It's still to early in the game to determine what, if any, impact the merger of Abbey National and Santander Central Hispano will have on the U.K. bank's hefty securitization program. Preliminary deal terms, at least, seem unlikely to trip ratings triggers, market sources said last week.

Between the two houses, at least eight securitization programs are counted, including Abbey's popular Holmes Funding and Financing series, and its Marylebone Road CBO. From the Spanish side, Santander counts Hipotebansa RMBS series, Santander Hipotecario 1, Consumo Santander 1, Hesperic No.1 and FTPYME Santander 1 in its repertoire of securitization offerings.

Moody's Investors Service stated last week that the offer by Santander to purchase Abbey should not lead to any ratings or ratings-outlook changes for either bank or for subsidiaries. Standard & Poor's released a similar statement during the week. Following preliminary discussions and a review of deal terms, S&P said it would affirm its single-A rating for both banks.

"Our financial institutions analysts think that while the funding structure of a deal would be important for ratings, the implications for Santander should be neutral," said analysts at Dresdner Kleinwort Wasserstein. "Moody's could take a negative stance; it has previously said it is dubious about the value and viability of cross-border consolidation, although concerns could be offset by a reduced proportional exposure to LatAm for Santander."

According to financial analysts at Commerzbank, the acquisition would dilute the Spanish bank's Latin American exposure and raise its profile in the low-risk European banking segment. "If the deal goes through, we would see it as a positive for Santander's ratings in the medium term," analysts said.

Santander entered a bid of GBP8.5 billion (US$15.4 billion) of cash and stock to buy out the U.K. bank. The deal is still subject to regulatory and shareholder approval and is expected to be completed by the end of this year. Many of the large European banking institutions have been retained to represent both entities in the merger process, which means little is being revealed in the run-up to the deal. At the moment, it's looking more and more likely that the bid will hold. Rumored competing bids from HBOS were put to rest at press time when the bank announced it would not be considering a counter bid for its U.K. rival. However speculation still remained as to whether other potential cross-border bids might slip into the mix.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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