Dynex Prices Wide in Raucous Market


Dynex Capital Inc. last week completed a securitization of $345 million in manufactured housing receivables last week, with the spreads on several of the tranches coming in well above price talk.

The sale comes on the heels of Dynex's successful legal tussle with AutoBond Acceptance Corp. and Dynex's plans to sell its manufactured housing financing unit.

Market sources said the sale came at a price to Dynex, since spreads on most of the tranches were well above presale expectations. The five-year tranche was priced at a spread of 210 basis points over Treasurys, compared with initial talk of 175 basis points to 185 basis points over. The three-year tranche was priced at a 167 basis point spread, versus talk at 145 basis points to 150 basis points.

The two-year came closer to expectations with a 144 basis point spread, up from presale talk of 135 basis points to 140 basis points. The one-year class priced at 50 basis points over synthetic Libor, which was expected.

A company spokeswoman said that Dynex is now in the due-diligence phase with a buyer and anticipates completing the sale before the end of the year.

"The business continues to grow, but it needs a parent with a larger capital base to support it," the spokeswoman said.

She noted that Dynex continues to generate production in this area and is warehousing manufactured housing paper, even as the talks proceed. She said she could not rule out the possibility of another securitization of such paper prior to the end of the year.

The deal comes as a district court judge in Travis County, Texas, denied AutoBond injunctive relief from Dynex' suspension of funding of retail installments contracts originated by AutoBond. In that decision, the court also ruled that AutoBond must immediately transfer the servicing of retail installment contracts that collateralize funding notes.

Dynex is suing AutoBond seeking relief for breaches of representations, warranties and covenants. AutoBond responded with a suit against Dynex alleging breach of contract and other claims.