For a decade now, the German True-Sale-Initiative has organised
the annual TSI Congress in Berlin. This year more than 600
representatives of banks, investors – mainly from Germany
– law firms, audit and consulting companies, service
providers (including TMF Group), banking supervision, ECB, rating
agencies and politicians attended.
The overarching topic was "The future of the securitisation
and structured finance market in Germany and Europe". Various
panels discussed a range of regulatory and structural issues.
European CLO – A useful alternative to loan funds?
TMF Group's Global Business Development Director for
Structured Finance Services Huub Mourits participated in this panel
session which addressed recent regulatory developments such as the
STS and the proposed European Parliament amendments to raise the
'skin-in-the-game' from 5% to 20%.
"There was a wide consensus that such proposed amendments
are harming the Structured Finance and Capital Markets in general,
by creating ongoing uncertainty and continuous re-interpretations
of already existing regulations" Mourits commented.
Euro CLOs, since their inception in 1999, have proven to be
resilient and survived remarkably well during the economic
crisis. Mourits said "the CLOs issued in Europe before
the crisis, marked as 'CLO 1.0' have not experienced a
default in their AAA-rated notes in their entire existence, which
we regretfully cannot state for Corporates, Financials and even
Sovereigns. CLOs are actually one of the best, if not the best,
performing fixed income instrument and that is also why investors
are getting more interested in this paper."
The panel discussed that Loan funds and CLOs can happily live
together forever despite the fact they ramp themselves up with the
same credit or names. The issued securities in the form of equity
(NAV driven) and tranched Bonds (Fixed income) have different
investor types and appetites, and might compete for the collateral
- but not so much for the different Investor types.
The panel's closing remarks were fairly united; that
regulatory uncertainty and shortage of loan supply seems to hinder
the markets, but that both Loan Funds and CLOs are performing quite
well and are relatively cheap.
The role of the Trustee operating under German and English
TMF Group's UK Director - Structured Finance and Loan
Services David Bell participated on this panel which first looked
at the origins of the Trustee concept, which dates back to the
Middle Ages where Knights departing for the Crusades would leave
assets to 'trusted friends' to manage in their absence.
The panel then highlighted the differences in modern Trustee
functions on debt transactions with regards to German and English
Law – the primary difference being the concept of a trust
arrangement is not recognised under German Law, but is operated in
a different manner. The session concluded with some lively
discussions around examples of certain public transactions and the
challenges a Trustee may encounter.
Bell commented "Where TMF Group acts as Bond Trustee we are
protecting the interests of noteholders and assist the Issuer with
amendments, waivers etc – our experience and ability to
understand the commercial and legal aspects are fundamental points
in delivering an efficient service."
Structured finance outlook
The outlook of the Structured Finance market this year appears
to be driven by the economic situation in Germany and the rest of
Europe; additional regulatory requirements to be fulfilled as well
as the consciousness of high liquidity in the market, with less
investment opportunities that meet investors' criteria.
Continuing the trend of previous years, the outlook was seen as
stable with a more positive forecast observed than in the past.
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