ABS East Leaves a Sense of Optimism

Our informal survey of this past week’s securitization industry gathering in Miami would suggest that there continues to be a moderate sense of enthusiasm for the slow but steady recovery of the structured finance markets.  IMN’s ABS East event has traditionally been a time for the industry to take stock of the past year’s activity and to begin planning for the next year.  With the general malaise of the past several years, the event had become something more akin to a group therapy session for the industry.  Perhaps not the case this year.

Good activity to report both for the year and looking forward in several asset classes including CLO’s and ABS securities including autos and credit cards.  Several areas of innovation in Latin America, particularly in Mexico where several innovative structures are being completed.  Commentary around “regulatory clarity”, while continuing to exhibit longstanding frustration in terms of pace and workability, was mostly centered on the feeling that putting the US elections behind will add some additional momentum to a slowly increasing pace for rational implementation.

It was very good to once again see investors, issuers and bankers discussing “real” deals and deal flow for the upcoming months.  All in all, a general feeling of better days ahead is what we take away from this year’s ABS East event.

IMN ABS East Conference: Industry Looks for Another Re-set

This weekend, securitization industry professional will once again gather in South Florida for IMN’s Annual ABS East Conference.  The gathering is projected to draw some 2,600 issuers, bankers, lawyers, accountants and service providers, all very intent on observing these last few weeks leading up to the US Presidential Elections to see if there may be a renewed sense of urgency in Washington to finally clarify and in some cases, fix recent regulations aimed at this important industry.

Maybe it’s just us but the last several months sure seem to have been a drag on the momentum for repairing the markets that we and others were so bullish about earlier in the year.  Despite the strong rebound of issuance in several asset classes including several classes of ABS securities and CLO’s, there seems to have been a growing sense of inertia in the market over the past 20 or so weeks.  As an example, this past week’s Covered Bond event in New York, seemed to be more about “if and when” then it did “how and why”.

We have no doubt that much of this may very well be attributable to a “wait to see who gets elected” mentality at the US regulatory bodies.  Certainly, it is fair to suggest that whoever wins the US election will influence how the new rules will be implemented.  So it’s fairly easy to understand why people my take a wait and see view.  Other factors that seem to be at play include the ongoing lack of clarity associated with Basel III implementation.  Clearly, how the Basel rules are finalized and implemented will have a signficant and long-lasting impact on the structured finance industry, as it is the banks that drive the securitization markets both as issuers and investors.

Despite all the rhetoric, we are not so sure that the impact of either a Democratic or a Republican victory in November will have a material “1-2 year impact” on the regulations.  We do, however, agree with those that suggest that whoever is elected, the leading US regulators will be re-motivated to finalize the rules for the securitization industry and sticky wickets such as finalizing a plan for the unwinding of the GSE’s, all of which will bring a much-needed sense of clarity to the markets (and by extension, increase issuer and investor confidence).

In recent years, ABS East has been more of subdued wrapup to another disappointing year in the industry.  With the election looming and the anticipated impact it may have on clarity and confidence, ABS East has the potential to provide industry professionals with a good opportunity to re-set their plans and relationships in anticipation of better things to come in 2013.  We’ll be following the crowd.