Structured finance: Securitization still a challenge
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CAPITAL MARKETS

Structured finance: Securitization still a challenge

Alex Medlock, VTB Europe

"Banks will have to go that extra mile with mortgage-backed transactions to convince investors of the quality of the underlying quality of the collateral"
Alex Medlock, VTB Europe

After a stop-start year of asset-backed securities issuance in 2007, Fitch Ratings expects European emerging market securitizations to perform comparatively well in 2008. However, it says that a prolonged credit squeeze could hit demand for structured bonds. "Borrowers with hard-currency refinancing needs have so far weathered the liquidity crunch remarkably well but their funding needs will become more acute if the international capital markets remain closed for another two or three quarters, and local markets are not deep enough to provide alternative funding," says Jaime Sanz, head of European emerging market securitization at Fitch in London.

Following a healthy crop of ABS transactions in the first half of 2007 from Kazakhstan, Russia and Ukraine, new-issue activity dried up in the second half on the back of the fallout from the problems in the sub-prime mortgage market in the US, which choked off investor demand for securitizations worldwide.

Nevertheless, Sanz says that those issues that did come to market from emerging Europe have generally outperformed the underlying market.

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