Barcelona -- While a derivatives panel was cancelled this morning at the Global ABS conference in Spain, a session focusing on the European emerging markets, covering the Middle East and South Africa as well, drew in at least 50 audience members, testament to the interest in these regions.
Meanwhile, outside the conference room, exhibitors were finishing the pack-up phase of their stay, deconstructing the shells of their booths.
“I think when I get back to London, nobody is going to believe how many attended a meeting on Friday morning,” said the emerging markets session facilitator David McCaig of WestLB.
Per the discussions, there is apparently strong interest in taking some of the domestic markets that have been active, such as India, to the international arena. Challenges include sovereign rating caps, among other things.
The major question seemed to be, “Why is growth in these markets taking so long when there is so much interest?”
Like everywhere else, ABS in the emerging markets must struggle with regulations, legal difference across borders and other challenges, all of which have worked to keep the deals primarily local, panelists said.
EETCs coming back?
Separately, during the final hour of the Barcelona conference, a small session concentrated on the future of EETC aircraft deals, and other large ticket assets in both the European and U.S. markets. There’s only been a few EETC-like transactions in Europe, said speaker Jaime Mariategui of MBIA Sucursal Espana.
Mariategui, however, believes the market will take off later this year. “The EETC markets will be active in the next few months, or even days,” Mariategui said.
One major difference between European airlines and U.S. carriers, is that the European planes are much newer, which may help mitigate some of the devaluation risk of the portfolios, as these aircraft would theoretically sell better in a liquidation than airplanes with significantly more years behind them. Dropping aircraft values have been a deal killer in the U.S.
Meanwhile, panelist Richard Zogheb from the CIFG New York office, believes the U.S. EETC market will come back as well, though he anticipates there will be a larger contingent of smaller regional carriers. He also believes that the deals especially in the wrapped market will have shorter tenors.
On the pooled leased side, Zogheb commented that, “We might see a transaction in the U.S. or the U.K. in the next six to nine months, because lease rates will have bottomed out.”
Zogheb is an MBIA alum, and had worked on many of the EETC transactions wrapped by the monoline over the past several years. He confirmed CIFG’s interest in this market.
Europe-based Fitch Ratings analyst Polly Kolotas, who rated the two EETC deals from Iberia, believes there is potential for other large ticket asset classes in Europe, such as ships and U.K. rail cars.
MBIA’s Mariategui added that public sector entities are currently motivated to use lease structures, as they receive favorable regulatory treatment from the European Union, and can be structured off-balance sheet.