supposedly being in the doldrums, some are making headway.
In a global leasing market plagued by arrears woes and pecked at
by tightening profit margins, one might question the benefits of
major cross-continental receivables securitisation deals.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
However, with news of Deutsche Bank throwing €200 million into
securitising the receivables of Bulgarian light commercial vehicle
and car finance company Eurolease Auto, such doubts may need to be
reassessed.
The deal is the first vehicle receivables securitisation signed
for the south-east European region, and will provide a highly
significant income for Eurolease and its rapidly expanding parent
Eurohold (see: Foreign interests do battle for surging auto
finance sector in Bulgaria).
The contracts, signed and serviced by Eurolease, will be funded
by bonds rated BBB+ by Standard and Poor’s and a mezzanine loan
rated at BB+. Deutsche Bank has stipulated that the funds made
available are to be used within 24 months.
Not the first foray
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataDespite the novelty of this deal, it is not Deutsche Bank’s
first such foray into the region. In 2006 it securitised part of
ProCredit Bank Bulgaria’s small and medium-sized loan
portfolio.
In the more forgiving liquidity climate in 2006, though, such
deals were a more common occurrence.
Austria’s Raiffeisen financial group is one entity that has been
traditionally active in European receivable securitisation, on both
sides of such transactions.
Recently, Raiffeisen Leasing has been involved in the selling of
securities through Italian affiliate A-Leasing SpA, and in the
buying of securities from other Raiffeisen-owned companies.
In these latter cases, profit was relatively assured by the
low-risk factor of purchasing securities from other companies in
the same group.
Now though, such activity has dried up at Raiffeisen – and
across Europe, too.
“We are lucky to have had the contracts with our Italian
affiliate at the beginning of the economic downturn,” said Daniel
Azem, assistant to Raiffeisen’s management board.
“Although we were successful with our Italian securitisation, we
have had to stop the whole securitisation process because few
people are interested anymore. We would only be able to sell
securities for a very low price.
“At the moment there is no compelling reason in the market for
investors to buy securities.”
According to Azem, Raiffeisen’s competitors have also packed up
their securitisation operations as a result of huge change in the
margins involved. The prognosis of Raiffeisen’s management,
according to a recent meeting, is that there will be “no change
before Q3 2009. We believe the situation will not improve for a
while”.
To make the situation even more unfortunate for buyers of
receivables, the European Central Bank (ECB) changed its procedures
this month in a move to make bonds created from securitised
receivables less effective as collateral in gaining access to ECB
funds.
This change can only further weaken the benefits of such
transactions, in cases where receivables are being bought primarily
as collateral for borrowing.
In the shadow of these bleak messages, Deutsche Bank’s €200
million deal looks even more peculiar. What could possibly be the
attraction of making such a bargain?
“The success or failure of the deal will depend on the margin on
the receivables,” according to an industry analyst source.
“If that is high enough, it may compensate for the risk
involved. If the assets yield less than 200 basis points, it will
be very hard to repackage them.”
The strength of this securitisation seems then to lie in the
asset type involved: automobiles. As explained in our Databank
feature (see: Foreign interests do battle for surging auto
finance sector in Bulgaria), the Bulgarian leasing economy is
growing rapidly, powered by a massively successful car finance
industry, with plenty of scope left for development.
Lucrative product
Deutsche Bank Bulgaria director, Borislav Ivanov, would seem to
agree, calling automotive leasing a “lucrative product” in a
statement about the securitisation.
Certainly, the BBB+ rating from Standard and Poor’s – as high as
the sovereign ceiling for Bulgarian deals – is weighted in part by
consideration of the value of the assets involved.
If Bulgarian auto leasing receivables are considered such a
secure purchase, perhaps it is time for other companies to reassess
the way they think about securitisations.
Eurohold is planning to use Eurolease’s securitisation funds to
reinforce its leasing and insurance operations in Bulgaria. After
this, according to CEO, Asen Assenov, it is planning to offer
another comparable package of receivables for international sale.
With the proceeds of this it plans to beef up leasing operations
elsewhere in southeast Europe.
Eurohold has a thirst for expansion that has caused it to look
outside national borders for funds, and it is certainly not alone
in this ambition. If the current deal returns good money, we may
yet see a revival in European securitisation deals.
Fred Crawley
