BARCELONA - European ABS investors say they'd like more information prior to the close of a deal - along with more time to mull it over. And at Information Management Network's global ABS summit, participants said that both prospectus and ongoing monitoring data were much more comprehensive for U.S. deals than for European offerings.
Recently enacted securities offering reform regulations within the U.S. have worked to limit the type of information released to investors prior to the close of a deal. Essentially, market participants under the new regulations have been dissuaded from releasing deal information outside of a formal prospectus because it may be incomplete or subject to change. If investors were to make a buy decision based on the flawed data, the sellers could be held liable.
But not having supplemental information handy for European investors means not seeing a number of deal details until the time becomes quite limited to make a purchase decision, speakers at the conference said. "I'm not very happy that regulations have limited prospectus supplements in the U.S.," said Milan Patel, a director at HBOS Treasury Services.
Available data is better for some sectors than others. According to Stefaan De Doncker, head of ABS and MBS credit spreads at Fortis Bank, U.S. subprime ABS information and monitoring is the "best pupil in class." The depth of information provided should be a model for European securities, he said. Regulation AB in the U.S. may be a headache for many market participants, but it has greatly expanded publicly available securities monitoring, among other things, European investors said. "I think that is certainly the model we'd like to use," Patel said.
But some panelists said that while technology has improved both the availability and depth of securities information available, it has also worked to broaden the investor base - making bidding an increasingly competitive process. "It is all just a game, and it is a game that is driving pricing tighter and tighter," said Sandy Szakach, a senior managing director at PPM America.
Because there are so many bidders willing to buy, Chris Meyer, who is involved in U.S. ABS and CDO trading at Investec, questions how much of the data can actually be used in Europe before an investment decision must be made. Fortis Bank's De Doncker agreed. "Europeans have less time to analyze because deals are announced in the U.S. in the morning, and they are already six times oversubscribed," he said. "There is such a short time period between when they are announced and when they close."
In fact, demand for certain securities are so high that some panelists questioned whether investors are even opening the first page of prospectuses before making a bid. And road shows - once standard practice to educate prospective investors in a deal's characteristics - may not be as necessary as they once were, speakers said, unless issuers wanted investors to dive significantly down in credit.
Because so many buyers are interested in purchasing ABS - many of them larger than market participants are used to - maintaining good relationships with issuers has become necessary to maintain more control over what kind of securities are available for purchase, speakers stated. "We have built much of our portfolio through reverse inquiry," Patel said. "You see less of this, but with good relationships, you can still do these."
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