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Saturday, 24 August 2019

EMEA Structured Finance House: Bank of America Merrill Lynch

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Broadening the platform

Bank of America Merrill Lynch moved to the top of the European securitisation market in 2017 by selling the broadest array of structured finance deals, while pioneering innovative structures. It is IFR’s EMEA Structured Finance House of the Year.

Bank of America Merrill Lynch boasts a broad platform – active in ABS, RMBS, CMBS and CLOs – that extends balance sheet to clients in a highly effective manner and layers that heft with top-class advisory, analytics and research.

To facilitate client focus – both investor and issuer – it has a standalone structured finance operation encompassing origination, syndicate, sales and trading, which it has mobilised across six European jurisdictions and multiple sectors, and sits atop the European issuers’ league table with a 9.7% market share.

“Everyone is focused on securitised product 100% of their time. Its not a part-time focus in conjunction with DCM or covered bonds. It’s a full-service platform,” said Gregory Petrie, BAML’s head of EMEA structured finance origination.

That platform had to stay nimble because from the very start of the year it was clear that UK banks, typically the linchpin of the market, were largely sidelined due to their understandable preference for ultra-cheap central bank funding.

Bank issuance of residential mortgages declined and yet, as has been the case for several years in a row, the largest events by far were yet more sales by UK Asset Resolution of jumbo legacy RMBS via the £12bn Ripon Mortgages and Harben Finance deals. BAML was one of the joint lead managers on both. In addition, it was on the books for other large mortgage deleveraging deals, such as the Warwick and Oat Hill transactions. 

“In the European market place as a whole, the UK is the most active space; as a core competency of your platform having the insight and expertise from the UK is critical,” said Petrie.

With the bank balance sheet deconsolidation theme coming to an end, and less bank RMBS product expected, the hunt was on to provide new investment opportunities. The highlight of these was the £300m securitisation of car insurance payments that BAML co-arranged for Premium Credit (See EMEA Structured Finance Issue of the Year).

“We have been actively in flow ABS, such as credit cards and autos, and RMBS … But also this year, importantly, we have introduced new issuers to the market place. And have provided innovative solutions to our clients,” Petrie said.

Premium Credit offered investors one of the rarest commodities after a steady diet of repeat issuance, a truly new asset class.

Another completely new name to the market – with the bonus of coming from a rare asset class for the Netherlands – came from Aurorus 2017. It was the first publicly marketed consumer ABS deal from Chenavari-owned Qander Consumer Finance.

During the IFR awards period BAML was active in seven asset classes: autos; credit cards; CLOs; Dutch consumer ABS; UK prime RMBS; legacy buy-to-let/non-conforming RMBS; and newly originated BTL/NC RMBS.

The tone was set in the first quarter when Kensington’s Finsbury 2017-1 priced seniors at 70bp over – near post-crisis tights for non-prime collateral.

The bank also brought more than its fair share of UK-originated prime RMBS, with Virgin Money’s dual-currency deal a highlight as the only US dollar public deal seen all year.

“Then you have Charter Court – a challenger bank, which had previously only sold mixed pools or BTL mortgages. It was able to test market appetite with a LCR-eligible prime deal and only paid 5bp–10bp back from big bank pricing levels,” said Prashant Sood, managing director, structured finance origination.

Another highlight was the return after a year-long issuance hiatus of Santander’s UK master trust RMBS shelf Holmes.

“That was the tightest print for a UK prime issuer post-crisis,” said Tristan Cheesman, head of EMEA structured finance syndicate.

BAML is a strong player in the CLO market, where activity was driven by liability spreads grinding tighter. This was typified in February by the new issue CLO the bank executed for GSO, which saw the tightest weighted-average cost of the rated tranches for a European CLO 2.0 at the time of pricing. BAML was on the books for the first European CLO by Onex Credit Partners a couple of months later.

It also arranged several CLO resets and refinancings with a range of structuring and distribution tweaks to achieve better execution for a range of sponsor clients including Barings, Cairn, Oaktree, Rothschild and Investcorp.

To see the digital version of this review, please click here.

To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com.

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