BARCELONA - World Cup excitement, pending airline strikes and beautiful weather set the stage for this year's sixth annual Global Asset Securitization Conference in Barcelona, Spain. With 2,500 attendees and nearly 124 exhibitors, it expectedly marked the largest global ABS gathering to date.

In the past, many market sources have claimed Barcelona is the hottest conference of the year. While the rave reviews continued this time around, the atmosphere was entirely different from 2001.

Overall, it was quite fitting that a global ABS conference was held during the World Cup, as people from all over the world gathered, not only to attend the event, but at times to watch the games on television screens at select exhibitor booths. Certainly, when South Korea scored a goal to tie the game last Tuesday, sounds resembling that of a Spanish futbol (soccer) stadium were echoed throughout the conference arena.

In the background and in between sessions, however, market players could be heard rumbling about the possible air traffic control strikes, which took effect in France and Spain, causing a great deal of concern for attendees trying to return home.

Globalization of ABS a continuing theme

Sessions were well attended - standing room only for several sessions. "Wow. Usually when I talk about this stuff people are out playing golf," joked one panelist, during an overcrowded issuer workshop called New Accounting Rules and The Impact on Issuers: A look at FASB 140; International Accounting Standards and FRS 5.

It has been said that the growing attendance each year in Barcelona parallels the growing market. During several of the sessions, panelists pointed out that the market is not only growing in size, but it is becoming more global, as countries are looking into cross border securitizations.

"The market is evolving to become more global, but there are many issues and it will take awhile," said one panelist. Speakers in this session also said that as the European nations look to create a more global market, it is important for arrangers to look at the underlying assets and the legal obligations to determine which transactions are appropriate for cross border securitization. And, while cross border transactions are clearly a growing trend across the region, one panelist also spoke of the few hurdles that need to be overcome.

Germany, known to have a relatively securitization-friendly system, has had an ongoing tax issue on true sale transactions which has hindered the market in some respects. France has also encountered structural problems as a result of the transfer of assets.

Additionally, there is a discrepancy among countries regarding insolvency laws pertaining to the mingling of cash and with regard to the originator and the creditor. In this panel, it was also mentioned that synthetic transactions continue to be a growth area in Europe.

The European Securitization Forum's Whitepaper was, as predicted, a relatively hot topic of conversation (see ASR 6/10/02 p.1). Panelists at the session noted that the blueprint is currently open for comment and that it should ultimately be used as a benchmark. And, while discrepancies among securitization regulations in the European nations can vary greatly, one panelist said, "Differences will probably diminish as time goes on."

Another common theme that seemed to appear in various sessions was that more attention should be given to the underlying assets in transactions going forward. In one particular session, What is the value of financial guarantees?, panelists remarked that there should be more transparency in transactions, and investors should not rely solely on the triple-A rating of monoline insurers (see story p. 15). "You must understand how the company works - you must understand its creditworthiness and what the contagion affects would be," remarked one panelist. "There's clearly more underneath the hood."

Another well attended session was Emerging Trends in European ABS. Panelists noted that there has been a steady increase in traditional asset classes and trade receivable transactions as corporate issuers cross over, aiming for cheaper funding via ABS.

And as issuers continue bringing repeat deals, the market is developing more benchmarks, and transactions are getting larger. "Growing liquidity has been the real story over the last 18 months," said one panelist. "However, it's hard to assess the real liquidity of the market."

As the entire conference was a learning session, it seems as though market participants have agreed that Europe will follow the U.S. lead. "We find that whatever happens in the U.S. ends up showing up in the market a few years later," said one analyst. "There was no recession for several years and therefore statistics have basically only showed the good side. Now there are a lot of tests in the market. [For example,] CDOs have shown that there are risks out there that you had better pay attention to."

It will be interesting to see what market participants will say at next year's annual conference, which will return to the Hotel Arts and is already slated for June 3-6.

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