-- Daniel O’Leary
Europe’s recent private placement trend could be doing more harm than good, according to market officials. A Frankfurt-based syndicate official said closed door practices were not inspiring confidence within the investment community. “We’re trying to make investors comfortable with the technology again, but then investors keep wondering why everything’s being done confidentially,” he said. “The closed door practices aren’t really conducive of a healthy, open and transparent market, which is what we’re meant to be aiming for.”
A London-based syndication official agreed. “There are some buyers getting pretty angry with issuers because they’re missing out on the action,” he noted. “They’re not being given the chance to take a bite of the cherry.”
Since the start of the year, most European deals—those that were not retained—have been either placed privately with an anchor investor, such as JPMorgan, or syndicated to a private club of buyers. The U.K. and Dutch residential mortgage-backed securities market have been the biggest practitioners of the private trend.
The syndication official said the issuers could be provoking a buyer revolt, should they ever wish to tap the public market in the future. “Investors, money managers and funds might go elsewhere with their money, instead of waiting around for the issuers to toss them a bone,” he said. “Although, greed can be an exceptional motivator.”
A Vienna-based investor said the private placement trend was not helping securitization to rebrand itself in a better light. Buyers will not be interested in a product they cannot see, he said.