Greek bailout talks intensified once again this July, a repeat in many ways of last summer's discussions. But structured finance issuance is taking it much harder this year, as Nora Colomer examines in the cover story. In July two actively marketed European securitizations were abruptly pulled when the market got too volatile. Other issuers went the retained route rather than face the risks associated with bringing new-issue deals to market.
Also covering Europe, Felipe Ossa writes about how Spain is working through the mess left behind by the real estate bust. It looks like it's going to be a slow burn, with SPVs dealing with a growing pile of foreclosures, banks grinding through massive consolidations, and loads of bad real estate loans sitting on banks' books. A lot has to happen before RMBS will make much sense again.
While the U.S. is facing similar circumstances with the debt ceiling saga, structured finance issues here haven't been pulled as a result. Moody's and S&P are in a wait-and-see mode as well, following downward rating action on the sovereign. Moody's put government-related structured finance on review for possible downgrade while S&P placed these instruments on CreditWatch negative.
Amid all this noise, Dodd-Frank turned one year old last month, a birthday many ABS players greeted with more jeers than cheers. In her coverage of an ASF Sunset Seminar, Kate Leonard reports how panelists argued that throughout the Act's first year, regulators failed to differentiate asset classes and repeatedly made the mistake of tarring them all with the same brush (the one with RMBS stenciled on the handle.)
Kenneth Morrison, a partner at Kirkland & Ellis, asked the question on everyone's mind: "Is there anybody really thinking about cumulative effect? I don't think so."
In his column this month, Bill Berliner takes issue with something other than regulators; this time it's a book. He reviews Reckless Endangerment by Pulitzer-price winning New York Times reporter Gretchen Morgenson and housing-finance authority Joshua Rosner, finding it an incomplete and flawed analysis of the housing meltdown. While he concedes the book is illuminating in some ways, Berliner says the book employs misconceptions of securitization arguments in furthering its arguments.
Despite all this negative static, there are some good things to write about this month.
For one, there is the $8.5 billion settlement that imposes requirements on Bank of America's servicing operations, which could bring long-term, broader benefits to RMBS investors. John Hintze in his article says that at the behest of investors, the settlement requires servicers to outsource high-risk loans to specialty servicers as well as to generally follow best practices.
The investor's voice has also been heard in CMBS, a market that has seen a recent glut of supply. Poonka Thangavelu said that CMBS buysiders have gained enough clout to get issuers to hike up spreads and subordination levels on a couple of deals that were marketed in July.
Finally, Felipe Ossa looks a little further into the future after Turkey debuted its first covered bond last month (and in the SME sector, no less) in local currency. The deal was bought by the arranger and multilaterals, so Felipe asks: when might bankers shop this new instrument to foreign investors?