Permanent TSB capital gain exceeds EUR150m in RMBS buyback

By Anil Mayre

LONDON, Oct 12 (IFR) - Irish originator Permanent TSB made a capital 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 rare occurrence in the European securitisation market where holders of legacy paper are generally reluctant to sell their bonds at a loss.

The originator offered a 3% bonus to investors that tendered by the early deadline of September 28 2012, a week ahead of the final 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 all orders from those investors that tendered at or below the minimum price.

The expectation that investors would come in at the minimum price may have influenced Permanent TSB's decision to use a modified Dutch auction, where the bank pays a single price across all investors in each tranche, rather than dealing with individual prices as through the unmodified auction.

ABS research analysts have pointed out that the unmodified auction process enables institutions to maximise the pricing benefit, but they also argued that the process was not the most investor-friendly because those considering tendering bonds are unsure 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 bought Class B notes back at 56%, Class C at 50% and Class D at 42%.

It received EUR658.2m of offers for Class A2, and repurchased EUR544.7m, bought EUR34.7m of Class B from EUR36.1m of orders and took out the EUR23m of Class C and EUR32.23m of Class D in full. In total, investors tried to sell back EUR749.6m of bonds.

In posting a gain in excess of EUR150m, Permanent TSB went some way to achieving its objective to "strengthen the quality of the purchaser's capital base and to contribute to improving the purchaser's regulatory capital position, thereby allowing the purchaser to meet its minimum capital requirements imposed by the regulator".

This process leaves EUR544.6m of bonds outstanding in the transaction.

(Reporting by Anil Mayre)

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