Sunshine and securitisation solicit European market smiles in Barcelona
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Securitization

Sunshine and securitisation solicit European market smiles in Barcelona

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The roof of a gingerbread house in the Park Guell

All signs point to an upbeat and optimistic 28th annual Global ABS conference in Barcelona on June 4-6, Europe’s largest gathering of securitisation market participants

Hosted by Invisso (formerly IMN, which merged with Euromoney Conferences) and the Association for Financial Markets in Europe (AFME), the three-day Global ABS promises new innovative networking events and a full programme. A record registered number of attendees is expected to descend on the city to meet, discuss, and learn about opportunities coming out of a very busy first quarter and growing European securitisation pipeline.

This year began with the long-awaited return of the large UK prime residential mortgage-backed securities (RMBS) issuers, who have subsequently remained relatively quiet. Instead, other mortgage lenders have stepped up their volumes with an increase in distributed mortgage issuance, particularly from the UK.1 The first quarter of 2024 ended with strong year-on-year comparisons,2 and kept up the pace into the first part of the second quarter. Indeed, the markets are already on pace for one of their strongest quarters in the past five years.

Collateralised loan obligation (CLO) issuance growth so far this year is also adding to market buoyancy after a slow end to 2023. In fact, many transactions have reached the end of their reinvestment period and are amortising.3 This has provided managers with a spark to improve assets under management and reset transactions or bring new ones to market.

On the other side of investment managers’ ledgers are loan challenges. Companies are facing refinancing and margin pressures thanks to increased input costs and elevated interest rates. Some of these companies are large users of the leveraged loan markets, which can create challenges for individual managers and the markets.4

As highlighted in KBRA’s recently launched European Auto ABS performance indices,5 auto borrowers are also increasingly challenged by the current environment. However, rising delinquencies and loss levels are coming from historically low levels and remain at relatively modest rates. Auto issuers remain a large component of the securitisation market, while the auto finance market continues to expand as more non-captive issuers make use of the sector as well as the traditional auto manufacturers.

Turning back to Global ABS 2024, organisers will showcase several new aspects during the three-day conference. For example, this year will introduce a planned Innovation Zone and Future Leaders Workshop. Given the advancements in technology, the market is primed for opportunity among various players seeking to improve productivity of the sector.

In addition, the format of the final day has been changed into a Private Credit summit to focus on this growing segment of the market. Sessions on the day will facilitate market participant awareness and opportunities.6

No matter the collateral focus, Global ABS offers an opportunity for the market to come together, assess where things stand, and determine how the sector can best move forward. As highlighted in KBRA’s recent investor survey,7 the KBRA Market Sentiment Index has reached its highest level in three years.

KBRA will again this year provide recaps of the three-day event on kbra.com and on GlobalCapital's website.

[1] UK Mortgage and Housing Trends: May 2024 Update

[2] European Securitisation: Positive Trend Continues

[3] Navigating European CLO Tail Risk: Mind the Amortisation Gap

[4] European CLOs: Too Big to Hold?

[5] European Auto ABS Indices: April 2024

[6] Private Credit: Potential for European MM and Direct Lending CLOs

[7] KBRA’s European Securitisation Survey: Positive Sentiment Grows

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