Europe is for the first time leading the global ABS market, according to asset-backed professionals, as the region's securitization experts bring ever more novel and innovative deals to market.
Speaking at the IMN Fabozzi Global ABS summit in Montreux, Switzerland, Kim Slawek, managing director at Fitch IBCA in London, pointed to European efforts to push the limits of securitization technology and use it for operating business deals, acquisition finance, intellectual property transactions and to collect overdue social security contributions.
Slawek was supported by Maarten Stegwee, Paribas' global head of securitization, who said that this was the most exciting time ever in European ABS. "The ratio of doing pitches to actually getting deals has greatly improved and not just in one country but in 10," he said. He added that since the introduction of the euro developments were coming so fast as to be revolutionary.
Peter Shorthouse, executive director at Warburg Dillon Read, agreed. "There is no limit to our imagination," he said.
Many securitization professionals pointed to operating business securitizations as an area where the British and to a lesser extent the continental European markets were making great strides over the U.S. They highlighted deals such as last year's Wools Finance transaction arranged by Merrill Lynch for French wool company Chargeurs, the recent Morgan Stanley/WestLB Formula One deal and the various U.K. pub, nursing home and motorway service station efforts. One of the most widely praised deals was Bankers Trust's transaction for Madam Tussauds, which securitized the whole of the company's waxworks-to-theme-parks business, providing it with longer-dated and cheaper financing than would otherwise have been available.
Julian Tucker of U.K. law firm Allen & Overy made the point that Europe would continue to lead in this field because the insolvency regime in the U.S. made such corporate bond/securitization hybrids next to impossible. He also suggested that while such deals would be possible in continental Europe some are being worked on in Italy, for example the insolvency regulations in civil law jurisdictions make them trickier than in the U.K.
A note of caution was introduced by David North, an investor at Scudder Investments, who cautioned investors not to get too carried away by banker's flights of fancy. He advised investors only to buy what they understand. "You can at least get a laugh out of the others," he joked. - MD