Dexia, the world leader in public finance has successfully completed a partially funded balance-sheet CBO transaction of a pool of wrapped infrastructure bonds, through its subsidiary Dexia Crédit Local, Dublin Branch. This is the first ever public securitisation of wrapped infrastructure bonds. Dexia mandated Crédit Suisse and Dexia Capital Markets to arrange the transaction.
The securitised portfolio comprises 7 bonds issued in relation with PFI projects (issued in relation to the financing of hospitals or other medical facilities, schools, accommodations or workplaces for central government or local authorities, waste disposal or effluent, waste to energy, renewable energy or recycling), and 21 bonds issued by regulated utilities in the water, electricity or gas sectors. All bonds are wrapped by AAA rated monolines. The total amount of the securitised portfolio is 1,47 bio GBP (circa 2,19 bio EUR).
Dexia is transferring the credit risk related to the wrapped infrastructure portfolio to external parties by means of two credit default swaps: a non-funded Super Senior credit default swap with an undisclosed party and a junior credit default swap with WISE 2006-1 Plc, a special purpose company registered in Ireland.
WISE 2006-1 has issued 3 tranches, ranging from AAA/Aaa to AA-/Aa3 (S&P and Moodys respectively). The tranches have been placed with several investors. The bonds will remain on Dexia Crédit Local, Dublin Branch balance-sheet and will continue to be administered by the company.
Benefits for Dexia
As a result of this transaction, Dexia has reduced the amount of regulatory capital attached to this bond portfolio. This freed up regulatory capital will allow Dexia to further enhance its leading position in financing the PFI/PPP and Infrastructure sectors and increase its debt underwriting / arranging capacity.
Dexia in the PFI / Infrastructure market
Dexia has been a leading player in the Infrastructure project finance market for 10 years, with a particular focus on PPP/PFI, delivering advisory, arranging, underwriting and lending services. The year 2005 was particularly successful with a #1 position as Mandated Arranger of PPP Loans (Dealogic League Tables), and also a #1 position as Loan Arranger in the UK PFI markets. The development of the Dexia infrastructure bond portfolio has gone along with the strong growth of capital market solutions in the infrastructure sector over the past two years. It led Dexia to build a sizeable, profitable, and diversified book, on the Infrastructure asset-class.
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