Securitization: Return of the living dead
Proving that higher spreads, the annihilation of half of the investor base and a global recession can’t keep a good product down, securitization has returned to Europe. Louise Bowman investigates.
THE OBSERVATION THAT markets have short memories is a cliché that is hard to refute. But the extent to which those in the industry are prone to selective amnesia still has the power to shock. "I was asked to buy a deal recently and told the broker that I had not yet read the prospectus," an investor told Euromoney in October. "He looked at me in amazement and said: ‘Why would you want to bother doing that?’" Shaking his head in disbelief the investor added: "The question I have been asked the most over the last week is: ‘Is it 2006?’" What is perhaps most baffling about this anecdote is that the investor was buying asset-backed securities. This most tainted of asset classes, having been dealt a near fatal blow two years ago, was supposed to have cleaned up its act. Having been given a painful lesson in the shortcomings of buying on rating rather than credit analysis, those ABS investors that did not disappear along with the ABCP conduits and structured investment vehicles are meant now to approach what is left of the market with a new sense of caution and control.