More consolidation among the securitization trustees

The news out this week that US Bancorp’s Corporate Trust Unit has acquired Bank of America’s Securitization Trust Services business on the back of M&T’s recent whole-bank acquisition of Wilmington Trust brings more turnover and disruption to the structured finance markets.

The BoA structured finance trust business came to Bank of America as a throw-in to its acquisition of La Salle Bank in 2007.  Prior to the crisis, La Salle was one of 5 or 6 leading providers of bond trustee services to the securitization industry and had a sizeable stable of clients in both the US and European markets.  At that time, the business likely generated more than $150mm in annual revenue and was very profitable.  No doubt BoA kept the business because of its strong financial footings and its abilities to generate cash balances for the company.

However, with the continuing slide of the securitization industry in both the US and Europe and the recent heat being placed on the trustee community by asset-backed investors, it stands to reason that the time to sell was right.  US Bank already has one of the leading securitization businesses and, with their existing scale and infrastructure, stands to be able to assimilate this business relatively easily and buy themselves some valuable time while the markets for new issues recovers.  The deal also provides access to a much deeper bench of euro-market clients.

At the end of the day, probably a good move by both organizations.

However, when coupled with the consolidation of the much smaller Wilmington and M&T Bank securitization trust businesses, this leaves issuers and arrangers with an ever dwindling choice of providers of bond trustee and administrative processing and reporting services for these complex financings.  That can’t be good for pricing and it might prove to be a challenge for issuers and investors to find the right levels of service quality that the new market standards will demand.

We’ll be watching.

About markferraris
Managing Principal Orchard Street Partners LLC

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