Contents

ABS

European SF to maintain 2024 levels

S&P forecasts €135bn issuance in 2025 with md Doug Paterson highlighting non-bank growth and innovation

S&P Global Ratings forecasts a promising yet complex year ahead for European structured finance markets. With issuance projected to reach €135bn, matching the record set in 2024, the outlook reflects a mix of economic resilience and emerging sectoral challenges.

According to S&P, the ABS sector, which achieved €43.5bn in issuance in 2024, is poised for continued activity in 2025. Much of this growth has been driven by consumer ABS, where originators increasingly sought greater risk transfer by selling full capital structures to investors.

Doug Paterson, md at S&P, says: “Non-banks are fundamental. They will continue to be very significant in terms of driving European securitisation issuance. There's a broadening base of originators and sponsors and a very positive outlook for non-bank originations in most areas of underlying lending.”

Rising real incomes and declining interest rates have fuelled consumer confidence, potentially boosting issuance volumes further. However, S&P cautions that these tailwinds may begin to lose momentum, potentially moderating issuance levels.

Innovation continues to reshape the ABS market. The first European solar ABS issued in 2024 has paved the way for similar green securitisations. According to Paterson. “Solar ABS transactions will become more common, along with securitisations backed by related asset types, such as heat pump and battery storage financing,” he says. “These developments align with EU policy goals to double the annual deployment rate of heat pumps to six million units by 2030.”

However, challenges persist in specific subsectors. Auto ABS, for example, faces headwinds from sluggish car sales and disruptions in the UK auto finance market following regulatory changes.

In the RMBS market, issuance surged to €44bn in 2024, with the UK leading the charge due to significant refinancing activity. Paterson highlights: “Bank-originated issuance will likely continue to pick up, as more UK lenders repay their borrowings from the Bank of England’s term funding scheme and engage further with wholesale funding markets.” As the central bank’s funding support phases out at the end of 2025, lenders will increasingly turn to RMBS as a source of wholesale funding.

The resilience of borrowers has been a defining feature of the RMBS market. Fixed-rate products, particularly in countries like the Netherlands, have shielded borrowers from sharp increases in monthly payments. S&P’s analysis revealed that “the average existing borrower has suffered a rate shock of only 0.3% points.”

In contrast, the UK’s non-conforming and BTL segments are grappling with higher arrears due to the prevalence of floating-rate loans, a trend likely to persist in 2025. Despite these challenges, structural factors such as robust wage growth and recovering mortgage markets support a positive outlook for RMBS issuance.

Bottomed-out
Meanwhile, the CMBS market remains on the road to recovery after subdued issuance of less than €2bn in 2024. However, Paterson observes signs of momentum, with gradually falling interest rates and stabilising commercial property values setting the stage for modest growth in 2025.

“Commercial real estate prices have likely bottomed out,” he says, adding that this stabilisation could ease refinancing pressures on loans maturing in the coming year. Nevertheless, refinancing risks remain a concern, particularly for loans with higher LTV ratios. S&P points out that “while defaults may rise, widespread losses are unlikely,” as many loans are backed by assets with manageable leverage.

Regulatory developments in 2025 could significantly influence structured finance markets. Paterson emphasises the importance of ongoing changes, such as the European Commission’s consultation on reviving the sector.

“These reforms aim to boost growth, enhance competitiveness and encourage greater activity, particularly in ABS and RMBS,” he explains. “The Basel 3.1 implementation from January 2025 could affect banks' use of securitisation for both capital relief and funding. Higher capital charges could result in more SRT transactions, but these will likely become more challenging and costly than under the current rules.”

Additionally, the UK’s Solvency UK matching adjustment could broaden the investor base by including securitisations with highly predictable cash flows, potentially increasing demand from insurance investors.

Emerging trends, such as the adoption of digital assets and blockchain technologies, could also impact securitisation processes. While still in its infancy, Paterson acknowledges the potential benefits, such as improved collateral mobility and increased transparency. However, he cautions: “There are outstanding challenges, including a lack of secondary market depth and interoperability issues, which will take time to resolve.”

Age of alternatives
Non-bank financial institutions and private credit are expected to play increasingly pivotal roles in the securitisation landscape. “Private equity firms are becoming more involved, often acting as arrangers or providing warehouse funding for originators,” Paterson notes. Additionally, new asset classes, such as solar and other sustainable securitisations, are likely to emerge as non-bank entities drive innovation.

On ESG factors, Paterson observes that investor interest remains steady but has not accelerated as rapidly as some expected. “It’s remained a significant factor, but economic stresses have shifted some focus back to credit considerations,” he remarks.

Finally, geographic trends point to increasing activity in central and eastern Europe (CEE) and non-core markets. “We’ve seen a fair number of inquiries from eastern Europe and even regions like Saudi Arabia,” Paterson reveals, noting the potential for interesting transactions in 2025.

Overall, S&P’s outlook paints a picture of resilience and innovation in European structured finance. With ABS and RMBS likely to maintain their growth trajectories and CMBS poised for a gradual recovery, the market is set to navigate 2025 with cautious optimism. As Paterson aptly summarises: “Conditions are rather mixed but mostly improving,” capturing the evolving dynamics of this critical financial sector.

Selvaggia Cataldi

Asset-Backed Finance

Volume and velocity

Bullish outlook for forward-flow in 2025

Forward-flow transactions are set to gain further momentum this year, with activity expected to surge in the mortgage and consumer lending sectors, in particular. These agreements have become valuable tools for banks and investors looking to accelerate capital velocity, optimise net interest margin (NIM) and support strategic balance sheet management.

“My outlook for forward-flow is generally very positive,” says Robert Bradbury, head of structured credit execution at Alvarez & Marsal. “You’re likely to see far more of it in the next few years because there is a matching need on both sides – banks need NIM and capital velocity, while investors need assets.”

Forward-flow agreements allow financial institutions to sell specific assets - such as loans or receivables - to investors over a set period. These transactions allow banks to recycle assets off their balance sheets while ensuring a steady inflow of funding for investors.

Notably, early-stage originators are increasingly turning to forward-flow structures, drawn by the high advance rates – often 100% or more – offered by forward-flow purchasers. Indeed, originators see these arrangements as an opportunity to achieve rapid scale without the added commitment typically required in warehouse and other specialty finance structures.

Unlike SRT transactions – which are designed to achieve regulatory capital relief through the generally synthetic transfer of credit risk while retaining the underlying assets – forward-flow deals aim to achieve broader objectives. “With SRTs, the structure is heavily regulatory-driven,” explains Bradbury. “With forward flow, the goal is broader and there are generally fewer external limitations - it's about creating value through asset recycling and strategic partnerships. The key is identifying the success metric for the transaction and focusing on that.”

In 2024, landmark deals like Ares and Investec’s first European cash securitisation of capital call facilities set a new benchmark for forward-flow transactions (SCI 12 November). This groundbreaking deal – in which Alvarez & Marsal and Linklaters both acted as advisors to Investec – overcame several challenges, particularly in achieving transparency across stakeholders, including rating agencies, funds, banks and regulators.

“Capital call facilities involve multiple layers - GPs, funds, LPs - each with distinct risk perspectives that require deep collaboration to address,” explains Bradbury. “One of the most challenging parts in the Ares-Investec transaction was achieving sufficient transparency for all stakeholders to be comfortable with their respective processes and requirements.”

Ultimately, the key to the transaction hinged on identifying the right success metric and focusing on it at every stage, while also ensuring that the data and information collected met minimum standards that satisfied every party.

"Every transaction is designed to fix a particular problem. The most successful transactions know exactly which problem they’re trying to solve - this is something we always focus on in the earliest stages of any transaction,” says Bradbury.

Looking ahead, he anticipates that forward-flow transactions will gain traction across various asset classes, with robust activity in the mortgage and consumer lending sectors in particular.

“Mortgages will likely see some of the highest forward-flow activity, covering everything from bridge loans to buy-to-let and second-charge mortgages,” says Bradbury. “On the consumer lending side, there’s also a growing demand from non-banks to partner with institutions on these types of flows.”

Forward-flow transactions stand out for their flexibility and adaptability, but successfully aligning stakeholder interests and structuring deals effectively requires significant upfront effort. “These transactions can solve even apparently intractable problems, given enough buy-in from all parties, but they require very significant commitment and collaboration,” concludes Bradbury. “That’s what makes them both powerful and challenging.”

Marta Canini

Capital Relief Trades

Green synthetic

SRT market update

The EIB Group and Findomestic - an Italian consumer credit institution under the control of BNP Paribas – have completed a synthetic securitisation referencing a €855m portfolio of retail performing loans originated by Findomestic.

Structurally, the EIF is issuing a guarantee on the mezzanine tranche to the tune of around €94m with a counter-guarantee from the EIB. Such mechanism allows Findomestic to free-up regulatory capital and enable it to disburse new loans according to environmental sustainability criteria defined with the EIB, for up to €250m.

This EIB guarantee is wholly dedicated to green projects for families and households, which will benefit from lower interest rates on Findomestic loans for the purchase and installation of energy-efficient equipment and the production of solar energy for domestic use across Italy. This is the EIB Group’s first entirely green support project dedicated to families and households in Italy.

Additionally, the transaction further consolidates the relationship between the EIB Group and the BNP Paribas Group in Italy, with both counterparties having signed operations totalling almost €400m in Italy in the past five years.

Vincent Nadeau

Capital Relief Trades

Agencies exit

Ground laid for GSEs to leave conservatorship

There is increasing evidence that the incoming Trump administration will seek to exit Fannie Mae and Freddie Mac from public hands and return the agencies to the private sector.

Sandra Thompson, director of the Federal Housing Finance Agency (FHFA) and a Biden appointee, will resign from her role on January 19^th – the day before inauguration of President-elect Donald Trump – according to the agency.

Thompson was appointed as acting director of the FHFA when Biden took office in early 2021 replaced Trump appointee Mark Calabria. She was confirmed by the Senate as permanent director in May 2022.

In addition to the news of Thompson’s departure, Treasury Secretary Janet Yellen and the FHFA last week announced an agreement to change the Preferred Stock Purchase Agreements with (PSPAs) with the GSEs. This is also seen as a step by which the ground is prepared for the GSEs to exit conservatorship.

The return of the GSEs to the private sector has been a long-cherished hope for Republican opinion. “It appears that they’re trying to create an orderly path for the GSEs to exit conservatorship,” says a well-placed market source.

Simon Boughey

CLO Managers

Janus Henderson bets on Europe

Global asset manager launches first active fixed income CLO ETF in the region

Global asset management firm Janus Henderson Investors has launched its first active fixed income CLO ETF in Europe.

The vehicle, named Janus Henderson Tabula EUR AAA CLO UCITS ETF (JCL0), follows the recent introduction of the Janus Henderson Tabula Japan High Conviction Equity UCITS ETF (JCPN) in October 2024 and the Janus Henderson Tabula Pan European High Conviction Equity UCITS ETF (JCEU) in November 2024.

Colin Fleury, head of secured credit at Janus Henderson Investors, will manage JCL0 alongside portfolio managers Denis Struc and Ian Bettney. 

The fund will focus on investments in European triple-A-rated CLOs, with up to 30% allocated to non-European triple-A CLOs that comply with European securitisation regulations.

Janus Henderson manages assets totalling over US$36 billion, with CLOs making up the largest portion of the firm’s securitised assets.

The company has a strong track record in the CLO ETF space, having launched JAAA—one of the first CLO ETFs—in October 2020. Building on the success of JAAA, Janus Henderson introduced JBBB in January 2022 and the Janus Henderson Securitized Income ETF (JSI) last November (SCI 21 August 2023).

The firm said in a statement that the UCITS ETF structure of JCL0 provides transparent pricing, high liquidity, and increased multi-region accessibility, which it says democratises access to the CLO market.

The vehicle will initially list on Xetra with the ticker JCL0, followed by listings on the London Stock Exchange and Borsa Italiana.

Camilla Vitanza

Structured Finance

Job swaps weekly: Aperture expands into structured credit

People moves and key promotions in securitisation

This week’s roundup of securitisation job swaps sees Aperture Investors hiring a senior executive to lead its newly launched structured credit division. Elsewhere, JPMorgan is fleshing out its global CLO primary team with a number of senior promotions and new hires, while two industry veterans have co-founded capital markets service provider Altius Advisors.

Aperture Investors has hired Vladimir Lemin to lead its newly launched structured credit strategy. Based in New York and bringing nearly two decades of experience in structured credit, he will serve as the global head of structured credit at the alternatives-focused asset management firm.

Prior to joining Aperture, Lemin was md at One William Street Capital Management, where he managed a portfolio of residential mortgage-backed securities and asset-backed securities. He has also worked at Magnetar Capital, overseeing RMBS and CMBS portfolios, as well as leading a team of traders and financial engineers.

Aperture’s newly launched structured credit strategy will focus on the US housing market, commercial real estate and consumer borrower markets, in addition to esoteric areas such as data centers, fiber optics and electric vehicles.

Meanwhile, JPMorgan has made a number of promotions and hires in its CLO primary business, according to an internal memo sent by Jake Pollack, global head of credit financing, CLOs and direct lending (SCI 8 January). The moves come as it looks to “continue the momentum” following a strong start to the year, with its busiest Q1 to date in terms of number of pipeline mandates. A JPMorgan spokesperson confirmed the contents of the memo.

After leading the EMEA CLO business for the past six years, Steve Baker will relocate to New York and be responsible for global CLO primary. The CLO primary leadership team – which reports to Baker – will consist of George Blair, who will become head of US CLO structuring; Jane Park, who will become head of US CLO syndicate; Anusha Singh, who will become head of EMEA CLO primary; and Lacey Vigmostad, who will become head of US CLO origination.

Sarah Gannon and Simon Hill have co-founded capital markets service provider Altius Advisors. Before founding her own consulting business in July 2021, Gannon had stints at Orrick, Demica, TMF, Kaupthing Bank, HSBC, MUFG and WestLB during her career, some of which involved securitisation-related roles.

Hill was previously a senior partner in Allen & Overy’s London corporate trust and agency group, having joined the firm in 1993. He has extensive experience advising trustees and other capital markets service providers on the full spectrum of capital markets transactions, including ABS issuances.

Apollo has appointed Philip Aldis as partner and co-head of Europe asset-backed finance, bolstering its efforts to originate ABF opportunities in the region. Aldis brings extensive experience from his 13-year tenure at Goldman Sachs, where he served as partner and head of international mortgages and FICC structured investing.

Blackstone Credit & Insurance has recruited two new mds for its infrastructure and asset-based credit team. Andie Goh joins the firm from Ares, where she most recently served as an md in the Ares Alternative Credit Group. She led the sourcing and execution of asset-based transactions across private and public markets, investing capital for both insurance portfolios and credit opportunistic funds.

Jack Ervasti joins Blackstone Credit & Insurance from KKR, where he most recently served as co-head of the consumer and ABS vertical within KKR Credit’s asset-based finance team. Prior to joining KKR, Ervasti was on the investment team at Global Atlantic Financial Group.

Mayer Brown has hired White & Case’s Chris McGarry as a partner in its global structured finance and private capital groups, based in London. He leaves his role as partner at Mayer Brown, where he led the European CLO and English law securitisation practices, after eight years with the firm, having previously worked at Ropes & Gray, Weil Gotshal & Manges and RBS. 

McGarry’s practice focuses on securitisations including leveraged loan CLOs, infrastructure CLOs, commodities securitisations, residential and commercial mortgage-backed securities, consumer credit securitisations, whole-businesses securitisations and esoteric asset classes.

Eileen Spiro has joined AB Private Credit Investors as md - structured products, based in New York. She is responsible for structuring and executing structured credit transactions, including recurring revenue loan ABS and other long-term portfolio finance solutions. Spiro was previously svp, associate portfolio manager at Shenkman Capital Management, which she joined from JPMorgan in August 2012.

Simmons & Simmons has named Karen Lam partner and head of Hong Kong securitisation and derivatives, within its financial markets group. She has over 20 years’ experience advising on a broad range of financial markets transactions across Asia, including asset-based finance, structured products, derivatives and financial market infrastructures. Previously, she was a partner at Linklaters, which she joined in 2019.

James Baxter has joined Tramontana Asset Management as general counsel. A structured finance lawyer with a focus on private credit, Baxter was previously head of structuring at Tradeteq, which he joined in February 2021. Before that, he was counsel at Latham & Watkins, having first been an associate at Clifford Chance.

The ECB has recruited Pablo Sinausía Rodríguez as its securitisation team lead, based in Frankfurt. He was previously a senior economist within Banco de España’s regulation department, which he joined in December 2023 from the EBA, where he was a policy expert.

Erion Peci has joined Klarna as senior structurer, offloading, based in London. He was previously capital risk solutions lead, complex transactions, at NatWest, having joined RBS in September 2013.

Point72 Asset Management has named Todd Hirsch as head of private capital, tasked with building and leading the firm’s private credit strategy. A former senior md at Blackstone, Hirsch will oversee Point72’s private credit and asset-backed investment portfolio, with a focus on sectors such as technology, healthcare IT, financial services, and payments. Previously, Hirsch was co-president of Blackstone Private Equity Strategies (BXPE) and a senior md in the firm’s tactical opportunities group since 2012.

Alexandre Cary has joined private credit firm Golub Capital as svp, based in London, leaving his role as investment manager at Glennmont Partners after six years with the firm. At Glennmont he focused on investments in private debt infrastructure, primarily tied to energy transition assets. Cary previously spent a number of years working in structured-finance-focused roles including at S&P Global Ratings and Crédit Agricole CIB.

And finally, The Association for Financial Markets in Europe (AFME) has appointed April Day as head of capital markets. During her 12 years at AFME, Day previously served as AFME's head of equities, overseeing equity capital markets, trading, and post-trade activities. Her career includes senior roles at Dresdner Kleinwort and Panmure Gordon as director of equity sales. Day succeeds Rick Watson, who announced his retirement in July, after 18 years at AFME.

Marina Torres, Camilla Vitanza, Ramla Soni, Corinne Smith, Marta Canini, Kenny Wastell