Japanese bank Sumitomo Mitsui Banking Corporation (SMBC) has completed the third securitisation based on its European public-private partnership (PPP) loan portfolio, the bank said in a statement.
SMBC: third PPP loan
Whereas in previous deals SMBC transferred risk through the sale of credit default swaps and credit-linked notes issued to several capital markets investors, for this securitisation the bank achieves protection via a guaranteed tranche within the synthetic instrument, to be funded by a single institutional investor.
Under this structure SMBC “has transferred a substantial amount of credit risk associated with the loan portfolio”, although it is still exposed to the first-loss piece and the bigger unhedged senior portion.
The bank’s first PPP securitisation – Stichting Profile I – was closed in 2005 comprising a portfolio of 32 UK PFI/PPP assets worth £373 million. The second – known as SMART PFI – was completed in 2007 with a £389 million portfolio of 34 UK PFI/PPP assets. SMBC has also done similar deals in recent years for other sectors, including energy project loans and corporate loans.