European ABS Indices Increase Transparency of Structured Credit Abroad
Several new asset-backed securities (ABS) indices are giving European bond investors greater insight into global structured finance vehicles. Barclays Capital is launching a new family of indices called the Pan European ABS Benchmark Bond Indices. It offers a total return benchmark for multi-currency European ABS portfolios. The indices measure both the fixed- and floating-rate euro and the sterling-denominated ABS markets. The expanded index family covers multiple ABS collateral types, including residential and commercial mortgage-backed securities (RMBS and CMBS) and securities backed by auto loans and credit cards, according to a statement. Another index will measure the repayment rate within European CMBS. Fitch Ratings launched the CMBS Maturity Repayment Index, which will measure the proportion of total matured commercial loan balance that has been successfully repaid. Fitch Ratings says it expects repayment of matured European CMBS measured by the new index to remain at current low levels until at least the end of the year, primarily because of high loan-to-value ratios among the loans. Although only 34 loans have reached their scheduled maturity dates, repayment trends are already becoming evident. "All of the 10 successful loan repayments to date were of loans originated in 2005 or earlier," said Gioia Dominedo, senior director in Fitch's European CMBS team, in a statement. "While this bodes well for 2010, as 51 of the 73 loans maturing in the remainder of the year are from early vintages, an early origination date does not in itself guarantee an orderly repayment. Factors affecting the availability of replacement debt financing -- in particular, leverage and loan size -- are crucial when determining likely maturity outcomes." Loan size plays a role in determining the likelihood of loans repaying in an "orderly manner," since larger loans are more difficult to refinance under tight credit conditions, although Fitch said this is less of a concern for 2010 European maturities. Leverage is a key concern, according to the CMBS team. Of the remaining 73 loans maturing in 2010, 49 bear LTVs in excess of 80%, indicating significant equity contributions would be needed for refinancing. Write to Diana Golobay.