchaser's regulatory capital position, thereby allowingthe purchaser to meet its minimum capital requirements imposedby the regulator".

This process leaves EUR544.6m of bonds outstanding in thetransaction.

(Reporting by Anil Mayre)

((anil.mayre@thomsonreuters.com; 44 207 542 3455; ReutersMessaging: anil.mayre.thomsonreuters.com@reuters.net))