Awards for Excellence 2005
Citigroup
Citi has added to its ABS franchise with a breakthrough year in continental Europe
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| David Basra |
In the past 18 months asset-backed securities went truly global. The first stage of the globalization of ABS – the development of thriving markets in North America, Europe, and Australasia – was already complete. Now issuers will tap these multiple markets simultaneously. UK residential mortgage-bcked securities issuers, for example, might issue in sterling, euros, and dollars, creating global distribution and exploiting global price tension. In a sure sign of market maturity, issuers are targeting different pockets of demand.
Against this background, a handful of ABS houses that run single global ABS origination, syndicate, marketing, and research teams could demonstrate their prowess. Deutsche Bank, for example, worked on a series of cross-border trades including co-lead managing Sallie Mae’s simultaneous dollar, euro, and (debut) sterling issue. It brought more Australian RMBS issues into the US than any other bank.
As well as considering existing global players for the award, Euromoney also looked at those banks that have recognized that if they only offer domestic currency deals in a limited range of ABS products they have no future. Barclays Capital, for example, performed well last year in its traditionally strong areas, such as UK sub-prime mortgages. But it is more and more visible in Europe. In November, the bank was sole arranger and bookrunner for Germany’s first commercial mortgage-backed securitization of tenanted residential properties, the €256 million Hallam Finance deal. This year it was arranger and joint-lead manager of Italy’s €4.37 billion SCIP II refinancing. It also notched up two signature deals. Box Hill Life was the first AAA/Aaa-rated value-in-force securitization by an independent European life insurer, Friends Provident. And as bookrunner on three delinked deals for MBNA Bank Europe, Barclays Capital helped import US ABS technology into Europe. Barclays Capital came very close to winning this award this year.
But Citigroup wins ABS house after diligently filling in the gaps in its global coverage. In practice, that meant staying strong in its traditional franchise areas of the US, Asia, and Australasia while making real inroads into continental Europe. It broke into the Dutch mortgage market, has strategically positioned itself in Germany, and has done deals in Greece.
“We’ve been filling out on a pan-European front, selectively doing more work on the continent,” says David Basra, managing director in securitization at Citigroup in London. “We’ve built out organically over the last two years to achieve much more breadth and depth.”
In the Netherlands, Citigroup has worked with ABN Amro on deals for mortgage provider Delta Lloyd. In Greece, it lead managed EFG Eurobank’s Themelion II mortgage deal. This was only the second public RMBS deal out of Greece, and Citigroup followed it up by working as joint bookrunner on the third, from Piraeus Bank. In Germany, as noted in our country awards, it could enjoy the fruits of an explosion in RMBS deals after financing residential housing portfolio purchases.
Globally, Citigroup was the number one ABS bookrunner between January 2004 and the end of April 2005, according to Thomson Financial. Although the Asian market has yet to take off, the bank featured on Japanese and non-Japanese deals (including the Hong Kong SAR’s first deal) last year. It cannot match Deutsche in its Australian volumes but does enjoy decent market share there. And Citigroup’s global league table position is not just the result of self-originated volume. It has a good third-party business and has done repeat deals for such companies as Canary Wharf, GMAC, and HBOS. Indeed, its deals for UK RMBS issuers into the US, whose volumes exceed Australia-US deals, prove its global flow credentials.
On the CMBS side, Citigroup also came up with innovative deals last year. As arranger on Land Securities’ innovative tiered refinancing, Citigroup demonstrated superb innovation. So what if relatively few issuers need to consolidate large chunks of property-specific debt? “Land Securities has put together a programme that brings lots of elements together and allows loans and bonds to coexist under one programme,” says Basra. “A lot of corporates finance in a fragmented way.” The Land Securities deal pioneered the exportable concept of re-financing through a single umbrella vehicle.
The traditional gap in Citigroup’s coverage has been in CDOs, but its global league table positions shows that it is a consistent top-five performer, along with such rivals as Merrill Lynch, UBS, JP Morgan and Deutsche Bank. “We have a complete platform across the board,” says Basra. “Maybe the high-jump isn’t our favourite sport, but this is a decathlon.”
The ABS market had a great run in 2004/05. Spreads stayed tight and demand stayed high. “Is the party going to stop?” wonders Basra. That ABS spreads were relatively stable when volatility hit the credit markets and spreads on other secured debt instruments widened in May suggests that it isn’t. European triple-A RMBS deals generally widened around four or five basis points, less than many corporate bonds.
