The program is a synthetic securitisation which involves a EUR 631 million public bond sale (cash section) and a credit default swap for EUR 2.62 billion (non cash section).
EuroLiberte plc has issued 5 classes of separate subordinated securities, each with an external rating and with its own return rate. The class A to D ratings, given by the Moody's and Fitch rating agencies, range from Aaa/AAA to Ba2/BB+; the last class (Class E) was subscribed by BNP Paribas.
EuroLiberte is innovative due to the type of underlying assets and its structure. The reference portfolio is primarily comprised of unrated borrowers, which was made possible with a review and validation by the rating agencies of BNP Paribas's internal rating system. This structure also allows, for the first time, for a pro rata amortization (3/5/7 years) of all classes issued so as to adapt to the underlying portfolio profile, at the best cost for BNP Paribas.
BNP Paribas is thus in a good position to make its mark in the securitisation market in the near future, a market focussing more on transferring credit risks than simply saving regulatory capital. This trend in the securitisation market is all the more crucial because the benefits afforded by current Investment Grade structures are expected to disappear with the new regulatory framework put forward by the Basle Committee.