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Investec Sells First Europe Subprime Bonds Since ’07

Investec Plc, the South African private bank, said it priced 128 million pounds ($200 million) of bonds backed by U.K. non-conforming mortgages in the first public sale of the securities since 2007.

The Class A1 notes were priced to yield 325 basis points more than the three-month London interbank offered rate, Investec said in a statement. The spread steps up to 475 basis points if the securities aren’t refinanced in December 2018.

Investec’s bonds pool loans made by its London-based Kensington Group Plc mortgage unit, Bank of America Corp.’s Mortgages Plc and GMAC RFC, the former financing unit of General Motors Co., according to the statement. Orders for the notes exceeded the amount available by 1.9 times.

“We were keen to ensure the deal was a success,” said Richard Downer, Investec’s London-based head of financial markets group. “It’s a good sign for the U.K.’s wider economy that we have re-opened the market for this type of issuance.”

The bonds were issued through Residential Mortgage Securities 25 Plc. The transaction will be the first securitization of non-conforming home loans since Lehman Brothers Holdings Inc. sold 730 million pounds of bonds from its Eurosail-UK 2007-4BL issuance program in August 2007, according to JPMorgan Chase & Co.

The lender sold the top-rated notes to 11 asset managers and mutual funds based in the U.K., Downer said.

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