SFIG Vegas 2019 conference review

The annual Structured Finance Industry Group (SFIG) conference in Las Vegas attracted over 7,900 registered delegates, a solid increase from the 2018 conference. A contingent of Australian RMBS, ABS issuers and bankers attended the three-day conference. 

A major topic of discussion was the phase-out of Libor at the end of 2021.  Speakers at the conference noted The Bank of Scotland’s Elland RMBS 2018 deal which used SONIA, the sterling overnight index average, as its benchmark rate. The leading contender to replace Libor on US ABS transactions is SOFR, the secured overnight financing rate. The ARRC securitisation working group is currently undertaking a consultation on fallback language to be incorporated into securitisation documentation. A key challenge noted in panel discussions was the need for consensus on the adjustment to margins to cope with the nature of SONIA and SOFR compared to Libor. 

The US CLO market is expected to facing headwinds from a potentially slowing US economy and corporate rating downgrades. The CLO market may also be negatively impacted by the new Japanese securitisation regulation which comes into effect on 1 April 2019.  Japanese investors have been strong buyers of US CLO transactions. Amongst other things, the Japanese regulations requires a minimum risk retention requirement of 5.0%.  In 2017 US CLO transactions were granted an exemption from the US Dodd-Frank minimum risk retention requirement of 5.0%.

Panel discussions noted interest by UK issuers to reengage with US investors but admitted a re-education program would be needed to increase investor knowledge of UK structures and collateral. Lloyds Head of Securitisation indicated plans to issue in euro, dollar and sterling in 2019. 

Panellists also discussed the transition from Libor as the benchmark for floating rate tranches with some indicating they proposed to issue fixed rate notes for 2-3 year tranches.

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