Winner: BNP Paribas

BNP Paribas (BNPP) declares it is that rarest of beasts in the jungle of significant risk transfer: a flow monster. “We like taking an illiquid product and making it mainstream,” says Bilal Husain, head of EMEA securitised products and real assets syndicate, in London.

For not only its prominence in this market, but also for its influence in shaping the development of the sector and bringing it to the attention of an increasing number of clients and investors, BNP Paribas is SCI’s choice of Arranger of the Year for the 2023 Capital Relief Trades Awards.

The bank’s role as arranger grew out of its role as an issuer. In March 2022, the securitised products group (SPG) was put in charge of coordinating and executing risk weight asset optimisation solutions for the entire BNPP group. This gave it not just a window into every business at BNP Paribas, but also the knowledge of what internal clients needed to do with regards to hedging.

BNPP’s SPG is a client-facing business, so, possessed with all this new knowledge and data, it seemed criminal not to deploy the expertise it had gained about the regulatory capital market for the benefit of external clients. Without exaggeration, it is fair to say that its business as an arranger has grown from strength to strength and it has marched lock in step with BNPP’s prominence as an issuer. The two functions draw vitality from each other.

“We have a complete took-kit that was very relevant for other issuers and have a global investor placement strategy that we felt would be very powerful. We didn’t want to waste this institutional knowledge,” says Husain.

Over the preceding 12 months, the bank has arranged three cash and nine synthetic deals for third-party clients and various BNPP entities, for a total portfolio size of €27.6bn and a corresponding €9bn placed in the debt markets.

There were some firsts among this number. In 4Q22, it brought LBBW to the private investor market for the first time and also at a time of uncertainty for German banks as energy prices were climbing seemingly inexorably. In the face of these difficulties, BNPP was able to bring to the table a group of investor relationships that it knew well and trusted to deliver a debut trade for its client.

But it was with Canadian issuers that BNPP has really made its presence felt. Hitherto, Bank of Montreal had been the only Canadian lender with a developed reg cap trade programme. But in 2023, Canadian Imperial Bank of Commerce (CIBC), Scotiabank and Toronto Dominion Bank (TD) all unveiled debut deals as capital pressures soared, mainly thanks to initiatives undertaken by the domestic regulator.

Two of these – for CIBC and Scotia – were arranged by BNPP. Not only were they firsts for the borrower, both transactions possessed features which reflected credit upon the arranger. The inaugural transaction for CIBC, dubbed ‘Waterloo’, securitised a mixed portfolio of investment and sub-investment grade large corporate loans. Binding bids on the transaction were due on Friday 10 March, with final execution and signing to take place over the following weeks.

However, in the interim, Silicon Valley Bank collapsed, in the third largest bank failure in US history and the biggest since the financial crisis of 2008/2009. Over that weekend, BNPP had to field numerous calls from investors worried that the deal was not going to go ahead. In fact, not only did it go ahead as planned, but it was also upsized from an initial US$3bn to US$4.5bn and pricing tightened by 25bp.

“Size increased and pricing tightened due to the strength of the transaction and sponsor, but also because of the long-standing institutional investor relationships BNPP had. As an investor, you weren’t just dealing with BNPP on an isolated SRT deal, but BNPP across the entire structured finance platform. This is the strength of our franchise,” says Husain.

The Scotiabank deal possessed some eye-catching features as well. It was a debut deal, yet securitised a pool of investment grade loans of no less than US$9bn, making it one of the largest-ever inaugural transactions and the biggest SRT deal in 2023 to date. This too was upsized from an original US$5bn.

Over a dozen investors participated in the deal, with around half the transaction anchored among a core group of institutional investors, while the remainder was broadly syndicated. The CIBC trade was broadly syndicated, with 10 different buyers as well.

This practice underlines one of the basic tenets of BNPP’s philosophy in the SRT market. While the bilateral market is more straightforward and easier to negotiate, the syndicated space can - under propitious circumstances - offer superior execution.

Syndicated deals do not always offer the easiest path, but BNPP believed it is its job to demonstrate to the client, in a transparent manner, that best execution is being attained. This is especially true as such strategic trades must get signed off at board level.

BNPP also beat competition from both sides of the Atlantic to get the seat at the helm for both the CIBC and the Scotia transactions.

Like many onlookers, Husain expects that the tier one US bank market will produce many more deals in the second half of 2023 and beyond, than has been the case for the last few years. The SRT market is becoming de rigeur. And few banks have played a more important role in that development than BNPP.

Honourable mention: Deutsche Bank 
In recognition of the firm’s thorough and measured approach to investor outreach and supporting debut issuers throughout the execution process.

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.