The Practicing Law Institute has published the first edition of Covered Bonds Handbook. Morrison & Foerster partners Anna Pinedo and James Tanenbaum edited the publication and wrote several chapters.
There are also contributions by several of their partners, as well as representatives from Moody's Investors Service, UBS and NERA Economic Consulting.
"We co-wrote/co-edited the handbook, which purpose is to fill a void in the market," Pinedo said. "There wasn’t really a book that focused on covered bonds as a financing alternative — how covered bonds can be used as a financing tool and how they are structured. We also explain how they differ from a securitization and how the rating agencies analyze them. "
The handbook goes over how covered bond deals are structured in the U.S., Canada, Asia and the different European jurisdictions, with specific chapters devoted to the U.K and German covered bond markets.
Pinedo said that they chose to highlight Germany specifically among the different European jurisdictions with covered bond markets because it is the oldest and biggest market.
In terms of the U.K., "it's an interesting case study because the country didn’t have covered bond legislation for a long time, and the a contractual covered bond market developed. We wanted to show how it developed, and how the market changed after legislation was enacted," Pinedo said.
Aside from these features, the new publication offers a comparative analysis of the jurisdictional framework and enumerates the many benefits of the covered bond product. It also discusses proposed U.S. legislation that is designed to codify the treatment of covered bonds and offer a statutory framework for issuance in the sector.
According to Pinedo, bankers from UBS wrote a chapter where they analyzed different transactions to find out what investors look for in terms of pricing. NERA also contributed a chapter that demonstrates the pricing benefits of covered bonds.
"It's incredibly useful to take a look at pricing — particularly for U.S. institutions to compare covered bonds to financing via [Federal Home Loan Bank] advances and securitization since banks have traditionally used these to fund their mortgage lending," Pinedo said.
The book caters to various securitization market participants. "I hope lawyers, banks and other financial institutions will read this and become familiar with covered bond financing approaches," Pinedo said, adding that interest in covered bonds is not necessarily limited, especially on the investor side. "There’s a robust U.S. investor base as shown by the fact that large, successful Canadian covered bond transactions were sold in the U.S.," she said.
The publication will be updated semi-annually or as needed.