Seward Kissel Event Kicks off the Holiday Season in NYC

Last night was the unofficial kickoff of the holiday season for structured professionals in New York with Seward & Kissel hosting their traditional event at Brasserie 8 1/2.  It is always a stretch to put too much emphasis on the vibe at these events but with well over 600 professionals in attendance and the conversations lively and positive, it is hard not to feel very optimistic for the securitization industry as we head into the final stretch of the year and look ahead to 2015.  Lots of conversations about new transactions and structures in the works, all around the room.

SFIG Announces New Board of Directors

The fledgling US securitization industry group known as the Structure Finance Industry Group, Inc. or “SFIG” announced the results of its recent board elections earlier this week.

Formed earlier this year, SFIG is attempting to right many of the mistakes that many in the industry feel the American Securitization Forum or “ASF” has made over the years.  Importantly, it seems fairly clear that the chief executive of SFIG, Richard Johns, will be fully accountable to the new Board of Directors and therefore by extension, to the membership of the SFIG.  Apparently, this wasn’t always as clear at the ASF.  Officers of the new Board include some well-known industry veterans, Reggie Imamura of PNC Financial Services Group, Christopher Haas of Bank of America Merrill Lynch,  Jordan Schwartz of Cadwalader, Wickersham & Taft LLP and Gregg Silver of 1st Financial Bank USA.

SFIG has gotten off to a fast start with a competing industry conference planned for early next year in Las Vegas and they been active in several regulatory and legislative initiatives over the last several months.  It will be interesting to see how the two trade organizations compete for the affections of the same constituents.  One gap that we have noted in ASF’s strategy over the past several years was a tendency to cater too easily to the larger and more established members and industry participants, often at the expense of the more grass-roots, organic and entrepreneurial segments of the industry.  Going back to the earliest days of the ASF, it was the most creative parts of the industry that disproportionately fueled its rapid growth and thereby the success of the trade group.  Although the current leadership of the SFIG board is made up of many of the same industry leaders, one would hope that as the recovery of the markets continues, more attention will be paid to new ideas and new strategies on a variety of fronts.

Here’s a full list of the new SFIG Board of Directors:

— Chair: Reggie Imamura, PNC Financial Services Group

— Deputy Chair: Christopher Haas, Bank of America Merrill Lynch

— Secretary: Jordan Schwartz, Cadwalader, Wickersham & Taft LLP

— Treasurer: Gregg Silver, 1st Financial Bank USA

Executive Committee

— Tom Davidson, GE Capital

— Howard Kaplan, Deloitte & Touche LLP

— Valerie Kay, Morgan Stanley

— Samuel Smith, Ford Motor Company

— Kevin Sweeney, Discover Financial Services

Board Members

— Jim Ahern, Societe Generale (AFME member)

— John Arnholz, Bingham McCutchen LLP

— Bob Behal, Vanguard

— Allan Berliant, GMO LLC

— Andy Berman, Fortress Investment Group LLC

— Christopher DiAngelo, Katten Muchin Rosenmann LLP

— Sean Dobson, Amherst Securities Group, LP

— Dave Duzyk, JPMorgan Chase & Co.

— Pat Evans, Wilmington Trust Company

— Bill Felts, Citigroup, Inc.

— Lisa Filomia, Ernst & Young LLP

— Tom Finke, Babson Capital Management LLC

— Steven Grundleger, Ocwen Financial Corporation

— Tricia Hazelwood, Mitsubishi UFJ Financial Group, Inc.

— Jay Kim, Credit Suisse Group AG

— Jason Kravitt, Mayer Brown

— Gary Horbacz, Prudential Investment Management

— Steve Kudenholdt, Dentons

— Pia McCusker, State Street Global Advisors

— Claire Mezzanotte, DBRS Inc.

— Tim Mohan, Chapman and Cutler LLP

— William Moliski, Redwood Trust, Inc.

— Doug Murray, Fitch Ratings

— Ned Myers, Lewtan

— Christopher Pink, Wells Fargo Bank N.A.

— Saul Sanders, Shellpoint Partners LLC

— Brad Schwartz, Blue Mountain Capital Management LLC

— Faith Schwartz, CoreLogic

— Susan Sheffield, General Motors Financial Company, Inc.

— Diane Wold, Two Harbors Investment Corp.

MBS Whale on the Horizon?

Rumors are in the market that a nearly US$9Billion residential mortgage-backed issue may be priced shortly.  There is lots of speculation as to who may be involved but we may know as soon as next week, if the pricing stays on course.

One would have to think that IF the deal goes through and IF the arrangers and issuer are happy with the pricing, how could this not be very good news for a resurgence in the MBS market.  You would have to think that if nearly $9Billion can be placed, investor appetite and “confidence” in the regulatory environment, which has been casting a shadow over the asset class for so long, has returned.

For more details, link to the WSJ article  http://blogs.wsj.com/moneybeat/2013/05/22/big-rmbs-sale-tests-steamy-market/

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.

Credit Suisse Retrenches

Word out this week that Credit Suisse may be giving up on waiting for the securitization markets to bounce back. 

Once one of the highest flyers in the business of underwriting and trading securitized debt programs, Credit Suisse has grown weary of the string of lackluster quarters that their fixed-income banking units have posted and decided now is the time cut some of their losses.

More than a year ago, CS began to move away from the asset-backed commercial paper markets, as the benefits to the bank and its clients continued to deteriorate in the post-credit crisis era.  Now comes news this week that Credit Suisse will be exiting the commercial mortgage-backed market and downsizing several of its asset-backed banking units.

We see this as a natural result of the continued uncertain regulatory environment in the securitization markets.  Whether it be the lack of clarity surrounding the implementation of Dodd-Frank or a similar level of uncertainty for the specific implementation of Basel III guidelines, who can blame these banks for throwing their hands up.  We are fairly certain that bank management must have considered the fact that if and when the air clears, they can always get back in with a few key hires. We would find that logic hard to argue against.

Nevertheless, we would hope that this does not become a trend.  While it might be wishful thinking, perhaps some of the regulators are paying attention and this possibility will inspire them to act more decisively in drafting and approving final regulations. 

Likewise, those regulators who have begun to come around to the benefits and even the “necessity” of the return of a robust securitization marketplace are paying attention.  If they wait too long, there may be no one left to invite to the party.

Could ABN Amro Slip Back into Securitization

Rising like a phoenix out of the ashes of the credit market’s 2008 collapse, word comes out of the Netherlands this week that ABN Amro may be getting off the mat for another strong run at the capital markets.  Could this be a precursor for other firms either assumed dead or on the respirator such as Royal Bank of Scotland or AIG (all beneficiaries of unprecedented national government assistance)  adding some competition and some spice to a revival of global structured finance?

You will recall that following the disastrous three-way breakup of ABN by RBS, Fortis and Banco Santander in 2007, the remnants of ABN’s business were rescued by the Dutch Government in 2008 via a Euro24 Billion infusion and the nationalization of the company.

Now comes word that the Dutch Government is hopeful that they will be able to recoup all or more than their investment through an IPO process of a resurrected ABN Amro, as early as 2014.

Chief cheerleader for the revived ABN is their new CEO, Gerrit Zalm, who was interviewed by the Financial Times earlier this week.  Zalm made a number of interesting comments about expansion plans for ABN in several product areas including, commercial, merchant and private banking business lines.

One comment that we found to be particularly interesting was Zalm’s indication that the bank is interested in buying up assets of “capital-stretched” banks in the Euro-zone and taking over the management of portfolios.  Could this mean what we think it does?

Does ABN expect to look for buying opportunities for distressed portfolios?  Certainly on paper, their clean balance sheet (all within the new ratio guidelines) make them a natural buyer, as they do have capacity.  What does one expect they will do with those portfolios?  Certainly they might sell them to their bank customers but we think it is much more likely that they will re-package those assets and sell them to institutional investors in the secondary market.

We’re not suggesting that ABN and others might light the match to ignite the return of a CDO market.  However, we don’t think it would be stretch to see ABN provide the market with a very valuable valve to release pressure in the credit markets and to help to once again align the distribution of structured product with investor demand; something which the so-called “healthy” banks have limited capacity for at the current time.

Talk about “weird justice”.  We may very well witness some of the baddest cowboys on the ranch donning white hats and riding to the rescue of the securitization markets.  Wouldn’t that be ironic!