Winner: Granville USD

Upsized from US$5bn to US$9bn, Scotiabank’s Granville USD represented the largest-ever debut Canadian SRT - in terms of both portfolio size and notes sold – when it closed in July 2023. In recognition of this, and for optimising Basel 4 output floor constraints via several innovative risk mitigation techniques, the transaction is SCI’s North American Transaction of the Year.

Granville USD, also known as Project Balboa, was driven by a focus on developing SRT as an active capital management tool amid the increased focus from the Office of the Superintendent of Financial Institutions (OSFI) on prudential constraints in Canada. Arranged by BNP Paribas, the deal provides credit protection on a 0%-8% junior tranche and hedges its risk via the issuance of four series of notes – with a face value of US$720m – credit linked to a financial guarantee. A total of 13 investors participated in the deal, with some taking 0%-8%, some taking 0%-6% and others taking 6%-8%.

The reference portfolio comprises a revolving pool of drawn and undrawn Canadian and US corporate loans, with a 36-month replenishment period, and the average rating of the exposures is equivalent to approximately triple-B. The majority (85%) of the pool was disclosed.

The transaction achieved approximately a 70% RWA reduction and was executed with an expedited timeline, having launched and settled within five months, against a challenging backdrop following the collapse of Silicon Valley Bank and Credit Suisse. Among the risk mitigation techniques utilised to optimise Basel output floor constraints was the assignment of triple-A to single-A public ratings by Morningstar DBRS to the retained senior securitisation positions, as well as the sale of a senior mezzanine tranche to lower the overall hedging costs.

Granville successfully enabled Scotiabank to establish itself in the SRT market and laid the foundation, both internally and externally, for a programme of future transactions.

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