Dislocation in the primary market continues to highlight value in some of the more non-traditional asset classes.
At yesterday's American Securitization Forum's (ASF) Sunset Seminar on non-traditional asset securitization, industry players swapped the usual discussion on regulatory updates for more upbeat talk about the securitization of pizza and doughnut franchises, solar energy and airplanes. These are just some of the assets that have been bundled into structures over the past twelve months.
In fact, one of the panelists Michael Mittleman, a director in project finance at SolarCity, said the company is looking into doing a securitization in 2012 during the panel discussion.
The deal is in a very preliminary stage as the underwriter, legal counsel and rating agency have yet to be selected.
Esoterics as they have been known in the past are enjoying a renaissance as non-traditional assets. The new take on the this segment of the securitization market has sparked some good sellside and buyside interest.
Prior to the last credit crisis, non-traditional assets were predominately wrapped by monolines and sold to a highly levered investor base, which as it turns out was not a stable source of liquidity.
However, over the last 18 months, the sector has developed a new, more stable investor base.
"Off-the-run assets used to be dominated by insurance companies and then monolines came in and the market became much different," said Michael McDermitt, vice president and team leader for commercial and esoteric ABS at Moody’s Investors Service. "With that going away there in once again a need for traditional buy-and-hold investors."
For these more traditional players, losing the monoline wraps has meant better value. Ed Fitzgerald, managing director at New York Life, said that the long-term investors welcome the development in the non-traditional segment of the market.
"The market has become more of an institutional, long-term market as opposed to SIVs and the commercial paper market," he said. "Our experience has been very positive from both a ratings and default point of view."
Fitzgerald said that the non-traditional space has created an opportunity for excess return and has provided comfort that in the event that there is some economic loss, it wouldn't be at catastrophic levels.
"In case you do have a bad economic outcome, investor can always opt to liquidate the asset or sell it on to another party," Fitzgerald said.