The seal has been broken; first Eurozone deal for 2019

Why the lack of activity?

As of 1 January, the new harmonised securitisation rules have been applied (STS). Issuers visited the market before the year end to ensure they didn’t delay deals in early 2019 whilst they put in place the processes and necessary infrastructure to comply with STS regulations. This resulted in an unseasonal spike in December issuance.
Alongside this, the European market is still awaiting an outcome on Brexit. A no-deal scenario, a new government and a second referendum all hang in the balance. The economic uncertainty is creating significant volatility in the market and causing secondary ABS spreads to gap out, making primary issuance unattractive.

What now?

The unfavourable issuing market is likely to mean that Q1 remains sluggish. However, many issuers will still require funding through the public wholesale markets. So, once the details of the new regulations are clear and there’s an established pathway to compliance, we expect issuance to pick up. We understand that there’s a pipeline of new deals waiting to go – will this trade by Blackstone break the seal and other deals start to trickle through?

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