By Mary Mullally
City firms Slaughter and May and Freshfields are advising on Abbey National's £1bn mortgage-backed bond issue – the largest of its kind.
The deal, which is scheduled to close on Thursday, involves removing mortgages valued at £1bn from the bank's balance sheet and repackaging the mortgages as a floating rate bond to institutional investors.
Ian Falconer, structured finance partner at Freshfields, led a team of eight partners and 22 associates advising lead managers JP Morgan.
Falconer said: "I don't believe that a mortgage lender has done anything of this type before – securitising its own mortgage book. I believe that it is the largest backed bond issue of its kind."
Falconer added that it is unlikely that this type of securitisation would have been carried out by Abbey National before it demutualised in 1989, because of restrictions imposed on building societies.
"Mortgage banks now have more flexibility. They are not hampered financially. I doubt the society would have done this deal if it was still mutual and therefore in a sense it is liberated by becoming a bank."
Falconer said that he believed the securitisation would be a benchmark deal.
"It is clearly a significant transaction. In the past there has been some scepticism about securitisation. When institutions with the stature of Abbey National use securitisation certainly many people will sit up and take note."
Slaughter and May's Marc Hutchinson and Dermott Rice headed the team advising Abbey National.
Both Slaughter and May and Freshfields advised on Abbey National's smaller £250m securitisation last year.
Carol Jones, a senior lawyer at Abbey National, said: "The in-house team worked very closely with Slaughter and May on the deal." She added that the bank had been working on the deal with its advisers since before Christmas.
Freshfields advised on the first securitisation in the UK in 1987.