NCUA Launches Biggest Offering Of Corporate Bonds

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WALL STREET – NCUA is expected this morning to price almost $5.4 billion of NCUA Guaranteed Bonds, by far the biggest of three offerings so far of the securities comprised of cash flows from failed corporate credit unions.

The latest deal on the federally guaranteed bonds has two AAA-rated classes. Price guidance on the $2.62 billion tranche is in the area of 37 to 40 basis points over one month London interbank offered rate, or Libor. On the $2.862 billion tranche, it is in the area of 45 bps over one-month Libor.

NCUA, through lead underwriter Barclays Capital, has created a securitization trust that is holding the actual mortgage-backed securities owned by the corporates and created bonds using the cash flows from those MBS. As a result, NCUA and credit unions will still be responsible for additional losses on the bonds themselves.

Today’s offer will include cash flows on private label residential MBS from four corporate failures: U.S. Central FCU, WesCorp FCU, Members United Corporate FCU and Southwest Corporate FCU. Securities from a fifth corporate failure, Constitution Corporate FCU, will be included in a future offering.

Last week’s offering of $3.8 million of NGNs was comprised of cash flows on commercial MBS held by U.S. Central and WesCorp. The initial offering of $2.8 billion came from residential MBS owned by U.S. Central

NCUA plans to sell as much as $35 billion worth of NGNs representing some $50 billion of MBS held on the books of the failed corporates over the next four or five months.

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Corporate credit unions