The European securitization market remained open for business despite the looming threat the impending sovereign downgrades can have on deals.
Last week Standard & Poor’s placed the long-term sovereign ratings on 15 eurozone countries, including Germany, France, the Netherlands, Ireland, Italy, Portugal, and Spain, on CreditWatch negative. The rating agency said the move can lead to downgrades on some securitizations.
Moody’s Investor Service today reiterated its intention to revisit the ratings on all of the European Union (EU) sovereigns during 1Q12.
“The absence of measures to stabilize credit markets over the short term means that the euro area, and the wider EU, remains prone to further shocks and the cohesion of the euro area under continued threat,” Moody’s analysts said.
Without a clear decisive policy measure to rescue the troubled EU sovereigns, the pressure on ratings will continue.
Despite these troubles, the securitization market remains active.
According to Informa Global Markets, six transactions priced last week. Two of the deals were likely pre-placed and the others retained.
Figures reported by Bank of America Merrill Lynch showed that the retention ratio of primary deals has slightly increased in past weeks.
Approximately 65% of primary issuance for 2011 has been securitized and retained by the issuer and improvements over 2010 figures, which showed that 74% of issuance was securitized and retained by issuers.
Still, in the pipeline are an Italian SME CLO and a Belgian RMBS, which BofA Merrill said are likely to be retained. Also marketing is the third Nordic securitization this year, an SEK-denominated auto loan ABS.
S&P has assigned a preliminary 'AAA (sf)' credit rating to Societe Generale’s FCT R&B BDDF PPI's (R&B BDDF PPI) up to €5.75 million MBS floating-rate class A notes. The capital structure will also offer unrated class R residual units.
The transaction transfers to investors the credit risk on a portfolio of prime residential loans originated by SocGen to individuals or companies constituted for property ownership and management to finance real estate and home improvements in France.
“There has been no jumbo covered bond issuance since the middle of November,” BofA Merrill analysts said. “Altogether this confirms our positive on securitization views. Banks’ need for funding remains high yet is highly dependent on macroeconomic, sovereign or market conditions. The combination of volume and uncertainty requires access to a wide range of financing tool.”
