Yesterday, StructuredFinanceNews.com reported that Feri EuroRating Services and LACE Financial Corp. created a joint sales cooperation venture designed to allow each organization to provide additional research and ratings products to its clients.
In terms of the structured finance arena, the new venture is currently looking at opportunities in the Trust Preferred and CLO sectors.
LACE has rated Trust Preferred CDOs from the banking sector. Michael Nelson, a managing director at the Feri Rating business, said that, aside from rating new-issue Trust Preferred CDOs, they are “looking at opportunities to rate new and existing CLOs because LACE has the background to look at the underlying collateral.”
He added that although there is currently less issuance in terms of the Trust Preferred sector, “there are asset management firms and broker dealers that might have inventory, which need an independent source of rating.”
Although rating corporate and bank debt is a natural place to start for the new venture, Nelson said that insurance-related securities might also be a potential source of new business.
Additionally, even if the new venture does not currently rate CMBS, with Feri’s capabilities and global expertise in commercial real estate research, this gives the new venture the ability to provide independent opinions on commercial real estate that is not security specific but on its sectors, both by market and as a whole.
Currently, Nelson has some support staff in New York, although he feels fortunate to have the combined manpower from both Feri and LACE. “I think the goal is to provide credible and independent research and ratings and I would expect as the market responds to this, we will have opportunities to expand our staff,” he said.
Meanwhile, there are a few opportunities to expand the new business, including doing research on municipals and sovereigns and serving mutual fund clients, including through mutual fund ratings and research.
Nelson believes that, “There is opportunity in the market for institutions that can provide independent research and ratings, and I would encourage market participants to speak to us and find out our capabilities,” he said.
Feri EuroRating Services is a European rating agency specializing in investment market and product ratings, and is one of the biggest economic research and forecasting institutes in Europe.
Meanwhile, LACE is a Securities and Exchange Commission-registered Nationally Recognized Statistical Rating Organization (“NRSRO”) as defined under the Credit Rating Agency Reform Act of 2006. LACE specializes in issuing credit ratings of financial institutions.
