On this week's Another Fine Mezz, the team heads to France, checks the pulse of two battered loan sectors, and asks whether reforming Solvency II will bring insurers to securitization.
First up, the ABS primary market has stayed busy, and Tom Hall picks some noteworthy deals.
Tom then takes a closer look at the French ABS market, including a recent consumer ABS deal from Cofidis that followed debuts and returns from BoursoBank, Younited, BPCE and Rothesay. While French political turmoil seems the obvious reason so many French lenders are turning to ABS, he finds there is a bigger driver.
Thomas Hopkins examines software and chemicals loans — two large sectors in European CLO portfolios — and explains why prices in both sectors have bounced back strongly after AI fears and high energy costs pushed them down earlier this year.
Although managers are now separating stronger software credits from weaker ones, and the US-Iran war is hurting Asian chemical producers more than their European rivals, Thomas finds both sectors still carry long-term risks.
Finally, Sarah discusses her leader on Solvency II reform. Capital charges on triple-A CLOs will fall sharply for EU insurers next year. But the cut only applies to the standard formula — the fixed capital rules written into EU law — so many large insurers that set their own charges will not feel it directly.
The EU may need to reform its matching adjustment rules, as the UK has done, if it wants insurers to buy securitizations in size.
