ABS allocations show UK already stands apart from Europe

Despite UK assets offering juicier spreads than their European counterparts, distribution stats show little European investor participation in UK deals. That might be disappointing for UK issuers, but at least it means little to fear from a hard Brexit.

  • By Sam Kerr
  • 08 Aug 2017
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Syndicate bankers on deals say that European interest in UK deals is minimal.

“I have a few European investors who I talk to about UK deals,” said one. “But those accounts haven’t changed much in a couple of years.”

The overall impression is that even though there are problems associated with trading in assets in a different currency, it is clearly not impossible.

Japanese buyers are large anchor investors in both European and US CLOs for example, despite the currency differences, and the lack of regulatory favour.

In fact outside of the UK it is US investors that seem to be most keen on the products such as RMBS, with sophisticated buyers looking to take advantage of sterling weakness against the dollar, according to bank sources.

In the recent buy-to-let transaction London Wall, for example, over 90% of the investors were UK-based despite the bond selling triple-A rated notes at 85bp over Libor.

UK buyers were also 95% of the buyer base in Lanark 2017-1 issued in June.

At the top of the stack triple-A rated bonds with a 2.98 year duration priced at 42bp over Libor, the 4.99 year paper sold at 55bp over.

However, European risk appetite was present in June as the very next day Obvion printed a Dutch prime RMBS deal to rampant demand and printed at 17bp over three month Euribor, an effective negative yield with the bonds being printed at a premium to offset it.

When asked why European buyers don’t take advantage of the higher yields on offer in the sterling market, bankers say that it isn’t currency but investor mandates which tendto determine participation.

They cite either regional buying habits, German investors buying German ABS for example, or restrained mandates as reasons why UK assets are not more popular in Europe despite the value compared to euro-denominated assets.

One added that if the situation was reversed and euro assets offered compelling value in comparison to sterling, then he could foresee UK investors piling into Europe.

At least, though, there is a silver lining. In a hard Brexit, requiring a hard regulatory split between the UK and EU, the UK's securitization market shouldn't suffer too much. Given the likely economic consequences, that's surely a good thing — a credit crunch on top will make a bad thing worse still. 

Until that happens, though, European buyers could find themselves a bargain or too in the UK market — and should buy while they still can.

  • By Sam Kerr
  • 08 Aug 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 358,291.38 1348 9.06%
2 JPMorgan 320,704.66 1461 8.11%
3 Bank of America Merrill Lynch 318,128.31 1104 8.04%
4 Goldman Sachs 236,643.87 789 5.98%
5 Barclays 231,197.41 895 5.84%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 35,007.57 165 6.53%
2 Deutsche Bank 34,880.53 120 6.51%
3 Bank of America Merrill Lynch 31,805.65 97 5.93%
4 BNP Paribas 27,920.60 169 5.21%
5 SG Corporate & Investment Banking 24,398.89 138 4.55%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 19,745.92 80 8.85%
2 Morgan Stanley 16,334.63 83 7.32%
3 Citi 15,972.34 95 7.16%
4 UBS 15,487.17 60 6.94%
5 Goldman Sachs 14,053.61 76 6.30%