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Friday, 17 November 2017

US Structured Finance House: Credit Suisse

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  • Breaking new ground

Breaking new ground

In just its second full year following a major reorganisation, Credit Suisse achieved a stellar performance in 2013. For its crucial role in the landmark transactions of the year, its dominance in key niche asset classes, and its ability to set precedents with influential new products, Credit Suisse is IFR’s USStructured Finance House of the Year.

Not only did Credit Suisse boast groundbreaking inaugural structuring mandates and dominate involvement in the most challenging and innovative deals in 2013, but it helped to create two brand new asset classes that will have deep repercussions for their respective industries: GSE risk-sharing MBS via the first Structured Agency Credit Risk (STACR) deal for Freddie Mac and solar power receivables ABS via SolarCity’s first ABS trade. The importance of these two milestones cannot be overstated.

The bank also continued to build on the residual-sale market it first developed in 2011 (via a nuanced auto deal for Huntington Bancshares), and now holds 100% market share for structuring balance-sheet management advisory and regulatory capital optimisation transactions on behalf of regional banks such as Fifth Third Bank (first issuance since 2008), California Republic Bank (a repeat sole bookrunner assignment), M&T Bank (inaugural deal) and issuers such as Hyundai (first residual structured deal for a new-issue captive).

“They have been the best securitisation bankers I have ever worked with,” said Lee Whatcott, the director of capital markets at California Republic Bank, who has been working in the securitisation industry in different capacities since the 1980s.

California Republic Bank, a newcomer to the auto-finance industry, was able to achieve regulatory capital relief through its first off-balance-sheet bank auto ABS deals. Its first deal surfaced in late 2012, with two more in June and November of 2013.

The latter transaction, which priced on November 15, was able to garner a Triple A rating from DBRS – quite a feat for an issuer that is less than three years into its auto-finance programme.

“Credit Suisse helped us to achieve a Triple A rating earlier than any other new auto issuer, I believe,” Whatcott said.

The Credit Suisse team fought hard since 2011 for its current reputation as a bank that takes on the most difficult deals. Group head Jay Kim defected from Barclays – where he was co-head in charge of consumer ABS – in March of that year and brought along at least 10 senior bankers.

The team has made the bank an unstoppable force in residential mortgage, allowing it to complete STACR, participate in all servicer-advance ABS deals issued in 2013 (up to November), and achieve number one status across all deal types within the mortgage sector.

And despite extending significantly less credit relative to its peer group, Credit Suisse is the structuring agent of choice for ABS issuers, having structured a market leading 27 ABS transactions and serving as bookrunner on the most ABS transactions in 2013.

Credit Suisse has steadily ascended the league tables over the past two years. Excluding self-funded deals and CLOs, the bank has climbed to a top-four position as of mid-November on the Thomson Reuters ABS league tables.

The successful first ever single family rental bond from Blackstone’s Invitation Homes division – on  which Credit Suisse was co-lead – utilised the bank’s innovative master trust structure template used in the STORE Capital 2013-1 and 2013-2 transactions.

The SolarCity deal, meanwhile, is backed by revenues generated by the company’s photovoltaic solar systems and contractual host customer payments across 14 states.

Where other companies had spent four years working on deals only to fail, SolarCity’s issue, which priced at 4.8%, provided a template for cheaper funding for solar panel companies that often funded in other formats at double the cost.

But Credit Suisse’s crowning achievement this year is certainly the US$500m STACR 2013-DN1, the first ever credit risk transfer deal, for Freddie Mac, completed in July. 

The deal was a smashing success, upsizing and attracting 50 different private investors. It also traded up in secondary, almost immediately.

Fannie Mae followed up with its own version of the deal – CAS 2013-C01, for which Credit Suisse was a joint lead manager – based on CS’s STACR structure, and Freddie itself issued a second deal.

“CS was involved very early on, and knew the market very well. They understood our objectives and were very insightful,” said Kevin Palmer, the vice-president of costing and portfolio management at Freddie Mac.

To see the full digital edition of the IFR Americas Review of the Year, please click here .

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

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