As appetite amongst UK-based investors for UK RMBS begins to look a little sated, UK securitisation issuers are turning their sights on tapping demand in the U.S. and looking once again at issuing 144A bonds.
This was last a ‘potential’ trend in 2012, although, as has been the wont of the European securitisation market post-credit crisis, this proved to be something of a false dawn. The signs that this time will be different are more promising, not least because of the encouraging volumes of RMBS issuance this year, both in the UK/Dutch markets as well as in the United States itself.
This is likely to take shape as issuance of tranches of U.S. dollar-denominated notes, supported by an in-built cross-currency swap (swapping sterling denominated cash flows at the asset level for the US dollar payments due on the notes). Of course, in the context of 144A notes, issuers will also be factoring in the additional cost of obtaining a 10b5 letter from U.S. counsel, but this is unlikely to impact materially the commercial viability of a 144A issuance.
The fourth quarter of this year and the first quarter of 2016 should indicate whether this is a trend that will, this time, come to fruition.