BARCELONA - Germany has yet to live up to its full issuance potential. But for the first time in the 10 years of Information Management Network's global ABS summit, the German session had less to do with the problems the country's securitization market had to overcome, instead taking a more optimistic tone on issuance going forward.
"Over the years we have discussed problems, reasons why deals can't be done," said Joerg Wulfken, a partner at Mayer, Brown, Rowe & Maw LLP and session facilitator of the Developments in the German ABS Market panel. "This year it's the other way around - panelists are in a good mood and positive for the future," he said.
People have expected a pickup and originators have responded by bringing several kinds of transactions to the market, Wulfken said. Leading new issuance volume this year has been a surge of multifamily transactions. One panelist said that predictions for this year put German CMBS transaction volume ahead of the U.K., which typically accounts for 60% of this sector. "We continue to see a big injection of foreign liquidity in this market and this should continue over the next 12 months," said one panelist at the session last week.
Another asset class that dominates issuance to date is the SME sector as seen in mezzanine deals. Panelists believe it will continue to have an important role in the future.
True sale has not proved a stunning success in terms of market use. But the initiative has kick-started some innovation in the market, such as Germany's new refinancing register, a law passed in the autumn on the transfer of mortgages (ASR, 01/09/06).
Germany's refinancing register has yet to be tested and should pickup momentum in the near-term, said panelists. Chris Holmes, director at Hypo-und Vereinsbank AG (HVB), said that they were one of the many banks actively looking to set up a structure using the new refinance register. "Standard & Poor's has had some concerns, mainly with the speed at which this law was passed," Holmes said. "We expect a detailed discussion to follow as they get comfortable with the details of the law." Holmes added that HVB is looking to use true sale for future CMBS programs and SME deals.
"Refinancing register and TSI were initiated to enhance RMBS but, over time, the dynamic has shifted and they are aiding transaction they were not designed for," one panelist said.
And while, at the moment, Germany has no subprime mortgage market, panelists believe that with first-time buyers increasingly being squeezed out of the prime mortgage market, products aimed at these buyers should help create Germany's version of a subprime market in the near term.
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