SCI CRT Awards: Arranger of the Year

Category: Capital Relief Trades ABS

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Winner: Santander

Santander has won SCI’s Arranger of the Year category after having showcased capabilities and achievements over the last 12 months that broke new ground in the capital relief trades market on several fronts. Indeed, the lender has closed transactions backed by new asset classes, with innovative features and while further developing the sector’s investor base.

Santander’s crowning achievement this year by far was Project Boquerón. The ESG trade references a €1.6bn portfolio and builds on previous market experience.

Consequently, although the structural features are not unique to this transaction, their combination in one single ticket is highly unusual. Specifically, Boquerón champions ESG lending through three unique features, both at inception and during reinvestment.

First, the portfolio is focused on ESG assets at issuance, including projects across 21 countries and more than 50% in renewable energy projects. Second, coupon incentives exist to replenish the portfolio with further ESG assets during the revolving period.

Finally, the trade includes coupon incentives for utilising the capital released to further grow Santander’s lending to new ESG assets globally outside the transaction, using a novel approach of linking growth to megawatts funded through green projects, as opposed to simply focusing on RWA metrics. Megawatts is an objective standard that investors desired, since it can be audited and reviewed.

Another important transaction executed by Santander during the awards period was Project Brera. Brera is an unfunded synthetic securitisation backed by a €425m pool of dealer floorplan assets granted by PSA to auto dealers in Italy, with the first loss and mezzanine tranches covered by three reinsurers (one of which was advised by Granular Investments). Two of the final reinsurers were new to the SRT market.

Steve Gandy, md and head of private debt mobilisation, notes and structuring at Santander Corporate and Investment Banking, says: ‘’In the case of Brera, the underlying assets were subject to the standardised approach and require much thicker tranches. Insurers can offer a lower cost of protection than funded investors, given their return requirements.’’

A challenge during structuring was the emergence of the global shortage in semi-conductors, limiting the supply of new vehicles. In response, Project Brera included the novel feature of a ‘ramp-up’ period during the 18-month replenishment period, whereby the protection could increase pro-rata as the underlying portfolio recovered from global supply chain shortages. An additional mechanism for a potential future upsize was also retained, to provide issuer flexibility.

Yet from a structuring perspective, Santander proved its worth during the awards period with a diverse offering that includes traditional and synthetic securitisations, full deduction deals funded and unfunded, as well as full-stack, global and single-country portfolios.

More saliently though, Santander distinguished itself by successful efforts in growing the CRT market’s investor base. In fact, the bank has managed to add over 70 unique investor allocations, of which half were in first loss or junior mezzanine positions. 

Gandy concludes: ‘’We invite a number of investors to bid via a competitive process, where we always invite a core group of investors and add new ones following a KYC due diligence analysis.’’  

Honourable mention: Citi

Citi has a long track record as an arranger in the significant risk transfer market and the bank has continued to innovate by further expanding existing jurisdictions. In the US, the bank arranged the first capital relief trade issued by US regional bank Texas Capital Bank. The US$275m deal references a US$2.2bn portfolio of residential mortgages.

Across the pond, along with the EIF, Citi structured and arranged the first synthetic securitisation by a German Landesbank.