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Capital Markets

CLOs: ABN Amro opens a new asset class

SovRisc is capital markets disintermediation and may transform the $50 billion export loan guarantee business.

“We looked at the structured trade finance market and discussed different ways of financing these portfolios,” says Niall Cameron, head of global markets at ABN Amro.

“What we have done is to take an asset class that was relatively illiquid and use securitization techniques to create a highly liquid bond.”

It’s a pattern that, over the years, has enhanced the efficiency of financing various assets including residential mortgage loans but also credit cards, leases and auto loans. In the case of SovRisc, the underlying assets in the $25 billion programme are export guarantee loans originated by ABN Amro. There are 22 loans guaranteed by the export credit agencies (of the US, France, Germany and UK), in the $1.05 billion SovRisc Series 1.

“In the ECA market this is something that has been talked about for 10 years,” says Gareth Thomas, head of cross-border structured finance at ABN Amro. These ECA institutions support exporters by guaranteeing loans supporting finance for capital goods.

This is not a true securitization, says Paolo Tomassetti, director in asset securitization, as payment does not rely on the performance of the portfolio but relies on the guarantors instead.

The complexity of repackaging this type of risk – four different export guarantee agencies – should not be underestimated.

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