(Read more on the debt and equity markets.)
PHILADELPHIA-RAIT Financial Trust has closed a euro 900-million (nearly $1.3-billion) European real estate securitized transaction that will be managed by a RAIT subsidiary. This is RAIT's second Euro-dominated securitization backed primarily by subordinated and senior debt issued by real estate companies in Europe. It is the company's 13th securitization transaction.
In its current transaction, the locally based financial REIT purchased euro 17.5 million ($24.6 million) of unrated notes in the securitization and will earn collateral management and origination fees. Approximately euro 820.3 million (nearly $1.2 billion) of investment grade notes, euro 37 million ($52.1 million) of non-investment grade notes, and just over euro 42.7 million ($60.2 million) of unrated notes were issued.
The total outstanding principal balance of the assets acquired by the securitization at the closing was approximately euro 444 million ($625.4 million). The remainder of the net proceeds of the securitization will be used to acquire similar assets by Sept. 15, 2008, which is the ramp-up completion date of the deal.
At the time of the issuance, the weighted average interest rate of the investment grade securities was Euribor plus 49 basis points. The Euribor, Euro Interbank Offered Rate, is the benchmark rate of the European money market.
Unlike the company's February European transaction, this one is not referred to as a CDO or collateralized debt obligation in the announcement of the deal. CDOs have fallen into disfavor during the current credit crunch and debt volatility. A call to RAIT was not returned by deadline. Like the first European transaction, this was made by unidentified placement agents and is a private transaction. In February, a RAIT spokesman told GlobeSt.com that because the transaction is private, information is limited to information in the RAIT-issued statement.
Shares of RAIT, which trades under RAS on the NYSE, experienced a spike to its 52-week high of $38.25 a share on Feb. 7, following the announcement of its first European CDO. However, shares suffered a severe plunge, falling to a 52-week low of $4.82 a share this Aug. 6, after the company disclosed that American Home Mortgage Investment Corp. had failed to make its July 30 payment. American Home Mortgage subsequently went out of business. Following the announcement of the current European securitization, RAS shares were trading at mid-day Sept. 20 at $9.47 a share, up nearly 3% for the day.
RAIT, which is headed by Betsy Cohen, chairman, and Daniel Cohen, CEO, was formed on Dec. 11, 2006 by a merger of RAIT Investment Trust and Taberna Realty Finance Trust. At a shareholder meeting on the day of the merger, Betsy Cohen described the ability to close and manage CDOs among the chief benefits of the merger.
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