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[This page lists news and developments in global securitisation markets - please do visit this page regularly as it is updated almost on a daily basis. Join our mailing list for regular news fed direct into your mailbox]
Read on for chronological listing of events, most recent on top:
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Previous newsletters June
02 ...Apr 02 ...Mar
02 ....Feb 02 ....Jan
02 ....Dec., 01....Nov,
01 .... Oct.,2001.,
Sep.,2001.,
Aug 2001... July, 2001,
.June, 2001, May, 2001,...
April 2001...
March 2001
..Jan. and Feb.2001
Nov. and Dec.2000
Sept. and Oct. 2000
July and August 2000
May and June 2000
April 2000
Feb and March 2000
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- Colombia introduces mortgage
securitisation
Added May 3
Coupled with guarantees and tax incentives, Colombia launched its mortgage securitization company. - SPE regulation concerns
dominate BMA meet
Added May 3
The annual meet of the Bond Markets Association this year was marked by concerns on potential SPE regulation in the wake of rising debate on off-balance sheet accounting. - David Pullman features
in Linda Davies fiction
Added May 3
The Wall Street investor who claims to have invented music royalty securitization features in Linda Davies latest fiction. - S&P explains CDO rating
volatility
Added May 2
Standard and Poor's has issued a guide to factors that cause CDO ratings to migrate. - Greek securitisation market bogged
down by EU concerns
Added May 2
Securitization of government assets in Greece has been put on hold on uncertainty as to whether this will be regarded as part of public debt. - Indian central bank forces banks
to invest in RMBS
Added May 2
Governor Bimal Jalan's credit policy may give the needed boost to the vast potential for securitization in India.
Colombia launches mortgage securitization
The Colombian Titularizacion Company (TC), backed by government guarantee and tax exemption, entered the market with the first mortgage securitization in the country. This was the first and long awaited step to bringing down mortgage funding costs in the trouble-torn country.
TC came out with USD 215 million worth bonds for maturities of 5, 10 and 15 years. The bonds are guaranteed by the Colombian government as also by the IFC Washington. The bonds have also been given a tax free status by the government.
Vinod Kothari comments: Colombia is a land of disparities: stunning beauty but strife-torn social life, lots of money chasing international investments, but dearth of money for local infrastructure, and so on. During my visit there, Colombians were enticed by thoughts such as cattle securitization, viatical policies securitization, etc: ideas that risky, but with high spreads.
Mortgage securitization should augur well for the country's needs for developmental funding.
Links For more on securitisation in Colombia, see our country page here.
BMA
meet expresses concern on
potential SPE regulation
The latest annual meeting of the Bond Markets Association (BMA) in New York recently was predominated by concerns on possible SPE regulation by the regulators.
SPEs have shot into public critique following Enron collapse, and disclosures about the amount of assets and liabilities tucked away into non-descript shell entities called special purpose entities. Securitization is not the only activity that uses SPEs - these are used for several other purposes.
FASB is currently engaged in re-defining the consolidation accounting standards relating to SPEs, which would disregard an SPE as having any economic substance, and therefore, claiming to be independent, unless it is seeded with at least 10% outside equity, currently only 3%. Besides, the accounting rules will try identify the primary beneficiary of the SPV and put in place rules to consolidate the SPV with such beneficiary. We have covered SPVs in a separate page on our site.
As far as securitization SPVs are concerned, they will expectedly remain outside the new accounting rules as per the current thinking. However, there is an increasing school of thinkers who think the present securtization accounting standards do not look at retained risks and rewards and permit assets to go off the books even though they continue to be supported by originator-credit. See excerpts from an article by Mark Adelson of Nomura on our news page here.
There are approximately 1 million SPEs in existence; BMA meeting was concerned that as more disclosures come in, the Congress might pressurise regulators to junk the present soft approach and think of taming these entities.
Links See for more on SPVs here. See for more on accounting issues here.
Music royalty securitization features in Linda Davies fiction
The 1997 music royalty securitization pioneered by New York investor David Pullman of Pullmanco has inspired Linda Davies' latest fiction titled Something Wild.
David Pullman engineered the first musis royalty securitization by raising USD 55 million through the issue of bonds backed by the future royalties of music. Since then, David Pullman has been assisting several such securitizations. Linda Davies picked up her storyline to write an investment banking mystery thriller of a first rock star to do a USS 100 million Pullman Bond(TM) named Redford. Linda Davies, a former investment banker herself, left her career in finance to write her first novel The Nest of Vipers which was a smashing success.
Links For more on intellectual property securitization, see our page here. For more of David Pullman's securitization, see his site here.
CDO ratings volatility explained by S&P
CDO activity is rising as more and more CDOs, both cash and synthetics, are being downgraded. As the interest levels in this field are ever rising, all global rating agencies are busy explaining the instrument. Fitch recently came out with a quarterly newsletter dedicated to CDOs. S&P issued 2nd May a note on CDO surveillance and the factors affecting the ratings of a CDO.
Highlighting that unlike typical asset-backed transactions, CDOs have a far lesser number of constituents - 75 to 150 or so, and therefore, rating migrations of the constitutent obligors may cast a bearing on the transaction, S&P goes on to explain the factors that affect the ratings. These are - migration in the credit quality of the constituent assets, erosion in the par value of the assets due to defaults, deterioration of spreads in cash transactions, etc. In case of synthetic transactions, it is primarily the credit events which cause either an erosion of the credit enhancement available from the first loss piece, or protection payments by the CDO vehicle to the originator.
S&P has also listed the red flags which raise concerns on the ratings of a CDO.
Greek government securitisation on hold
on EU concerns
The Greek government has put on hold plans to come out with asset backed securities collateralised by Government receivables, as it is not sure whether the European Commission will continue to accept it as a source not captured in public debt limits. Future pension contributions were to be securitised by IKA, a Greek pension fund which have been put on freeze. The government was also to securitize lottery receivables once again.
It is notable that IKA had only recently announced plans to securitise pension contributions adding to some USD 8.4 billion.
Several European countries, led by Italy, were planning to securitise different forms of government revenues. Italy took the lead with social security contributions, following by gaming revenues and mortgage property receivables. Spain and Finland are also to join the league,with an obvious motive to cut public debt. This is similar to what a bank or corporation typically does- off-balance sheet funding.. However, Eurostat has expressed doubts as to whether this is only a different form of funding and will come out with a ruling on the matter in July.
Greek has gone quite aggressive on use on securitisation. It is reported that Greece's securitisation issues are equivalent to 4.1 per cent of GDP, higher than any other Eurozone country. The IMF said this year that Greece's use of off-balance-sheet accounting methods "impedes efforts to achieve a sustainable rapid decline of the public debt".
Links For more on securitisation in Greece, see our country page here.
Indian
banking policy to motivate and
force banks to invest into RMBS
Even as a lot of development potential remains untapped in the Indian market due to a long silence on the part of the regulators, the RMBS segment is expected to get a boost. This is likely to be the outcome of the measures announced by the Reserve Bank of India's Governor Jalan in the recent credit policy for the year 2002-3.
The measures relevant for securitization are:
- attribution of a 50% risk weightage to RMBS, however, securitized only through the apex housing finance body National Housing Bank (NHB). This would however not be applicable if the mortgage pool includes commercial mortgages as well.
- Banks have been required to invest at least 3% of their incremental deposits into housing sector. This will even include investments in RMBS transactions routed through the NHB.
The NHB is India's apex housing finance body. In the past, a few RMBS transactions have already been routed through NHB. There have not been any publicly known RMBS transactions so far outside of the NHB. Unlike Ginne Mae, NHB does not provide any guarantee of its own but merely provides a legal template as an SPV and a trustee, and charges trusteeship fees. The NHB enactment provides special powers for foreclosure of a mortgage securitised through the NHB.
Links For more on the securitization market in India, see country page here.