Sandwell Commercial Finance 1

11MAY2004 --- SANDWELL COMMERCIAL FINANCE 1 --- (launched 10-May)
CLASS A: STG205M, AAA/AAA (S&P/FITCH), EAL 3.6YRS, 3ML+22BPS
CLASS B: STG17.5M, AA/AA , EFM 5YRS, 3ML+44BPS
CLASS C: STG12.5M, A/A, EFM 5YRS, 3ML+72BPS
CLASS D: STG10M, BBB/BBB, EFM 5YRS, 3ML+125BPS
CLASS E: STG5M, BB/BB, EFM 5YRS, 3ML+500BPS
COMMON TERMS: I/P 100; PAY 19-MAY; LFM 2009. LEAD CITIGROUP.

--- DEAL INFO ---
The pace of issuance in the primary abs market has slowed to a trickle,
though there are some signs of relief in the pipeline with Granite's Stg3.2bn of
supply and the Dutch quartet due later this month. All these are going to price
in the low-mid teens, showing why demand for yesterday's issue for Sandwell was
so strong, allowing price talk to come in from the starting high 20's, to +25-
28bps, before finally printing at +22bps.
West Bromwich Building Society is the originator here, and is the UK's 9th
largest mutual. Though this is its first securitisation, it has been originating
commercial loans since 1992, changing tack in 1998 to concentrate on larger
loans on buildings occupied by well-known national third-party tenants to
protect WBBS' loans in an economic downturn. Sandwell includes a number of
these, with FTSE-100 companies accounting for 12.3pc and local and national
government for a further 11pc of the rent roll.
There are 203 properties in the pool, let to 358 tenants, giving a lowish
average loan size of Stg1.7m amid a fairly granular portfolio. The largest loan
represents 3.2pc of the pool and is for an office building in the South-East,
largely occupied by a government department.
Sandwell follows in the footsteps of two previous commercial deals for
former/current building societies, Bamburgh (Dec-02) for Newcastle BS and
Dolerite (Jun-02) for Northern Rock. The collateral in Sandwell looks attractive
against both deals, with a lower average loan size and LTV at loan maturity, and
WBBS' historical loan performance has been good. Market conditions in 2002
deteriorated considerably between the two issues, Dolerite pricing at +28bps for
3.1yr and Bamburgh at +45bps for 5yrs. For comparison, June's Permanent 5yr
priced at +18bps, Granite coming 6bps wider by November just weeks before the
massive SCIP-2 issue which kept spreads under pressure well into the new year.
The only UK cmbs to come in 2004 has been the non-conforming BMF deal and
SocGen's Stg206m White Tower deal, a rather different animal with large trophy
loans and well known tenants. White Tower priced at +28bps for its 5.4yr AAA
notes. Sandwell's pricing clearly blows all of these out of the water, and
underlines how desperate the market is for assets which yield a little more than
prime rmbs while offering UK exposure and reasonable granularity.