ASSET BACKED FINANCE – WHY NORD/LB?
The ABF Group is comprised of individuals with solid background experience in various financial positions and in-depth expertise in securitization. This in-depth experience has enabled the ABF Group to arrange well structured, high quality securitization transaction structures.
In March 2007, Trade Finance Magazine awarded NORD/LB its 2006 Deal of the Year Award for structuring an international trade receivable transaction for Alliance One International, a large multinational tobacco distributor.
In September 2006, our experience helped us realize that market practices in the residential mortgage market had become highly accommodative of risk, and underwriting standards were overly dependent on continued home price appreciation. We realized that we could no longer remain in this asset class if we wanted to maintain our history of funding only well-structured, high quality transactions in Hannover Funding. We made the difficult decision to exit this extremely popular asset class. This decision has allowed Hannover Funding investors and us to avoid losses during the current mortgage crisis.
Key Features of Hannover Funding Company LLC
- Hannover Funding is a "hybrid" conduit program, which primarily purchases receivables, but may purchase securities and make loans as well.
- Because it primarily finances client receivables, Hannover Funding essentially is a "multi-seller" conduit.
- Seven major dealers support the program. (Merrill Lynch, Lehman Brothers, Goldman Sachs, Credit Suisse, Morgan Stanley, Citigroup and JP Morgan Chase) Two of these dealers primarily focus on Euro commercial paper issuance.
- NORD/LB provides program credit enhancement up to $500MM in the form of a letter of credit to Hannover Funding.
- Liquidity:
- Up to $5.85 bn of liquidity support provided by NORD/LB. The first $5.0 bn is guaranteed by NORD/LB's two German state owners.
- Liquidity is also syndicated to other banks.
- Credit enhancement is structured for each transaction. Each transaction is structured to at least an "A" ratings level.
- Liquidity can be syndicated for each transaction.
- Receivables are typically purchased on a revolving basis.
- Typically transactions have 364-day commitments which are renewable annually.
- Hannover Funding commercial paper issuances can have maturities of up to 270 days. Typical maturities are in the 30 day range.
- The NORD/LB ABF Group structures/arranges all transactions.
- NORD/LB serves as Administrative Agent.
