As the European securitisation community finished H1 in buoyant mood, the outlook for the structured finance market looks positive.
Issuances have continued to rise but it is a market that continues to evolve, and remains vulnerable to the impact of geopolitical risk, and yet is ripe for innovation and disruption.
Cautiously optimistic would be an accurate description of the overall mood across the structured finance space at the mid-point in 2024.
While core products, such as Collateral Loan Obligations (CLOs), continue to produce solid pipelines of activity in the more traditional structured debt markets, issuers and investors are also exploring new solutions in emerging asset classes and to mitigate the challenges posed by market uncertainty.
It’s a mix that is creating an interesting dynamic across the sector – a sentiment that was highlighted clearly at the Global ABS. A multi-jurisdictional team from JTC joined nearly 5,000 attendees from the securitisation sector meeting over three days, to understand the positive momentum and anticipate what it means for the coming months.
“Overall, the feeling is that the industry is in an exciting place compared to last year,” says Mohammad Zia, Head of Corporate Services, Ireland at JTC.
“There are deals and transactions happening in the more familiar core areas – but at the same time, a new type of positive energy means there is now scope for the sector to evolve and bring new solutions to market.”
One of the key evolutions was the inclusion of a new Private Credit Summit, recognising that the industry is broadening its reach into the private credit arena.
“The focus on alternative financing and the private credit market in particular is an example of how the sector is innovating,” says Melanie Herbert, Regional Head of UK and Ireland within JTC’s ICS division.
“It’s about understanding synergies between different areas of financing and lending to create new solutions. Supporting that, from a service provider perspective, means being able to blend expertise and knowledge in new ways.”
In addition, the sector is also increasingly touching different types of assets used in transactions beyond the more traditional.
“It’s something we’re seeing more and more, across the different stages of the deal pipeline JTC is involved in,” explains Eke Verbeke, Managing Director of JTC’s Netherlands office.
“We are seeing sustained interest in ESG assets and emerging technologies, for instance, where the conditions are right – while in tandem new solutions are coming to the fore that we haven’t really seen in the past – equity mortgages and lifetime loans, for instance.”
To a certain extent, this drive for new solutions is being shaped by a new demographic of entrants to the market and a greater diversity across market participants.
“There is definitely a wave of new entrants to the market and that diversity is a welcome evolution,” says Melanie. “It’s supporting innovation within the industry, with issuers and investors both looking at how they can move in new directions to secure non-bank lending in different asset classes, new regional markets, driven by new ways of reporting and evaluating success.”
Nevertheless, despite this evolution and the shifting structured finance landscape, some core criteria remain fundamental – including service quality from the service providers and intermediaries supporting securitisation transactions.
“What the evolution in the marketplace means is that there is now an opportunity for the more agile players to stake their claim, offer a fresh perspective and demonstrate to the market that there are new and better ways of doing things,” explains Mohammad.
“From our own point of view, that means drawing on our specialist and deep expertise across our global network and our jurisdictional offices, showcasing our capabilities and how we can add value across the lifecycle of a securitisation deal.”
From JTC’s perspective, for example, it can draw on its specialist teams in multiple jurisdictions and use that as a key strength to support market trends and developments, as Marcello Magnaghi, Manager – Corporate Services, explains:
“Our aim is to work together as a joined-up team, so that our experts here in the Netherlands, who are primarily working on orphan structures for example, can work in a seamless way with colleagues in Ireland, Luxembourg, the UK and the Channel Islands, to pool our knowledge in other areas such as SPV structuring, administration and regulatory monitoring, to deliver the service levels issuers and investors expect.”
With the structured finance landscape set to continue to evolve in the months ahead, demonstrating agility, capability and expertise is going to be key for those supporting the aspirations of investors and issuers.
“As a challenger in this space, our global reach, service levels, fresh thinking and joined-up approach is a real strength for us,” adds Melanie.
“What’s clear from all the people we speak to is that you have to get it right first time, there are no second chances in this space.”
