CMBS conduits are the craze this year, riding on the strong increase in issuance levels last year and the booming property sector. The main European commercial banks are setting up their own conduits to make full use of what they see as unlimited business opportunities in the region. But there are grounds for caution. Valuations are high and risks of mispricing even greater. In the RMBS sector, European non-conforming finally looks set to expand from the UK to mainland Europe. The UK is well est

Ford Motor Credit has chosen to fund demand for auto loans in the capital markets but to a much lesser extent this year. GM has bypassed the securitisation markets to a large degree by entering into the first year of a five-year commitment to sell US$55bn of auto loans directly to Bank of America. It has also tapped the syndicated whole loan market to secure funding. Not so for Nissan, an automaker who has spent the last several years turning around a mediocre product line into a powerhouse of t

Alan Kerr, managing director of HCM, believes the business model HCM adopts is naturally suited to the CLO market. “We focus on low volatility collateral, such as senior secured leverage loans and investment grade ABS. We strongly believe that it is more appropriate to apply CLO leverage to those asset classes, rather than investing in more volatile assets such as second lien, mezzanine or high yield bonds,” he said. “It is now recognised that senior secured loans are less volatile than subordin

According to Greg Park who is head of Asian securitisation at Calyon, “Standard Chartered First Bank (SCFB) is without question the benchmark Korean cross-border residential mortgage backed issuer. It has paved the road for future issuers by establishing a structural framework and setting pricing and subordination comparables”. Park, who has worked on three of SCFB’s internationally marketed RMBS deals, says the borrower has achieved good levels of oversubscription and tight pricing on a relativ

The Reserve Bank of India’s (RBI) intention through its new rules was clear enough. The regulations were aimed to create the framework most likely to act as a catalyst over the long term towards forming a more robust Indian securitisation market. The near-term effect, however, has been disastrous according to many observers. The new RBI guidelines require that first-loss portions of deals (usually cash collateral to take transactions up to investment grade) have to be deducted from the capital f

The new regime is designed to align banks’ economic risks more closely with their regulatory capital requirements. This will have a big impact on the risk weightings that banks are obliged to apply to certain securitised products – whether they adopt the standardised or the internal ratings-based (IRB) approaches that are allowed under the new accords. The standardised approach will allow institutions with less sophisticated risk-management systems to use external ratings and follow predetermine

The CDO and CLO markets main impetus for growth has been grounded in a few precepts, namely cheapness of collateral, the favourable arbitrage involved in creating and buying CDOs, and asset manager quality. But as home equity issuance slows amid falling home prices and hyper tight spreads (for the ABS that back many deals), prospective managers are likely to become more cautious before embarking on a prospective CDO management enterprise. Many underwriters have talked about the desire of and eme

The engine driving the US home equity issuance machine – home price appreciation – has finally begun to show signs of slowing down. While ABS investors, issuers and underwriters fight shy of claiming that the housing market bubble has exploded, it is losing some air and clearly deflating. According to Freddie Mac's latest mortgage survey, national 30-year fixed mortgage rates have moved to 6.56% and home price appreciation, which has driven the amount of equity homeowners can withdraw from their

Securitisation has long been seen as a possible key tool to help governments meet national deficit obligations under the European Union's Stability and Growth Pact. As governments find themselves with growing commitments to spend on pension deficits, healthcare facilities and infrastructure provisions, the recourse to the ABS market might be expected to increase. However, securitisation by public and governmental entities in Europe remains restricted to a handful of deals each year, and few bank

The number of new CDO managers has increased rapidly over the last two years. A recent study by S&P entitled "New CDO market managers are undeterred by high barriers to entry" suggested that 57 new names had appeared in the US over 2004 and 2005. The agency noted that as much as half of these names were entirely new to CDO technology. By implication, intellectual capital and the infrastructure behind these organisations should lead investors to demand a premium, but the absence of price tiering

Rob Bier, chief executive of Sparck Hypotheken, which expects to launch a true non-prime RMBS deal out of the Netherlands next year, believes the future looks bright for the non-conforming sector in Continental Europe. “A change in attitude towards debt, causing people to use consumer debt more aggressively, is leading to more adverse credit history. We also see a change in the structure of the job market, with more people being self employed, suffering job instability and a growing population o

For a bank, setting up a CMBS conduit, is a way of making a statement. Conduits do not exist as such, but are a series of procedures and techniques. Ann Lond-Caulk, managing director and co-head of structured bonds at HSBC, prefers to say that the bank is the conduit between clients and the capital markets. HSBC is one of the latest financial entities to jump on the CMBS conduit bandwagon. French banks Calyon and IXIS CIB have each created a conduit in the past months; Natexis is working on one,