SCI CRT Awards Issue Oct 19

Arranger of the Year
ARRANGER OF THE YEAR
WINNER: CREDIT SUISSE
Credit Suisse is SCI’s Arranger
of the Year in recognition of
the variety of structures it
has placed and the breadth of
its investor base. Since September
2018, the bank has arranged five
capital relief trades providing protection
on approximately €15bn of reference assets
with an aggregate tranche size of approximately
€850m.
The transactions included both equity and
mezzanine tranches, featuring flexible guarantee
facilities and dual-tranche structures with a range
of counterparties and investors. Equity tranches
were generally CDS/CLN structures, while mezzanine
tranches included CDS/CLN, financial
guarantee and unfunded insurance structures
placed either directly or via an SPV.
Credit Suisse arranged bilateral trades,
as well as placements of CLNs with multiple
investors. Investors spanned pension funds,
hedge funds, family offices and insurance and
reinsurance firms. Reference portfolios comprised
income-producing real estate loans,
senior unsecured loans and similar products
provided to corporate clients.
Hannes Wilhelm, md at Credit Suisse,
states that the bank’s investor universe is very
large and diversified, thanks to its preference
for executing broadly syndicated trades
through both the investment bank and the
private bank. For instance, 36 investors
participated in the Sfr2.6bn Elvetia 8 deal
from 4Q18 (resulting in efficient pricing of
Libor plus 7.75%) and 37 participated in the
Sfr5.6bn Elvetia 10 deal from 2Q19 (resulting
in efficient pricing of Libor plus 7.9%).
“We typically try to syndicate deals due to
cost efficiencies and the opportunity to attract
not only the traditional CRT buyers, but also
new investors – including, for example, family
offices, for which such transactions are an attractive
alternative investment,” Wilhelm says.
He continues: “We have also tried to make
the documentation understandable for nonlawyers,
which is another way of broadening
the investor base. New entrants need to be
able to fully understand a deal.”
However, syndication is not always possible
if the time is short – which was one of
the motivations behind two unfunded deals
from 4Q18 and 2Q19 on a Sfr1bn portfolio
“
WE TYPICALLY TRY TO SYNDICATE
DEALS DUE TO COST EFFICIENCIES
AND THE OPPORTUNITY TO ATTRACT
NOT ONLY THE TRADITIONAL CRT
BUYERS, BUT ALSO NEW INVESTORS
”
each, which were executed with an insurance
company as counterparty.
The transactions hedge the risk of a
portfolio of short-term (less than two-year)
mortgage loans. Credit Suisse retains the first
0.15% of losses in both deals, after which the
following 4.35% of losses are hedged.
The innovative feature of these two transactions
is that they operate similarly to a facility
and therefore the transaction sizes are not static,
but can vary depending on the situation. “This
type of facility has never been structured before.
Because it’s bilateral, the insurer can provide
the necessary flexibility to accommodate the
Facility approach
Variable size mortgage portfolio
Protection buyer
Reference portfolio
20% side-by-side retention
Source: Credit Suisse
Senior
4.5%-100%
(retained)
capital needs throughout the term of the deals –
which couldn’t be achieved via a note issuance,”
explains Wilhelm.
Another stand-out deal is the Sfr4.5bn
Elvetia 11 from 3Q19, which features a
dual-tranche structure and aims to expand
insurer involvement in the SRT market. The
Sfr202.5m equity tranche is a funded CLN
issuance bought by a single institutional
investor, while Sfr67.5m unfunded mezzanine
tranche protection is provided by a syndicate
of insurance companies.
The insurance policy terms are common
for all insurers and the bank has a direct claim
Financial guarantee
Re-insurance firm
Guarantee fee amounts
Mezzanine
0.15%-4.5% Mezzanine risk
Guarantee payment
0.15%-4.5%
Equity
amounts
0%-0.15%
(retained)
www.structuredcreditinvestor.com
SCI Capital Relief Trades Awards | October 2019
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