A double blow put the brakes on the European securitization markets’ flying start to the year.
Another Fine Mezz was recorded in between UK bridging lender Market Financial Solutions being placed into administration on February 25 and the US and Israeli airstrikes on Iran starting on Saturday.
Two weeks ago, spreads had recovered close to 2025’s tightest levels, and issuers were starting to queue up. Some of them still hope to prove the primary market is open this week, but they are certainly being more cautious.
For securitization, the events in Iran are what analysts like to call an exogenous shock — an unexpected, external event with swift, negative effects. A rise in the price of oil might have a knock-on effect on consumer health further down the line, but in the short term, ABS price movements will be mostly due to broader volatility.
For a comprehensive rundown of where relative value might fall, read GlobalCapital’s series on the conflict’s effects on emerging markets, SSAs, FIG, covered bonds and corporates.
On the other hand, securitization is at the centre of the storm around Market Financial Solutions.
Its fall into administration doesn’t necessarily mean losses for its creditors, but there’s no doubt that something went wrong at the firm, which was backed by some of the big players in European securitization.
A spokesperson for MFS told GlobalCapital last week that the firm's founder, Paresh Raja, “categorically denies any allegations of fraud”.
Nevertheless, the implications of MFS’s collapse will be vast and wide-ranging.
There will likely be a doubling down on due diligence and a fresh focus on governance, similar to what the SME market experienced last year. Perhaps also a flight to quality and a consolidation of the UK bridging sector.
The MFS story has also cut through to the mainstream press, providing another negative headline for private credit. And it appears that an outflow of retail investors has begun.
But if you want a silver lining for the market, skip to the second half of the show to hear how Europe’s private credit CLO market is beginning to blossom!
