The numbers may not be enough to turn heads, but French securitizations offer a variety in assets that are as varied as the many wine and cheeses throughout the different regions of its country. And while its volume may not amass to 2001 numbers seen in Italy and the Netherlands, 2001 is regarded as a good year for the French securitization market, with more to come in 2002.

"Clearly the growth in France cannot be accounted as the most explosive in Europe," said one market participant. "France did well but not extraordinary; it exhibited stable performance but it is regarded as the most diversified in asset transaction type and it is clearly one of the more balanced countries in Europe."

The history of French ABS begins with its typical seller - banks - and has now evolved to include more and more corporates. With more restraints, these new entities must find structures that meet both rating agency requirements and also client needs. "It's a new challenge and from a legal perspective the structures are becoming less and less standardized," said the market source. "There are more sellers that are interested in securitization, which were before reluctant to get into such technology. It's now more common and that makes people on both the sellside and buyside more comfortable."

The augmenting participation from these vast sectors means more choice, analysts say. Investors can make up their minds to stay away from the telecoms because they have choices that allow them, for example, to move towards food and wine securitizations. Such a choice resounds in the year-end EURO55 million securitization of Delbeck Bricourt Martin's champagne stock that closed in December 2001.

Private placements preferred

According to Moody's Investors Service, in 2001 French public transactions amounted to EURO21 billion: a 5% growth from 2000 volumes; but more significant is the trend towards a greater number of private transactions. Moody's reported: "The growth in the total amount of credit risk transferred is 50% to EURO37.6 billion versus EURO24.4 billion in 2000. That increase signals double-digit growth in each of the private ABS, RMBS,CMBS and CDO areas."

Private transactions are funneled through two major sources : The ABCP market and CDO market. "ABCP is generally chosen because the issues are too small to be in the term market but it's often also the case of the seller not wanting to announce to the market they are securitizing their assets," said one source familiar with the situation.

ABCP experienced solid growth in 2001, reported Moody's, and reached an estimated volume of EURO20.7 billion, a 22% increase from EURO17 billion in 2000. Trade receivables stood out as the dominant asset class, accounting for 37% of market volume, along with a significant number of deals executed with individual ranges from EURO20 million to EURO500 million.

In the CDO segment the private transactions account for a large number of deals, making it difficult to get an idea of risk transactions in the market, said one source. "The only ones we know are the ones that are rated and this private placement trend has become more popular with the standardization of credit default swaps," she said.

To be sure, the private volume dominates to the extent that the total volume of publicly rated transactions in 2001 decreased from EURO10.6 billion to EURO4.4 billion. Nonetheless the volume of credit risk transferred in public and private transactions that were rated by Moody's increased by 50% to EURO19.8 billion. "The huge volume of unrated privately place transactions means that Moody's data and market estimates probably greatly understates the true size of the sector," said Moody's. "The trend is towards a greater number of private transactions and a reduced issuance of notes, with transfer being more and more effected through credit default swaps."

What next?

In 2002 expect to see a number of both new and repeat issuers in the French securitization markets, said Moody's, because a number of the sellers that entered the market for the first time in 2001 have already expressed their intention to come to market on a regular basis.

Among these potential issuers are specialized financial lenders and corporate lenders with the utility sector being a good bet. "We can expect more and more inventory transactions, utility receivables like water, electrical and telecom - these are usually large companies, which implies that there is a good diversification of the assets and usually good performance," said one analyst. "The service they provide is so needed that their customers tend to pay on a timely basis.

"Deregulation is happening throughout Europe but more so in France and for these companies it's important to find diverse funding with this evolution of more competition."

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