By Al Yoon Wells Fargo Securities and RBS Securities on Thursday restructured their $1 billion commercial mortgage-backed securities issue to accommodate increased investor demand for floating-rate debt, according to investors familiar with the offering. The two dealers shifted $75.25 million from the top-rated, public 10-year fixed-rate offering to a privately placed floating-rate class, the investors said, citing the "launch" of the bond that takes place ahead of official pricing. Wells Fargo, a unit of Wells Fargo & Co. (WFC), and RBS, a unit of Royal Bank of Scotland PLC (RBS.LN, RBS), had been struggling with shifting demand in the CMBS market after a steep drop in interest rates in recent weeks. An aversion to buying assets with long duration at such low rates had cooled investors on the deal's largest, 10-year class, resulting in pricing delays and ultimately the new structure, according to investors briefed by the dealers. However, the dealers were able to launch the smaller public 10-year debt at 140 basis points--or 1.4 percentage points--over a benchmark, interest-rate swap rates. Some other underwriters had said that level was too low given the risk aversion that has dominated financial markets as Europe's debt crisis flared up and U.S. economic data disappointed. On the public bonds, the dealers raised risk premiums on two other senior classes by 5 basis points from initial guidance, for spreads of 205 basis points and 280 basis points. They lowered the yield spread on a lower-rated class by 25 basis points to 450 basis points, however. For privately issued bonds, the floating-rate class likely will price at a 120-basis-point spread. The spread on lower-rated private classes were cut or unchanged from levels bandied about earlier. Write to Al Yoon at albert.yoon@dowjones.com
