Several Strong Indicators for Continued Improvement in Securitization Markets

Historically, the end of the summer in the northern hemisphere has been a good time to take stock of new developments and the general health of the structured finance markets.  When we look back on this summer of 2014 a few years from now, we might point to this as a particularly important time for the continuing recovery of securitization, as a viable and necessary financing tool for companies and industries of many stripes and colors.  The industry still suffers from comparison envy (year after year it seems), to the glory (and unfortunately the excesses) years of the early 2000’s.

But this year seems different to us here at Securitization Monitor.  While there has undoubtedly been gradual and steady improvement in the markets in every year since about 2012, the facts are that much of that improvement has been limited to pockets of asset classes and limited to only some markets.  A sampling of some recent headlines supports our renewed optimism……

* On August 21st, Bloomberg reported that the Basel Committee on Banking Supervision made another very positive statement about adjusting bank capital rules to provide better treatment for plain vanilla ABS structures, the results of which would only broaden the global investor base and bring the big banks back into the buy-side, where they have been sorely missed.

* On August 20th, CNBC reported that delinquent residential mortgage payments in the US had fallen to their lowest levels (3.46%) since the first quarter of 2008.

* On August 12th, Infocast confirmed that they are expecting strong attendance at the second major solar securitization conference within the past year, named Solar Securitization 2014, at the end of September in New York.  Perhaps not the flash-in-the-pan asset class that some have called it?

* On August 8th, the Israeli business daily, Globes, reported that a joint task force of the Bank of Israel, the Israel Securities Association, the Ministry of Finance, the Ministry of Justice, and the Israel Tax Authority has announced a major initiative aimed at restarting the securitization market in Israel.  In the announcement they indicated that the legislative/regulatory process should be completed within four months and the market should be reopened for business within the next year.  While Israel is not a big market, the news represents another positive niche opportunity for growth, in a global industry that has always been built on new markets and niche asset classes.

* On August 6th, the SFIG produced their “Green Papers” series outlining the industry’s thoughts and recommendations for introducing standardization and sustainability to the private US RMBS markets.  More commonly known as RMBS 3.0, the initiative represents a major breakthrough in pushing the conversation about the continuing hurdles that have prevented a more robust recovery of this most important of the global securitization markets.

* On August 1st, China Daily detailed the continuing movement being made by The China Securities Regulatory Commission to streamline the issuance of asset-backed securities in the PRC.  While this is not the first such pronouncement, the frequency with which news and progress is being made in this important market cannot be ignored.

A darling of the recovery for the past few years has been the CLO markets.  You may have seen a table like this one that Forbes ran back in May this year…..

US CLO issuance

All said, some pretty strong news for the securitization markets!  As we head into the home stretch of 2014 and the late year conference circuit, including IMN’s ABS East in Miami next month, we envision much more than just talk about new deals and possible structures.  While it’s been a long time coming, it hard to refute that market momentum in many areas is both strong and steady.

About markferraris
Managing Principal Orchard Street Partners LLC

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