There has been a lack of consistent reporting standards in structured finance and according to investors it is time the problems were addressed. At last week's Surveillance and Investor Reporting Conference held by the Strategic Research Institute, investors from the industry expressed grievances with issuers in the market.
The problems include over leveraged borrowers, insufficient data disclosure, unsatisfactory analysis of data that is disclosed, and inaccuracy of information. Historically there has been poor contingency planning within trusts, high loan and bond prices; negative experiences from previous bankruptcies and fraud situations. Trustee accountability and concerns over lack of performance data over-extended investment managers and concentration of risk in a few issuers/servicers.
Another important difficulty the panel of investors focused on was the setback related to the lack of transparency and inconsistency regarding the formatting of the reports, stressing the need for spread-sheets format. Investors also expressed the need for issuers to share updated information at every stage stating that problems are correctable when detected early on. "It's our money on the line," said Anup Agarwal, head of ABS andMBS credit research at INVESCO.
Solutions offered were the appointment of deal managers, Trustee advisors, special servicers, work out or turnaround specialists, better rating agency surveillance and the added position of a credit risk manager.
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