PHOENIX, Ariz. - More than 2,100 securitization market participants gathered last week at the Arizona Biltmore for IMN/Fabozzi's Seventh Annual ABS West event.
This week's follow-up from Strategic Research Institute is expected to carry forward the positive tone and hearty handshaking seen at IMN, although most anticipate SRI to be a bit tamer, smaller and more intimate. To be sure, it would be difficult to top what is essentially the first-ever securitization rock concert (i.e., Blues Traveler, the two-to-three hit wonder, which played exclusively for IMN'ers, courtesy of sub-bond market-maker United Capital Markets).
In more sober moments (literally), as expected, the post-Sept. 11 landscape and the market's proven strength and resiliency was a major theme here, though the potential impacts of the Enron Corp. fallout on structured finance has proven to be a potentially serious issue for the market (see story lower left).
Enron aside, as conference organizer Scott Brody said, "People were looking to get together and re-affirm previous relationships, which has been so needed since the events of Sept. 11."
Brody added that ABS West is the largest U.S. securitization conference to date.
Interestingly, this year was the first in many that Brian Clarkson, head of structured finance ratings at Moody's Investors Service, did not moderate the opening ceremonies. Noel Kirnon, also top brass in the ABS group at Moody's, filled in for Clarkson, and opened the panel with a life-size photo, supposedly of Clarkson, hanging off the side of a famous mountain, which he is currently climbing.
For most of the morning, globalization was the buzzword, as the European market grew well over 50% in size last year, and is expected to show continued growth going forward. According to one panelist, Europe now makes up roughly 20% of the global securitization volume.
Philip Weingord, head of domestic ABS at Deutsche Banc, said that the European markets are flourishing because of a more conducive regulatory environment for securitization. Interestingly, each country's need to securitize its own exposures - causing a rapid adjustment of laws - generally spawns these changes.
Innovative whole company securitization-like deals - especially from utilities and hospitals in Europe -are expected to stay in vogue overseas, where the creditor-friendly environment makes it easier for those deals to come together.
As for Latin America, the shutdown in the Argentine market will likely propel more structured deals out of the other LatAm markets, said Moody's Kirnon. He particularly expects that the Mexican and Brazilian markets will continue to grow.
Consumer credit and the economic outlook were, of course, staple discussions at the generalist panels.
Although corporations have spent the last year or more restructuring their balance sheets, the consumer has yet to de-lever, noted Craig Platt of Keybank.
Refinancings, home sales and other consumer spending activities have worked to increase the debt load on the consumer, partly attributable to the lowered interest rates
Platt also raised a new question: will prime collateral start to feel the impact of the downturn? (see story p. 12)
"I'm not bullish on the economy, but bullish on the ABS side," said Joe Donovan, head of ABS at Credit Suisse First Boston. Donovan firmly argues safety in structure, a view that is increasingly catching on, as the ABS market benefited substantially over the past year from investors moving out of corporates.
All in all, ABS continues to fare well, and some pros like Donovan see more room for spread tightening, especially in some of the riskier sectors, like home equity.
Merrill Lynch's Ted Breck mentioned that the issuers who have benefited the most are the ones who have maintained a presence throughout the years, with regular issuance even if it was not the all-in lowest cost of funding.
Going forward, other issuers may securitize just to prove they can, establishing an investor base (see ASR 1/21/02 p.6).
Surely one of the market's proudest moments followed shortly after Sept. 11, when benchmark names such as Ford, GMAC, and MBNA, were able to re-establish liquidity.
"I think it was absolutely remarkable - the courtesy, the team work, and the participation," said Vernon Wright, vice chairman and CFO of MBNA American Bank.