In a transaction that will go a long way to reconfirming ING Barings' commitment to the securitization business after a disappointing couple of years, the Dutch bank has bought UBS's four asset-backed commercial paper conduits for an undisclosed sum.
ING already owns two A-1 rated conduits - Rembrant and Holland - but hopes that buying UBS's A1-plus rated vehicles will allow it to move from its niche business, which has concentrated on emerging markets, towards a more mainstream commoditized focus, particularly in Europe and Japan.
"The conduits we are acquiring are all rated one notch higher than our own, and while that is a subtle distinction, they work better for well-developed markets. So this gives us the opportunity to compete face to face with our European competitor banks in the high grade sector for major corporate finance," said Ken Cox, ING's global head of securitization.
From UBS's point of view, the four conduits - Mont Blanc, Monte Rosa, Matterhorn and Eiger - are casualties of the merger with SBC.
After the merger the combined bank decided to shrink its balance sheet and focus capital towards core businesses. Like a trade finance operation sold to Standard Chartered earlier this year, the balance sheet intensive conduit operation was classified as non-core.
UBS's decision may have been made easier because the merged firm was left without those who had previously originated the deals needed to fill the vehicles, after most of the old UBS's securitization originators - a team led by David Bonsall - left for Canadian bank CIBC.
That job will now be the responsibility of ING's asset securitization team, which will be expanded to take up the challenge, according to Cox.
In Asia, in particular, Cox is looking to add to the recent hire of John Mullins from Daiwa Securities in New York. Mullins takes over as head of ING's Asian securitization team. He will initially be based in Hong Kong, but will concentrate on the growing Japanese securitization market, working with ING's head of Japanese securitization, Yukio Rokuura.
New hires in Asia will answer critics that have questioned ING's commitment to Asian securitization, after the bank allowed a team that had been the biggest in the region to dwindle to nothing, with the recent departures of Greg Park and Alan Liu, both of whom left the firm to join Credit Lyonnais in Hong Kong.
The 17 administrative staff that currently run the conduits for UBS - including four in London and 12 in New York - are expected to join ING when the ownership is transferred on September 15.
On that date ING expects the value of the assets in the four vehicles to total about $7.5 billion, considerably down on the approximately $14 billion worth they contained about a year and a half ago. "Clearly what we need to do is get cracking and stabilize what is in there and rebuild with new and existing clients. We expect to build them up to at least their original size," Cox said.