May 24, 2016 / 2:31 PM / a year ago

Obvion plans Europe's first Green ABS bond

* Obvion brings first-ever Green RMBS

* Issuer eyeing Green bond buyers outside SF

* Dutch RMBS could tighten further on Green bid

By Mariana Ionova

LONDON, May 24 (IFR) - Dutch lender Obvion is in the market with the first Green bond in the mortgage-backed sector, securitising residential loans on energy-efficient homes from one of Europe’s most eco-friendly nations.

Green Storm 2016, which was announced on Monday, will issue five-year euro-denominated senior notes backed by a provisional 271m portfolio of prime mortgages, over half of which carry a Dutch government guarantee.

The pool contains a mix of energy efficient homes, as well as houses that have been refurbished to improve energy performance. About three-quarters of the homes have an energy efficiency rating of A. The loans are originated by Obvion, which is wholly owned by Rabobank.

Obvion is embarking on a European roadshow to market the deal later this week, an unusual move for one of the most prolific issuers of European RMBS that is usually in and out of the market in a matter of days.

The aim is to target buyers with a focus on socially responsible investment (SRI), who may not typically buy structured credit products and may not be familiar with the group’s RMBS platform.

“It’s a segment of the market that’s growing exponentially at the moment and it just makes sense to expand with this product,” said one banker close to the deal.

The roadshow will take place between May 27 and June 3, with the deal expected to price in the week of June 6.

While the deal marks the first time Green bonds are used in the European securitisation space, the instrument has been tested in the US and Australian ABS markets.

In the US, issuers have securitised energy-efficient consumer loans, hybrid car loans and monthly household utility payments - although not all have carried official Green certification.

Australia saw its first Green ABS last month, when FlexiGroup cleared a deal that included a A$50m tranche backed by loans for residential roof-top solar power systems.

The asset class has garnered a strong investor response in those jurisdictions. Buyers typically like Green bonds because they often provide a yield pick-up, while also supporting eco-friendly initiatives.

However, in some cases, the popularity of the instrument has wiped out any premium over the issuer’s standard bonds.

It is an open question where Green Storm will price relative to the broader Dutch RMBS market, which has ground tighter and tighter this year on the back of slim supply and a strong bid from the European Central Bank.

The market saw its last public Dutch RMBS deal in January, when Obvion printed 405m in 1.9-year notes at 25bp and 1.4bn in 4.9-year paper at 40bp.

One investor said last week that Dutch notes were nearly impossible to source in the secondary market, pegging spreads on 4.6-year paper at 26bp.

Several market players said these squeezed secondary levels are due to the ECB’s purchases and do not accurately reflect the spreads needed to place a deal in primary, but Green Storm is expected to price tighter than Obvion’s January trade.

“In primary, to get other investors involved, you’ll need to have a bit of a premium. But I‘m sure it’s going to be tighter than 40bp,” said one banker.

Rabobank is sole arranger and joint lead manager on the Green Storm trade, together with Societe Generale.

Reporting by Mariana Ionova. Editing by Robert Smith, Alex Chambers and Julian Baker

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