Morgan Stanley, BofA CMBS May Price Tighter Than Recent Deals
07/11/2012| 12:29pm US/Eastern
By Al Yoon
Morgan Stanley (>> Morgan Stanley) and Bank of America Corp.'s (>> Bank of America Corp) Merrill Lynch may price the benchmark 10-year portion of $1.35 billion in commercial mortgage-backed securities tighter than the most recent CMBS, indicating some stability in demand for such new issues, according to two investors familiar with the deal.
Morgan Stanley and Bank of America told investors they are considering pricing the $490 million of publicly offered AAA 10-year debt at 145 to 150 basis points over interest-rate swap rates, the investors said.
The pricing range is an improvement over earlier talk of 150 basis points, and the 160 basis point spread--the highest since September--on similar debt from a UBS (>> UBS AG) and Barclays (>> Barclays PLC) issue at the end of June. Spreads in that CMBS and two prior deals have been widening as falling interest rates depressed yields to levels that raised the risk of investing in longer-term securities.
Morgan Stanley and Bank of America Merrill Lynch have already sold two classes of bonds rated A/A1 by Fitch Ratings and Moody's Investors Service, respectively, in a sign that investors are comfortable with the credit.
The CMBS is based on 72 loans on 98 properties. Morgan Stanley and Bank of America spokesmen declined immediate comment.
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