A busy 2004 saw primary ABS volumes exceed expectations on the European front. Among the many contenders to emerge for European ABS deal of the year, one deal that stood out for it's innovative and breakthrough qualities was MBNA Europe Bank's de-linked credit card securitization program.
The transaction was the first European de-linked securitization platform, functioning similarly to U.S.-style programs but governed by European laws. The structure enables the issuer to tap specific demand by tailoring to investor generally reverse inquiries and take advantage of market conditions at specific rating levels and maturities.
This was also a groundbreaking evolution of MBNA's funding platform. By adding the de-linked program to MBNA Europe's existing credit card receivables trust, MBNA has the benefit of the current securities receivables portfolio with the markedly more efficient execution of medium-term notes. MBNA can now issue independent tranches of notes in a rapid and efficient manner - similar to its U.S. program.
"The Ford Globaldrive program issues MTN notes in Europe but in effect writes a brand new prospectus each time they issue," said one market source. "What was done here is not that different, you set up one issuer and going forward the same issuer will issue the MTN notes. The documentation for credit structure has been streamlined and can be completed - from the start of the transaction to the issuing of the MTN - within ten days, versus the typical four to six weeks it used to require."
The first three tranches of MTN 2004-A1, 2004-B1 and 2004-C1 were priced throughout last July with settlement on Aug. 3, 2004 led by Barclays Capital, Deutsche Bank Securities and JP Morgan Securities.
The de-linked program is also capable of achieving debt-for-tax for U.S. investors for all three classes of MTN, should MBNA choose to place them in the U.S.
Aspects of both the de-linked technology and the asset-backed MTN program have wider implications for the European securitization market and other programmatic issuers. Issuers in both the credit card and mortgage asset classes may implement it more widely. There has been much interest from the residential mortgage trusts looking to utilize some of the structural advances in their own programs, sources report. "In the last six months we've had several conversations with issuers wanting to replicate the MTN at the bottom into their existing master trusts," said one source.
The structure is most logical for issuers with a need to tap the market often, without the luxury of waiting for one issue to come to market - what industry player have coined as the monoline banks. "We should see some of these deals from the RMBS sector emerge this year - indeed the ability to pre-fund subordinated requirements, to take advantage of good market conditions is especially attractive to mortgage lenders," said one industry analyst.
And the program also benefits the issuers and investors alike - while the investors enjoy larger transactions tailored to their needs with greater liquidity, the issuer enjoys increased market access, an increased investor base and the opportunity to create liquidity within the program.
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