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Credit Suisse Said to Sell First U.K. Subprime Bonds in 2012

Credit Suisse Group AG is selling 180 million pounds ($283 million) of U.K. non-conforming residential mortgage-backed securities in the first transaction of its kind in Europe this year, according to three people with knowledge of the deal.

The notes issued through ALBA 2012-1 Plc will have an average life of 3.7 years, said the people, who declined to be identified before the transaction is completed. The notes will have a top credit grade from Fitch Ratings, the people said.

It’s the first deal to be priced in Europe since Credit Suisse issued 202 million pounds of notes in May, according to Barclays Capital data. Investors demand 320 basis points more than interbank rates to hold a three-year senior bond backed by U.K. non-conforming residential mortgages, the lowest spread since June, JPMorgan Chase & Co. data show.

The transaction will include another 60 million pounds of mezzanine and junior notes that won’t be publicly offered, said the people. The deal is backed by 340 million pounds of mortgages initially originated by GMAC-RFC, the people said.

Banks create residential mortgage-backed bonds by packaging home loans into securities of varying risk and return that are sold to investors. Subprime mortgages, known in the U.K. as non-conforming, are loans that don’t meet standard bank lending criteria.

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