German ABS Initiative Should Speed Along True Sale Deals

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  • 28 Apr 2003
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Last week's unveiling of a project led by a consortium of German banks aimed at providing a means for securitizing loans should speed up the passing of the legislation necessary to complete so-called true sale deals. It should also spur the development of the German securitization market, says analysts.

Commerzbank, Deutsche Bank, Dresdner Bank, DZ Bank, HVB Group and KFW Group have teamed up to create a special purpose vehicle through which the banks will pool loans and securitize them. The plan is to offer the banks a means of reducing their equity charges and open up an alternative funding source.

Birgit Specht, head of European securitization research at Dresdner Kleinwort Wasserstein, says the primary objective of the initiative appears to be that banks want to speed the implementation of the new legislation for SPVs regarding trade tax. Whether the legislative changes and the consortium's initiative will cause publicly placed German asset-backed issuance to grow significantly in 2003, remains to be seen, but the probability has increased, she says.

"This program is a welcome development for the German securitization market," says Ganesh Rajendra, head of European securitization research at Deutsche Bank in London. "Until now, asset-backed financing there has been disproportionately small relative to Germany's economic size in Europe. The KfW banner will add credibility to the program, which is light on detail so far," he adds. KfW's Promise and Provide programs which offer a platform to German banks for the synthetic securitization of loans to small and medium enterprises and residential mortgages, respectively.

Still, one analyst warns the issuers the securitization market cannot be used for a dumping ground for risk. "The implicit assumption that asset-backed investors will buy anything is rubbish. This market is not an open-ended outlet for funding," he says.

Until now, German banks looking to securitize have depended on synthetic deals. In February, the German Finance Ministry announced its intention to eliminate the trade tax that makes true sale deals prohibitive, but the repeal has not yet been finalized.

  • 28 Apr 2003

All International Bonds

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1 Citi 244,235.70 910 8.87%
2 JPMorgan 223,767.95 1021 8.13%
3 Bank of America Merrill Lynch 211,276.97 750 7.68%
4 Barclays 166,062.82 634 6.03%
5 Goldman Sachs 162,877.27 537 5.92%

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1 HSBC 25,385.87 103 7.10%
2 Deutsche Bank 25,125.19 81 7.03%
3 Bank of America Merrill Lynch 22,023.57 59 6.16%
4 BNP Paribas 18,766.65 109 5.25%
5 Credit Agricole CIB 18,157.63 105 5.08%

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1 JPMorgan 12,578.87 55 8.17%
2 Citi 11,338.07 71 7.36%
3 UBS 10,682.06 44 6.93%
4 Goldman Sachs 10,419.53 53 6.76%
5 Morgan Stanley 10,194.88 57 6.62%