LONDON, March 9 /PRNewswire/ -- The first European reverse mortgage securitization transaction will be launched this month, Amanda Thomson, vice president at Citibank N.A., the arranging bank, confirmed today.

"We're going to begin the premarketing phase this week and expect to launch the transaction very soon," she said. "The bonds will be primarily targeted at U.K. long-dated fixed-rate investors."

The transaction was originated by Norwich Union Equity Release Ltd. through special-purpose entity Equity Release Funding (No.1) PLC and has a preliminary amount set at GBP222.5 million. Preliminary ratings were assigned by Standard & Poor's on March 5, 2001.

A reverse mortgage is a product designed for older borrowers, typically aged 60-plus, who wish to release some of the equity in their property in exchange for cash. It enables borrowers to raise cash from an unencumbered asset without having to sell their home and move.

Ms. Thomson added that Citibank is very pleased to be bringing a brand new asset class to the European securitization market, which could trigger further activity.

"This is a very interesting asset class that has a lot of growth potential," she said. Mark Kelly, director of Personal Finance at Norwich Union, added that this securitization will be a fundamental part of the company's funding strategy going forward.

"We intend to use securitization to refinance our mortgage equity release products because it is a flexible financing tool that allows for cost-effective refinancing," he said. "We envisage establishing a program going forward."

Heather Dyke, associate director at Standard & Poor's Structured Finance Ratings group in London, also added that demand for this type of product will increase over time as the population of older people grows.

"In the U.K. there are more than 10.6 million people over pensionable age and this is forecast to grow as life expectancy increases and birth rates fall," she said.

Ms. Dyke continued that this is the first time that Standard & Poor's Structured Finance ratings group Europe has assigned preliminary ratings to a reverse mortgage transaction and in view of this it has been necessary to adopt a different approach to its traditional RMBS analysis.

"Repayment of the loan is a function of mortality and prepayment, whether voluntary or as a result of the borrower having to enter into long-term care, together with the value of the property at the date of sale," she said.

A Monte Carlo approach was used to profile and assess the requirement for credit enhancement and liquidity. The Monte Carlo technique involves the creation of many thousands of scenarios through the random sampling of the distribution of a combination of key variables.