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Market weakness hits securitisation deals

Lehman Brothers has had to massively reprice its latest securitisation deal after failing to find buyers for the offering at its original price, Money Marketing understands.

This has been taken as a further sign of weakness in the securitisation market following the US sub-prime problems.

It is understood that Lehmans originally offered the AAA-rated part of its latest commercial mortgage-backed securitisation deal, Windermere XII, to the market at 12 basis points over Libor but had to change this to 35bps over Libor after receiving no interest.

Confidence in AAA-rated issuance has been dented as a result of several formerly AAA-rated mortgage-backed collateralised debt obligations being downgraded by ratings agencies recently.

Earlier this month, West Bromwich Building Society withdrew its latest residential mortgage securitisation deal, citing difficult market conditions.

As Lehmans is effectively funding loans from its own reserves, the bank has increased sub-prime rates through its subsidiaries and partnerships with Northern Rock and Alliance & Leicester.

Lehmans-owned Preferred is raising sub-prime rates by 0.65 per cent from September 10.

John Charcol senior technical manager Ray Boulger says all securitisation lenders face similar problems. He says: “This is why they are putting up rates so sharply. The market is so difficult and the securitisation market is basically closed.”

Lehman Brokers declined to comment.

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