Credit, conversation, and cocktails welcome securitization industry to Barcelona
If you’re caught in meetings all day at Global ABS, KBRA’s daily recaps will keep you on top of events at the conference
The time has come for the European securitization industry to converge for its annual convention in Barcelona, with this year marking the 27th edition of the Global ABS conference hosted by IMN and Afme.
The industry has weathered a number of crises over the past 27 years yet, despite the fact it is now 15 years since the global financial crisis, the market still struggles to find a steady pace and rhythm. In 2023, while a recent KBRA investor survey indicates that investors have divergent views on the direction the market might take over the next six months, in general sentiment is leaning towards an expectation that there will be further challenges ahead.
One segment of the industry that has proven to be steadfast is auto ABS, as it is a stable funding sources for auto manufacturers and finance companies. Yet even this market continues to evolve, as highlighted by KBRA’s recent report on the gradual greening of collateral thanks to a growing inclusion of electric and hybrid powered vehicle lending.
Another active sector to be discussed is the CLO market, where managers and investors have seen dramatic market growth since 2012. With an increasing number of active managers in the European market, it can be hard to distinguish differences in management styles. KBRA publishes updated reports that examine manager behaviour across all of their transactions to discern individual styles of approach, including whether managers tend to be more conservative or more opportunistic. No matter which strategy they pursue, all of the leveraged finance managers will face challenges in the coming year as levered companies are tested by the increasing cost of funding and a squeeze on margins with increased input costs.
Mortgages are historically a dominant part of the European securitization market. However, the low-cost central bank refinancing operations, alongside the alternative choice of funding offered by covered bonds, have tempered the use of securitization. The market has evolved away from bank mortgage issuers towards alternative lenders and alternative collateral, and mortgage collateral is now differentiated into various distinctive mortgage products. Buy-to-let lending is an active part of the market, but faces a challenging time due to rising refinancing costs and a disappearing tax advantages. Based on KBRA’s analysis as an active rating agency in this segment, we have observed that changing demographics across Europe — coupled with the use of equity release mortgages to provide later life lending — is just one factor helping to drive growth as a source of collateral.
No matter the collateral focus, Global ABS offers an opportunity for market participants to come together, assess where things stand, and determine how the market can best make forward progress. With plenty of meetings and exchanges of views, market participants are ready to enjoy another successful event and KBRA looks forward to engaging with all industry participants. However, if you are caught in conversations (or cocktails) all day, KBRA have you covered. You can read our recaps of each day’s events on GlobalCapital’s website and on kbra.com.