Botín Re-Opens The Mortgage Resale Market 8 Years On

10 June 2015 – Cinco Días

The packaging and resale of high-risk, or subprime, mortgages between large financial institutions in the United States was the epicentre of the international crisis that began to unravel in 2007 and which revealed its devastating force one year later, with the bankruptcy of Lehman Brothers.

When that bubble burst, it swept away much of the market for mortgage securitisations, amongst other things. In the case of Spain, which had become the second largest market in Europe and one of the most important on the global stage, the market vanished. But now, it is making a come back.

Unión de Créditos Inmobiliarios (UCI), the financing arm of Banco Santander that specialises in loans for home purchases, has just signed the first operation of this kind to be closed with investors since 2007.

Specifically, at the end of May, UCI placed a €450 million package of mortgages, backed by residential homes. The portfolio, which has been assigned a Aa2 rating by Moody’s, is considered to be a high quality product, since it comprises loans that, on average, cover 53.8% of the values of the homes (loan to value), compared with the limit of 80%, recommended as good practice in the sector.

It is understood, therefore, that the clients that took out these mortgages had (access to) significant resources beyond the financing they requested and that the real estate guarantee behind the loans (homes acquired across the whole of Spain between 2006 and 2013, of which 79% are located in Andalucía, Madrid and Cataluña) would more than cover any possible non-payment.

The sale received a great deal of interest from banks and investment funds, primarily those based in Germany, The Netherlands, France, the UK and Spain, with demand for the package exceeding its value by 1.7x, according to sources close to the operation.

The placement coupon was Euribor plus 0.85 points, compared with the differential of 25 or 30 basis points that was paid in Spain eight years ago. That lower differential is being paid now in the UK and The Netherlands, where the market has never completely closed, but where the differential increased to 150 basis points after the outbreak of the crisis.

Sources at UCI, which placed securitisations amounting to €12,000 million between 1994 and 2007, understand that “since this is the first transaction, a premium must be paid in order to return to the market”, but that it is still an “attractive level”.

The same sources say that the step has been taken as the result of three factors. “Until 2014, there were no transactions involving the public issuance of securitisation bonds in countries on the periphery of Europe. Nevertheless, following an RMBS (residential mortgage-based securitisation) bond issue in Italy, we saw an opportunity for us to issue debt”. They add that the debt purchase program launched by the European Central Bank has, in turn, led to the “revitalisation of the securitisation market”. “Despite that, after eight years of paralysis, bond issues have not been possible until now, since we needed to reach a post-crisis economic situation”.

UCI expects to undertake similar issues in the future and hopes that its example will encourage other entities to do the same.

Original story: Cinco Días (by Juande Portillo)

Translation: Carmel Drake

Santander & Uro Property Revive The Securitisation Market

28 May 2015 – Expansión

Debt issues amount to €2,350 million to date in 2015 / UCI, owned by Santander and BNP, is finalising the first mortgage securitisation in the market since 2007 and the Socimi Uro is closing the first rental income securitisation in Spain, for €1,345 million.

The securitisation market is being revived. Over the last few days, two Spanish companies have gone to the market to raise almost €1,700 million using these structured financing instruments, which have been in disuse since the burst of the subprime crisis in 2007.

Both of the companies are partially owned by Santander: Uro Property, the Socimi that owns one third of the bank’s (branch) network in Spain, closed a €1,350 million securitisation yesterday to refinance its business; and Unión de Créditos Inmobiliarios (UCI), jointly owned by Santander and BNP, is finalising the first mortgage securitisation since 2007, amounting to €342 million.

These two transactions come after a deal closed by Santander in February, involving the placement of a securitisation amounting to €668 million containing loans to finance car purchases granted by the Spanish branch of the French bank Banque PSA, the financial arm of Peugeot Citroën (which has an alliance with Santander). In total, these three transactions amount to €2,355 million.

Innovative debt issues

The largest transaction, the one involving Uro Property, was completed yesterday afternoon. The real estate company – controlled by Santander, CaixaBank, Atisha and Phoenix Life – has refinanced its debt through a securitisation amounting to €1,345 million, over a term of between 22 and 24 years. The most innovative aspect of this transaction is that Uro is securitising the rental income that it receives from the 750 Santander branches that it owns until its rental contract with the bank comes to an end.

The real estate company agreed a fixed rate of 3.348% with investors – mostly insurance companies and fixed income funds – whereby cut its financing cost almost in half from 6%.

Goldman Sachs has led this issue and has been supported by BNP, Santander and CaixaBank. The securitisation will be structured through a company in Ireland.

“It is quite an innovative transaction in the debt market; issues of this type have not been seen before, except for in the UK. With this, we acheive the three main objectives that we set when we took over the reins at Uro, namely to: list the company on the Alternative Stock Market (MAB); sell part of the branch portfolio [the company transferred 381 branches to Axa]; and refinance the debt”, said Carlos Martínez Campos and Simon Blaxland, Chairman and CEO of Uro Property, respectively.

In the case of the issue by Unión de Créditos Inmobiliarios, the operation is expected close this week, for €342 million.

The fund, which issues bonds backed by 3,761 loans in total for the purchase of primary residences, is called FTA RMBS Prado I and matures in 2055. The total volume of this fund amounts to €450 million, but only the highest quality tranche is going to be sold, corresponding to the €342 million issue, which has an ‘Aa2’ rating according to Moody’s, the second highest possible.

To carry out this issue, both Santander and BNP Paribas have conducted several presentations with investors around Europe. The definitive interest rate is expected to be set today.

Asset securitisations received a significant setback after the burst of the subprime crisis, given that it was structured financing that unleashed the crisis in the first place. In Spain, the market also shut down, because even though simpler and more transparent assets were traded here, they were the main source of financing of the credit boom until the burst of the real estate bubble. The outstanding balance of this type of asset exceeded €300,000 million in 2006, according to data from AIAF.

In recent years, the ECB has made significant efforts to revive this market and with this in mind, it started to buy securitisations in Europe in December.

Original story: Expansión (by J. Zuloaga and D. Badía)

Translation: Carmel Drake

Fitch Confirms The Credit Recovery In Spain

23 April 2015 – Expansión

Over the last month, Fitch Ratings has revised upwards its growth prospects for Spain in 2015 and 2016, to 2% and 2.3%, respectively. In this context of recovery, the agency notes that “new credit growth has been more robust during the first quarter of 2015” and it expects this trend to continue for the rest of the year. Although, the pace will depend on “the strength of the economic recovery and consumer confidence”. “The banks’ healthier balance sheets and initiatives being taken by the ECB to improve liquidity, including the TLTRO (long-term auctions) should support this increased lending”.

Fitch makes these reflections upon publication of its Fitch Spanish Fundamentals index, which analyses changes in the fundamentals of credit, taking into account the key indicators of the Spanish economy: the evolution of mortgages, SMEs and securitisations, the expected EBITDA (gross operating profit) and capital expenditure (capex) of companies, ratings outlook, CDS forecasts, new credit, unemployment prospects and trends in transport. The index ranges from 1 to 10 and Spain is awarded a six, which shows that “its recovery is holding up”.


In terms of unemployment, another one of the key variables that Fitch uses in its new index, the agency forecasts that the rate will amount to 22.5% and 21% in 2015 and 2016, respectively. “This positive trend in employment will support domestic demand. The increase in real disposable income, together with the fall in oil prices, should also drive economic growth”. Nevertheless, in the agency’s opinion, unemployment continues to be too high and, as a counterpoint, it warns that the non-financial corporate sector is continuing to deleverage.

The agency confirmed Spain’s BBB+ rating in October last year with a stable outlook.

Original story: Expansión (by D. Badía)

Translation: Carmel Drake