Reuters IFR: ASF 2012 - ASF sees Europe looking to secured funding

LAS VEGAS, Jan 23 (IFR) - 

    Many European institutions are looking to secured funding -- both securitization and covered bonds -- to fund themselves, according to Robert Plehn, managing director and head of ABS Solutions at Lloyds Bank Corporate Markets, speaking Monday about the impact of the European debt crisis at the annual American Securitization Forum (ASF) conference in Las Vegas. 

   With nearly 5,000 market participants in attendance this year, the conference is seeing conversation focused on the sovereign debt crisis. 

   "Secured funding is replacing unsecured funding as a way for institutions to fund themselves," Plehn said, while cautioning: "You can't make generalizations about asset classes anymore. You have to look through to the assets." 

   Vishwanath Tirupattur, managing director at Morgan Stanley, said that from a secondary market perspective, the reason for the sale of secured finance assets by banks in Europe is risk-weighting, not asset quality. 

   Therefore, he said, the European assets being sold by banks are the "ultimate value play" for investors willing and able to tolerate some shorter-term volatility. 

   At the conference's opening general session, attendees were cautiously optimistic about a slowly improving US economy over the next 12 months. However, the general consensus was for global ABS issuance to remain flat in 2012. 

   One panelist, Reginald Imamura, executive vice president at PNC, was encouraged by the liquidity beginning to flow back into the mainstream economy.  

   He said he has seen "pockets of improvement", including auto spreads returning to pre-crisis levels and CLOs beginning to re-develop. But he also noted that the struggles of private-label non-agency RMBS will linger throughout the year. 

   Doug Murray, managing director at Fitch Ratings and moderator of the panel, said Europe is the "ultimate wild card" in how the year plays out. 

   The recovery in the U.S. is much more solid than in Europe, added Ganesh Rajendra, head of international asset and mortgage-backed strategy at RBS Securities in London. 

   The European region is likely to contract for two straight quarters, leading it back into a recession, he said. However, the United Kingdom would remain recession-free and only contract one quarter, with moderate growth later in the year. 

   The continental European recession will be caused by the trouble spots of Greece, Portugal, Ireland, and "the big elephant in the room, Italy", he said. 

   Rajendra believes Greece will technically avoid a default but said that even if it did occur, it has already been priced in by most in the market. 

   High-quality vanilla European ABS transactions should not be affected by the turmoil, he said. 

   When asked what the major discussions of ASF 2013 will be, panelist answers varied. Ronald Mass, a portfolio manager at Western Asset Management, wants to see investor rental housing loan transactions. He sees a real market developing as homeowners sell off property and begin to rent.  

Amy Resnick, Charles Williams, Adam Tempkin