ABN AMRO prices new asset class with USD 1 billion SovRisc issue

ABN AMRO today priced the debut SovRisc issue, an innovative USD 1 billion three-year benchmark issue backed by Export Credit Agency (ECA) guaranteed loans.

Priced at 34 bps over three-year US Treasuries, SovRisc is a new type of high-grade investment that offers further choice for investors looking to diversify their high-grade portfolios.

Paul White, Global Head of Syndicate at ABN AMRO, said SovRisc attracted strong global demand, especially from investment funds.

"SovRisc was well-received by our global investor base, closing oversubscribed with a high-quality and predominantly cash order book. Funds led demand, taking 40 per cent of the book, along with banks (25%), government institutions (20%), insurance companies (10%) and corporates (5%). "

"Geographically, take-up from the USA (50%), UK (20%) and Scandinavia (20%) was tremendous. Asia/Middle East/Africa took eight per cent while other European countries accounted for the remaining two per cent," he said.

SovRisc uses securitisation techniques to provide importers and exporters with a more efficient source of funding.

Traditionally, banks would fund ECA loans on balance sheet. However, their own credit ratings are significantly below the AAA-rating of the loan assets. SovRisc eliminates this pricing inefficiency by dis-intermediating traditional bank funding and re-packaging the loans to access funding from capital markets investors.

Steve Curry, Head of European Consumer ABS at ABN AMRO, said the structural innovations introduced with SovRisc will prove attractive to a range of new issuers.

"SovRisc marks the creation of a new asset class in the securitisation market. We expect significantly more issues to feature this structure in future given the attractiveness for investors and issuers alike," he said.

SovRisc is rated AAA on the timely repayment of principal and interest by Moody's Investor Services and Fitch Ratings. The bonds will pay a semi-annual coupon of 4.625 per cent.