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The last few weeks have proven to be a tumultuous period for the capital markets, and with it a stark (and painful) reminder has been duly delivered on the impact that they have on all aspects of business and the wider economy. Securitisation has also shown that it is not immune to this turmoil demonstrated…

They say that the early bird catches the worm and it seems that courts in the US definitely agree. A recent decision by a court of appeals in Philadelphia could serve as a wakeup call for any noteholders or issuers and servicers that might have claims to bring in relation to, respectively, the disclosure of risks in offering materials or the valuation of underlying assets that they need to be diligent with regard to their filings. The facts of the case highlight why interested noteholders, issuers and servicers should scrutinise the relevant materials on which they have relied and investigate any claims in order to take relevant action in a timely manner.
Continue Reading The Operating Engineers Pension Trust Fund Lawsuit: The time is now (or has it already passed?)

So Eurosail-UK 2007-3BL plc (Eurosail) is not ‘balance sheet’ insolvent, no event of default has occurred under the RMBS notes it has issued and a post-enforcement call option (PECO) does not make limited recourse any of the notes it relates to.

Those are the conclusions of the Supreme Court (see here) after it substantially re-affirmed the judgments of both the High Court and the Court of Appeal in the case of BNY Corporate Trustee Services Ltd v Eurosail UK 2007-3BL and others.

Facts

For those unfamiliar with the facts, the case concerned an attempt by certain A3 noteholders to have an event of default under the notes declared on the basis that Eurosail was balance sheet insolvent due to, amongst other things, losses incurred as a result of the lack of currency swaps originally provided by Lehman Brothers.  The key argument being that the audited balance sheet of Eurosail showed an excess of liabilities over assets and that losses from the loss of the currency swaps could not realistically be recovered. 
Continue Reading ‘Point of no return’ is not the point says Supreme Court

Those issuers, corporate services providers, collateral managers, servicers and special servicers that regularly submit debt announcements on the Irish Stock Exchange will know how straightforward and quick it is to submit.  For those that don’t, at present this process involves simply sending a copy of the notice or announcement to the email address announcements@ise.ie and the publication is free of charge if a Word version of the notice is sent. 
Continue Reading Irish Stock Exchange announcements – Its all change at the Exchange!

The Basel Committee on Banking Supervision announced yesterday that it had finalised the rules for the Liquidity Coverage Ratio or LCR i.e. the main mechanic for regulating liquidity in the Basel III package of reforms.

The LCR requires that a bank hold a sufficient stock of “High Quality Liquid Assets” to meet its net cash outflows in a hypothetical stress scenario. The rules set out the parameters for the stress scenario, the calculation of the net cash outflow and the type of assets which can constitute High Quality Liquid Assets.

Lobbying has achieved a notable success as certain “residential mortgage-backed securities rated AA or higher” can now be included in a bank’s stock of high quality liquid assets (subject to a 25% haircut, which is lower than the haircut applied to some corporate debt securities and to the limitation that this component can form no more than 15% of the buffer as a whole).
Continue Reading RMBS can form part of the Basel III liquidity buffer. Some good news for the structured finance industry.

I was encouraged to see Virgin Money announce its second securitisation of the year, Gosforth 2012-2, particularly so as Virgin Money is also one of the 30 or so banks that have now signed up to the Bank of England’s Funding for Lending Scheme.

The Funding for Lending Scheme (FLS) was introduced by the Bank of England back in July to reduce funding costs for banks and building societies to stimulate lending to UK households and small businesses. Under the scheme, between August 2012 and January 2014 any participating bank or building society can borrow UK Treasury Bills for a 4-year period in exchange for providing eligible collateral as security. Broadly speaking, the eligible collateral will include certain loans, securities and other assets also eligible under the Bank of England’s Discount Window Facility. The costs to participating banks and building societies for this lending depends on how much lending they do into the real economy but can be as low as 0.25% per year. If this results in banks lending more to the real economy at better rates and borrowers have the appetite to take on such debt sufficiently to make a noticeable impact, then that’s great …. mostly.
Continue Reading Securitisation: a nationalised pastime?