Although there is a lot of talk on renewable energy, specifically solar financing, in the esoteric space, there are other assets giving the non-traditional sector life.
Dan Passage, a partner at Bingham McCutchen, said that, at the moment, he continues to see transaction volume in deals involving insurance products that include life settlements, premium loans, annuities or other insurance-related assets. Clients continue to transfer portfolios and find ways to get those pools and trades financed, and to arrange liquidity support and leverage.
"We don't expect a lot of securitization of those assets in the short term because the rating agencies remain difficult in terms of offering ratings on those transactions," Passage said.
Instead, Passage said that these transactions continue to be done as privately placed 4(2)- or 144A-type offerings, and in structures that are not usually referred to as traditional securitizations.
"Often there is some combination of equity or mezzanine debt or debt in loan form coupled with a notes issuance, so while bankruptcy remoteness elements, defined cash flow management and waterfall elements are present, there may also be consent or control rights, covenant packages and tests and triggers present that are a bit different from those in more normal securitizations," he stated.
At Bingham, the securitization team has also received inquiries about setting up structures to facilitate regularized institutional funding into peer-to-peer Internet-based consumer finance platforms that match borrowers seeking loans with willing lenders.
Securitization techniques may enable a broader investor base to help satisfy the growing demand for those loans.
On the IP side, Passage and Bingham expect that there will be continually viable and valuable structured financings and securitizations that allow companies to bring new pharmaceutical products to market by tapping future flows from distribution agreements secured by related patents and licenses.
Michael McDermitt, vice president and leader for commercial and esoteric ABS at Moody's Investors Service, said that the rating agency has also seen a great deal of demand for aircraft deals.
Last month, American Airlines issued $725.7 million of Class A passthrough certificates rated 'Baa3' by Moody's, thereby signaling that the market is ready to come back.
Barclays Capital has also been an active underwriter, helping issuers to bring deals to market in this space. It helped reopen the market with a billboard securitization it led for Adams Outdoor Advertising in November 2010.
That transaction has been followed up with at least two whole business type deals, one for Church's Chicken and another more recent one for Sonic Drive-In.
Cory Wishengrad, co-head of the securitized product origination group, Americas at Barclays, said that the bank has also remained active in some of the "slower" nontraditional ABS assets such as rental car companies and wireless tower companies.
In terms of what lies ahead, Wishengrad said to expect more of the same. "We continue to be very active in these spaces of the non-traditional market," he said.
