Securitization Remains Essential In Debt Financing: ABS Conference
By Anusha Shrivastava
Of DOW JONES NEWSWIRES
391 words
26 October 2009
11:53
Dow Jones News Service
DJ
English
(c) 2009 Dow Jones & Company, Inc.
MIAMI (Dow Jones)--For all the blame heaped on securitization for creating the credit crisis, the market remains viable and is the most efficient way to finance debt, panelists speaking at a conference on asset-backed securities said Monday.
By bundling consumer loans into bonds and selling them to investors, issuers and banks are able to lower the cost of borrowing, panelists said. This is necessary for a broader recovery in the economy, they added.
For investors, securitization is essential as a "risk-transfer vehicle," said David Jacob, executive managing director at Standard & Poor's, speaking at a panel on the importance of securitization at the 15th annual ABS conference in Miami.
Securitization also provides investors with an essential tool for diversifying their portfolios, panelists said. As public anger against securitization subsides and investors regain confidence in the bonds, they predicted that market would begin to grow again.
Year-to-date issuance of asset-backed securities stands at $122.36 billion, according to a note from Deutsche Bank. This is down 22% from 2008, when it was $156.7 billion at this time.
The bulk of this year's deals have been eligible for the Term Asset-Backed Securities Loan Facility, the Federal Reserve's program to boost this market. TALF, as the program is known, has spurred the issuance of consumer-loan-backed deals. These are all newly created triple-A-rated bonds, purchased by investors who get cheap loans from the Fed expressly for that purpose.
"TALF is good but we need to sell bonds below the triple-A level, too," said Reed Auerbach, a partner at Bingham McCutchen LLC, who advises clients on TALF deals.
That will happen as the economy begins to stabilize, the panelists said.
TALF has created the "right environment" and it is a matter of time before other deals are sold, said another participant who declined to be named for this report.
"TALF is one of the most successful programs and should be extended," he said. "The Fed does not have to do anything to end it. When the market conditions are right, it will no longer be as useful."
-By Anusha Shrivastava, Dow Jones Newswires; anusha.shrivastava@dowjones.com; 212-416-2227 [ 10-26-09 1153ET ] |
