For a new kid on the ABS conference block, the American Securitization Forum (ASF) did well for itself as a solid showing flocked to attend ASF 2004, held last week at the Fairmont Scottsdale Princess in Scottsdale, Ariz. In fact, organizers have tentatively set a Jan. 23-26, 2005 date for next year's gathering. Unofficial estimates pegged this year's attendance at well over 1,000, a number that ASF Chairman Vernon Wright aims to double for next year's event.
In his welcoming remarks, Wright said that the ASF will continue playing a proactive part in shaping the future by educating and informing regulators about "our collective industry." Aside from this, he said that one of the main goals of the ASF remains boosting membership, particularly among investors. According to senior committee members, the Forum was taken aback by press accounts the week before indicating that investor attendance would fall shy of the goal. However, if attendance is an indicator of a conference's success, it's hard to see where the ASF fell short.
Wright added that the organization will not rest on its laurels. "Are we satisfied? Absolutely not!" he shouted in true Howard Dean fashion, proclaiming that throughout 2004, ASF will focus on the investor.
State of the industry
In her presentation, Diane Citron, a partner at Mayer Brown, Rowe & Maw, showed encouraging statistics indicating how significant the industry is among the fixed-income world. In the past 10 years, RMBS, ABS and CMBS securitization has grown to $8.5 trillion. She said that 70% of all mortgages, 75% of all auto loans and 85% of all credit card accounts have now been securitized. This is equivalent to 33% of the debt market.
The investor focus was quite apparent in the conference agenda, with many sessions devoted to the blowups both directly and indirectly related to ABS. Discussion focused on the telltale signs of when a company might take the wrong turn and how investors should protect themselves. The panel on "Investor and Market Issues" featured participants highlighting now infamous names like LTV Steel, DVI Inc., Conseco Finance and so on. Talk ran the gamut of issues, such as servicing reorganizations, seller fraud and portfolio deterioration.
Despite a general effort to forget this name, Enron Corp. was even given as an example investors could learn from, even though panelists were clear to differentiate the accounting plays of Enron from what they called "true securitization."
Aside from discussions on fraud-related horror stories, speakers also highlighted the chinks in the structure. Many panels revisited the meaning of bankruptcy remoteness, in light of recent examples, such as DVI and Conseco, where true sale was never debated but bankruptcy, nevertheless, took its toll on cash flow and performance.
Many panelists said that despite the recent setbacks, the industry remains viable and provides a good funding alternative. Speaking on the "State of the Industry" panel, Lehman Brothers research head David Heike said that ABS still has very strong credit fundamentals, though offset by rising rates. While the industry does not pass with flying colors, it still has performed well, he said.
The ASF's investor focus was also apparent in its selection of topics. The event featured several simultaneous issuer presentations from all of the various sectors. There were also updates on the different asset types, such as student loans, CDOs (three panels devoted to this topic), and the auto sector.