They've conquered Europe, raising billions of euros for mortgage lenders and banks, and now covered bonds are poised to take on the US. Last month Washington Mutual, often referred to as WaMu, became the first US financial institution to sell covered bonds. In doing so it raised €4 billion ($5.1 billion) and, observers believe, opened the door for a new group of issuers.
New financial instruments are often developed in the US and then exported, giving the law firms that helped structure the first deals a head start in winning follow-on work. The WaMu deal suggests, however, that covered bonds could provide a rare and interesting opportunity for UK firms with US law capabilities and top tier securitization practices to move into the mainstream US structured finance arena.
In the short term US issuers are expected to tap the existing European investor base with New York law-governed bonds. This...