A Dutch residential mortgage-backed securitisation
(RMBS) has used an interest rate cap instead of the usual swap
agreement to hedge interest rate risk.
Tough collateral requirements and counterparty downgrades have made swaps an
increasingly expensive and illiquid way for RMBS issuers to
offset the differential between underlying fixed-rate mortgages
and floating-rate notes.
Last Tuesday’s Arena NHG 2014-1 deal from
Delta Lloyd could provide a long-awaited solution to these
interest rate issues, while also satisfying
regulators’ desire for securitisations that are not filled with
"In essence, it is a more transparent structure as
it gives investors more exposure to Dutch mortgages instead of,
as is normally the case, a combination of Dutch mortgages and
swap counterparty," said Marc van Lent, a director at ABN Amro
which acted as arranger and cap counterparty.
While Europe has seen securitisations with a swap and
partial interest subordination, this is the first time...