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Industry prospers but key players call for a number of changes in Finance Act 2006 Back  
Ireland’s securitisation industry continues to go from strength to strength, with the latest statistics revealing that Irish investors bought seven per cent of all European structured products on the market, in the year to October, delegates at the 4th Annual Finance Dublin International Securitisation Conference were told. Also on the agenda at the two-day event was the industry’s regulatory ‘wish list’, in which a number of favoured changes were outlined for the upcoming Finance Act, as well new opportunities for the industry, which included leveraging on Dublin’s capabilities as a hedge fund servicing centre. Fiona Reddan reports from the 4th Annual Finance Dublin International Securitisation Conference.
The 4th Annual Finance Dublin International Securitisation Conference, held on November 28th and 29th, attracted the most ever delegates, with almost 300 people attending over the two days at the Burlington Hotel.
Delegates attended from all over Europe to hear world-class speakers such as Rob Forde of Barclays Capital, William Davies, a leading authority on CDSs on ABS of Merrill Lynch, Anton Simon, head of European High Yield at Putnam Investments, Philip Wooldridge, senior economist, Financial Markets, Monetary and Economic Department, Bank for International Settlements; Louis Hagen, executive director and member of the board, Verband deutscher Pfandbriefbanken e.V. (Association of German Pfandbrief Banks) and chairman, European Covered Bond Council (ECBC), and Liam O’Reilly, chief executive, Financial Regulator.
Topics covered at the two-day event included finding value in today’s asset backed securities (ABS) market, how the Irish securitisation industry can further develop, and an update on the European covered bond market.

Future strategy
In November, the Irish Securitisation Forum (ISF) was formed, with a remit of protecting and expanding the Irish securitisation industry. At a special panel session held on the afternoon of the 29th, entitled ‘What the Irish securitisation industry needs for its future development’, the chair of the new forum, Deirdre Somers, who is also director of listing at the Irish Stock Exchange, led a discussion on the potential for the industry.
Neil Ryan, managing director of Naspa Bank, and head of the Investors Working Group of the ISF, told the audience that with Dublin now ranking as the second or third largest ABS investor centre in Europe, there is a ‘fantastic opportunity to be harnassed’.

However, he warned that ‘the old IFSC model is becoming jaded’, and he urged the Financial Regulator’s chief executive Liam O’Reilly, who also participated in the panel, to provide a common definition of the regulator’s principles based approach.

When asked what the IDA are doing regarding implementation of the Deloitte report by chairperson Somers, Deirdre Lyons, head of international financial services at the IDA, told the audience that they are currently working on a new marketing strategy, which will be finalised early next year, and distributed to IDA staff across the world.

She said that the IDA would like to attract more securitisation issuers to Ireland, leading to a cluster developing. At the moment, she says that Government marketing agency is receiving a flow of inquiries across all sectors, from the US and Europe, about establishing in Ireland.

Another opportunity identified was in the area of the cross-over between hedge funds and ABS. Darina Barrett, a partner with KPMG, and head of the Service Providers Working Group of the ISF, said that it offered an ideal opportunity for Ireland to leverage on the expertise and reputation it has developed in the servicing of hedge funds. She said that Ireland needs to get first mover advantage for the innovative products now coming on the market, and pointed to the example of recent funds such as the Alcentra European Credit Fund.

Dublin now ranks as one of the top ABS roadshow destinations in Europe, with a recent survey indicating that Irish investors hold over €100 billion in hedge fund assets.

According to Paul Hawkins, who is vice president, EMEA Asset Based Finance, Securitisation & Principal Transactions, at Merrill Lynch, in the year to October, seven per cent of all European structured products, were bought by Irish based investors.

This compares with 31 per cent in the UK, 8 per cent in France, and 2 per cent in Italy.

A number of these investors - Patrick Coleman, head of treasury and bonds, Commerzbank Europe (Ireland) Ltd; Andrew Curtin, head of credit investments, Anglo Irish Bank; Dermot Hardy, head of treasury, Aareal Bank AG, Dublin Branch and Caroline Wharton, portfolio manager, Naspa Dublin - participated in a panel discussion, which was chaired by Fergal McGrath, director, Credit Spread Portfolio, at Dexia Investments Ireland, the largest ABS investor in Ireland.

When asked about where they are finding value in the market at present, said that they wouldn’t buy UK residential mortgage backed securities (RMBS) at present, and are favouring commercial mortgage backed securities (CMBS), which they say, will continue to grow in importance as an asset class.

Alan Kerr, a director with Harbourmaster Capital Management, the Dublin based collateral manager, told the audience that Harbourmaster has so far transacted six collateralised loan obligations (CLO) deals, worth €3.3 billion, making it the largest CLO manager in Europe.

He said that there are currently 24 CLO managers in the European market, which is worth some €27 billion. Irish CLO managers feature very strongly, including AIB in seventh place, Avoca Capital in eighth, and Bank of Ireland in 21st position.

Although issuance in Ireland is still very low, with only one deal of note being transacted in the Irish market by a mortgage bank this year – First Active’s ?1.75 billion RMBS transaction – Ireland as a location for the administration/domiciliation of Special Purpose Vehicles (SPVs) continues to go from strength to strength.
Giving an overview of the Irish structured market, Turlough Galvin, a partner with Matheson Ormbsy Prentice, said cracks are beginning to appear in the Irish model, and while previously a lot of ABS deals had migrated from the Netherlands and Luxembourg to Ireland, the flow is now starting to go in the opposite direction. As such, Galvin called on the Government to be more supportive of the industry.

He also gave his ‘wish list’, of things he would like to see happening within the industry in Ireland. Firstly, he would like Ireland’s quoted Eurobond definition, which allows interest payments made by an Irish company to be exempt from paying withholding tax at the rate of 20 per cent, providing it meets the terms set out in the definition, to be extended to include registered as well as bearer notes, as this would facilitate US investors.
Secondly, he called for clarification regarding the VAT position of SPVs, as well as for tax deductability of Tier 1 capital.

Finally, he said that the Government should look to extend Ireland’s double taxation treaty network, particularly in North Africa and South America.

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