Bank points to virtues of securitising
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Your support makes all the difference.A NEW bank trade association, established to find ways of averting another property crisis, has been asked by the Bank of England to study the prospects for property securitisation.
In a speech to the Association of Property Bankers, Pen Kent, a senior Bank of England executive, also appeared to endorse the emerging market in the debt of troubled companies, saying this could provide a way for banks to transfer their exposures to other investors better able to deal with difficult situations.
Against the background of a likely shortage of bank finance for property, he said alternative financing could include debt-for-equity swaps, debentures, bonds and securitisations, in which property companies sell bonds backed by the security of buildings.
Mr Kent said securitisation freed property companies to raise new capital, refinance debt and strengthen their own balance sheets. There have already been examples, including dollars 180m raised by Rosehaugh Stanhope Developments in the US commercial paper market to refinance its Broadgate development in the City.
This used sophisticated 'credit enhancement' techniques to make the securities more marketable, Mr Kent said. He also expected a new wave of specially tailored commercial property investments for retail investors.
He appeared to suggest that the Bank of England might smooth the way for greater use of property securitisation by making sure market regulations were conducive to its use.
Mr Kent said it was important to have much better information flows on which to base lending decisions. He asked for suggestions on how statistics on property lending could be improved and how the banks could help.
He also urged the banks to take a greater interest in planning and development at a local level so they would understand better the projects to which they were lending.
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