Depfa Bank’s private finance initiative collateralised loan obligation structure
Merrill Lynch was mandated lead arranger
In a landmark securitisation deal, Depfa Bank successfully completed the securitisation of part of its UK public infrastructure loan portfolio through a synthetic collateralised loan obligation (CLO) structure. Ninety nine per cent of the risk on a portfolio of 24 UK public finance initiative (PFI) loans amounting to £391.7m was transferred to AMBAC, the leading US monoline insurance company, and a small group of bank and institutional investors.
The benefits to Depfa are numerous, including: freeing up regulatory capital to support loans; a reduction in risk-weighted assets by €500m; a significant improvement in return on equity of its infrastructure financing unit; plus, the know-how gained from such a complex transaction opens the way for similar transactions in the future.
The deal was a rare example of project finance assets being securitised.
