The private placement market and quasi ABS structured transactions
Article 3 minute read

The private placement market and quasi ABS structured transactions

03 August 2018

A recent study by the European Commission has identified significant growth potential for private placement in several markets, including Austria, Belgium, Denmark, Italy, Ireland, the Netherlands, Poland, Spain, Sweden and the UK.

Fuelled by a desire to reduce over-reliance on bank funding and lower costs, the growth of the private placement market continues at pace.

This year’s Global ABS Conference, the largest annual European structured finance gathering, drew nearly 4,000 delegates – a significant increase on last year – as market momentum builds. 
The European study – ‘Identifying Market and Regulatory Obstacles to the Development of Private Placement of Debt in the EU’ – was commissioned to encourage market development. The study concluded that furthering the standardisation of documentation and processes between member states, plus best-practice sharing, would be a good route to support increasing use of private placements among potential issuers (and investors) and would also support further market participation across the EU.

The EU is also seeking to clarify the application of the EU regulations to European private placements, with a ‘single, transparent, standardised’ (STS) framework for European securitisation. Efforts are being encouraged at a national level to adjust the application of the regulatory framework to private placements by further relaxing overly restrictive laws and creating private placement specific provisions aimed at facilitating the issuing of, and investment in, private placement instruments.

A second study on ‘EU markets for private placements’ showed that private placement of debt instruments with institutional investors could play a greater role in financing medium-sized companies in the future, thereby having a direct impact on the real economies of many EU member states. It highlights a considerable growth potential for private placements in the EU, due to new domestic markets and increased cross-border activities.

Elsewhere in the world, there is also growing interest in private placement deals, which help to diversify funding sources and increase financial stability.

Benefits

Private placements represent a different funding option for issuers seeking to access the bond markets, with streamlined documentation involving documentation, less onerous covenant packages and potentially fewer investors to deal with. This final point allows issuers to match their funding requirements more closely, so limiting unnecessary cost. For investors, it provides them with an alternative investment option helping them to diversify their portfolio and tailor their deals to long-term liabilities.

Complexity

If a transaction is cross-border, there can be regulatory complexities and different nuances in putting together the most effective SPV. Detailed local market knowledge is vital, which is where TMF Group – with 7000 accounting, legal and other businesses services professionals around the world – becomes an invaluable source of expertise.

Currently running more than 4,000 SPVs globally, our capital markets services teams maintain compliance with respect to the management of the SPVs around the world, keeping clients well-prepared with upfront briefings and preparation on new or changing regulatory issues that might affect them.

As SPV administrator, TMF Group’s involvement in a potential transaction tends to be earlier in the deal lifecycle than for banks providing similar corporate trust services, meaning that a wide range of business support services can be nimbly engaged to assess the best location for transaction origination and onward management. For privately placed transactions where, generally, there is no system involvement, we can deploy our full range of SPV administration, agency and fiduciary services supporting client needs to create bespoke transactions. The value of our extensive network means we are also able to support transactions on a global level, this give us a significant advantage over many of our competitors.

One trend that continues to show signs of developing in terms of market interest is ‘green bonds’, whose investments are used to fund environment-friendly projects. The Property Assessed Clean Energy (PACE) securitisation market is also rapidly growing amongst property owners wishing to finance a green upgrade to their property. TMF Group has followed this trend, and we have been involved with green bonds and PACE securitisations since they were established.

Talk to us

If you would like to know more about this asset class, corresponding structures and our solutions for administering transactions and solving oversight challenges, please contact us.

Don’t let complexity hold you back – find out how our services help our clients reach new heights.

Written by

Alfonso Pagano

Commercial Director, Capital Markets Services

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