LONDON, May 30 (Reuters) - The impact of the credit crisis on asset-backed securities will be clear as bankers, issuers and investors gather in Cannes on Sunday for the European market’s major annual conference, a byword for lavish entertainment.
To start with, fewer people are coming.
And the discussions — foreshadowed last year when Merrill Lynch structured finance analyst Alexander Batchvarov warned of “potentially dramatic changes” in the wake of the U.S. subprime mortgage crisis — will focus on how to reinvent the market.
The Global ABS 2008 conference moves to Cannes from Barcelona after outgrowing its old venue. But it will play host to 3,000 people, down from around 3,500 last year, said a spokeswoman for the Information Management Network, which is hosting the conference along with the European Securitisation Forum.
Sessions include titles such as “Transparency and Rebuilding Investor Confidence” and “Financial Stability Implications”. One panel will feature a discussion of “When will we reach the bottom, or are we already there?”
Asset-backed securities are created by banks from pools of assets with predictable cash flows such as mortgages and auto loans. Issuance ballooned in Europe in 2005, 2006 and the first half of 2007 to hundreds of billions of euros, making the market an important source of consumer finance.
But since then, many investors such as structured investment vehicles (SIVs), conduits and leveraged hedge funds that had taken the key triple-A slices of ABS deals have been forced out of the market in the crisis.
Much of the discussion at Cannes is likely to centre around the prospects for attracting new investors to take their place.
Secondary markets also have seen unprecedented volatility. Issuance of ABS in the international markets has plunged by about 56 percent this year to mid-May from a year ago, according to data from Xtrakter, the market data arm of the International Capital Markets Association.
The conference kicks off Sunday afternoon, when European Central Bank Executive Board Member Jose Manuel Gonzalez-Paramo is scheduled to deliver a keynote address.
The ECB is now providing a key prop for the market by taking more than 200 billion euros’ worth of top-rated ABS — unsellable in the current market — in a liquidity facility.
Banks currently design most big ABS deals in Europe either to place notes as collateral with the ECB or retain them, knowing they can be used to obtain liquidity when needed. But analysts warn the central bank will not provide support indefinitely.
In previous years, many of the people who descended on Barcelona did not bother to attend the conference itself but spent their time in ancillary private meetings and social events.
Bank-hosted parties will probably be lavish again with Michelin-starred chefs and penthouse suites, because they would have been planned months ago when the outlook was more positive, said one banker and frequent participant.
The most exclusive ticket has been for the Deutsche Bank party, with female performers such as the Sugababes providing entertainment for a guest list of a few hundred names.
“Everybody’s else’s party was crashable,” the banker said.
The true impact of the crisis will take longer to be visible, he suggested. “Next year, it will be more interesting to see what happens to the parties.”
Reporting by Jane Baird; editing by Sue Thomas