By noon, when the conference attendees had just managed to shake the weight of a prior night of revelry, another promising night of parties takes hold. Stalls are set up to soften the wait, for the sophisticated palate a spot of champagne and, for the beer drinker, light ales that ease the Spanish summer.
But this party comes heavily mixed with business and the underlying buzz that makes this Information Management Network's Global ABS conference what it has become: perhaps the heaviest networking ABS conference on the planet, with an ever-expanding attendee population.
"It can't be all about the sessions, although for some people who are just starting to develop an appetite for the market you get a taste for the here-and-now, and where the market might be headed," said one conference attendee. "I think what most people appreciate is the fact that you have so many big names under one roof who otherwise don't participate in these types of functions."
At 2,500, this is the largest ABS group the IMN has hosted - testament to the growth and maturity of this market. The market this year has already grown by 25% more than figures recorded last year, and current developments promise further growth from new sectors as well as from more-established markets. The new giants are U.K. RMBS and credit card securitizations.
The German true sale initiative is perhaps the shiniest of the new prospects. German ABS has long been dominated by synthetic vehicles hobbled by trade tax laws that penalize established SPVs. These costs made many types of securitization less viable for most players. The advent of upcoming amendments that promise to ease this burden could mean big things for German issuers, who, based on synthetic volumes, count among the largest ABS players in Europe. But not only does it ring a promising note for Germany, it could also have a domino effect on other jurisdictions that have been reluctant to join in up until now.
Whole business ABS still muscles its way along, despite the troubles plaguing the corporate sector. In fact, the nature of this business and the functions of structures under whole business deals means investors can see first hand that, for the most part, these structures have managed to perform in the face of adversity. Just take a look at the number of utility deals executed to get a taste for how these deals work.
But down the line, said speaker at this year's opening session Tamara Adler from JPMorgan Securities, trade receivables will finally take off in the term market, moving away from the testing grounds of the conduit market.
On the government level, while the Italians and the Greeks may have had some appetite curbed by Eurostat regulations, it hasn't been enough to completely quell their hunger. Italy, as European ABS pros are well aware, continues with its initiative both on the government and municipal level. And Greece, after a long hiatus, was back with a government-backed issue earlier this year. But there are still a number of opportunities remaining for neighboring jurisdictions in the form of infrastructure and utility deals that are sure to drum up volume going forward.
"Infrastructure is a big part of our business," said Phillipe Tromp at Financial Security Assurance, who also spoke at the opening session. "We are pleased that there are some growth opportunities there. Perhaps it will open up the door for greater European monoline presence."
Nonetheless, the market is not moving ahead unfettered. Many pros are awaiting the looming regulatory slap from accounting issues on two fronts - including the new rules from the U.S.-based FASB and the European group IAS - and the impending Basle II Accord. Yet the market is confident in its approach.
Tromp at FSA looked at the changes as another growth opportunity for monoline presence. "We don't know what accounting changes will do to our industry because it discourages banks from buying subordinate tranches, and clearly they'll want to push these assets to non-bank institutions," he said. "It will provide us with some good opportunities to assume or absorb some of that risk."
The market as it exists now will no doubt change, though players are generally optimistic, and most are hopeful that with some time and dialogue Basle II will benefit securitizations. The problems in Europe are problems most industries would prefer to deal with, noted one speaker.
While a year ago the hot topic at the conference was opportunities in CDOs of all kinds, this time around the subject was set in a more somber tone. One speaker on the second-day opening session dubbed the CDO market the perfect storm - all that could have gone wrong went wrong in the worst possible way. But the number of sessions still dedicated to the sector indicates that interest is still there. The market recognizes a need for the product, and though some investors may have been scared away, banks still need to get this paper off the books, meaning that buyers will be found.
"The problems have changed the market fundamentally," said one speaker. "And in a sense, more and more
is being done on a bespoke basis. Address-ing investors' needs means there is a lot more structuring involved."
Europe is clearly on its way to becoming a capital market, shedding its bank-market image. For some players, the transition is still a scary one - the world has changed, and players must pay close attention to liquidity. For Europe, the transition will likely be into a pan-European market, shifting away from the micro markets that continue to define securitizations. Industry players are hopeful that Basle II will provide the standardization to situate this going forward.