Structured Finance 2010
Inside this issue
It had looked like the beginning of a recovery for structured finance. Bankers had just launched the first collateralised loan obligation in more than a year and investors were showing increasing interest in new securitisation deals. Then the US Securities and Exchange Commission struck. - -
It had looked like the beginning of a recovery for structured finance. Bankers had just launched the first collateralised loan obligation in more than a year and investors were showing growing interest in new securitisation deals.
In the aftermath of the Seven Year’s War, Frederick, king of Prussia, crafted the prototype of this borrowing tool to ease a credit shortage. Over the years, covered bonds became a common way for banks throughout Europe to create financing for home and other loans, eventually developing into a $2,400bn market.
Not surprisingly, the SIV-type investors that fuelled the sales of many of the more complex mortgage-linked bonds have all disappeared
Industry insiders were quietly pleased with a recent Standard & Poor’s report that showed European deals have suffered less than a 10th of the downgrades of their US relatives.
Over the past two years, the credit crisis has tested a wide range of structured products and led to the collapse of swathes of complex vehicles.
Defaults have been damped so far by the desire among banks not to cause problems, instead rolling over loans near maturity in the hope that values will rise to refinanceable levels.
Because many of the obvious sources of funding for these vehicles – and the leveraged loan market itself – have been laid low by the credit crunch, the market has struggled to restart.