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New Deal May Inject Life Into Esoteric Asset Class

The second public securitization fully-backed by secured shipping loans, due to come to market in September, will offer a firm base on which to build the asset class, according to market participants.

The second public securitization fully-backed by secured shipping loans, due to come to market in September, will offer a firm base on which to build the asset class, according to market participants. Hamburg and Kiel-based HSH Nordbank’s $1.055 billion Ocean Star 2004, backed by 80 loans secured on 103 vessels, is expected to be just the first of such deals from the Landesbank, which has a €21 billion portfolio of shipping financing. Deutsche Bank and Lehman Brothers are underwriting the transaction.

 

“Any bank with a large shipping portfolio on its books, such as the German Landesbanks or some of the Scandinavian banks, is looking to this deal to provide an indication of the attractiveness of securitizing these types of assets,” said Jutta Heckenstaller, director in European structured finance at Fitch Ratings in Frankfurt. “We’ve received a lot of interest and been approached by quite a number of banks wanting to understand Fitch’s approach to rating these deals,” she added. Frankfurt-based Kreditanstalt für Wiederaufbau, for example, has an estimated €10 billion in shipping financing on its balance sheet and Scandinavia’s Nordea Group is another big player in that market.

 

That HSH plans to be a repeat issuer is important in spurring investor interest in the deal. “We have to make sure that analyzing a deal is a good use of our time, especially if it’s a new asset class. If the issuer is just doing a one-off we might do better focusing our efforts elsewhere,” said Brendan Galloway, ABS portfolio manager at Barclays Global Investors in London. He noted HSH is demonstrating commitment to the market with the time it is plowing into investor education by conducting a five-week roadshow across Asia, Europe and the U.S.

 

The first shipping-backed deal, by contrast, did not result in any further similar issuance from NIB Capital Bank. The bank securitized $663 million of the approximately €2 billion in shipping-loans on its balance sheet in 2002 through Latitude Synthetic 1, lead-managed by Merrill Lynch.

 

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